Michigan Court of Appeals Decision: Renting Your Primary Home
Can I rent out my primary home as a short term rental and still retain my principal residence exemption (PRE)?
In late 2017 there was a ruling by the Michigan Court of Appeals that could potentially impact many short term vacation property rental owners in Leelanau County. The petitioner was the owner of a vacation property in Boyne City who was denied their Principal Residence Exemption (PRE) by the Michigan Tax Tribunal because they rented out their primary home for more than 14 days during each year. The petitioner provided proof that he occupied the house for the majority of the year as the primary residence, was registered to vote at the address, and it was the address listed on his driver’s license and tax returns. He also stated that he had not claimed a principal residence in another state.
In the appeal, RENTSCHLER v. TOWNSHIP OF MELROSE the Michigan Court of Appeals decision was the following:
“…For all these reasons, we conclude that the PRE guideline provision relied on by the Tribunal is erroneous and inconsistent with the GPTA. Renting one's home for more than 14 days does not disqualify a homeowner from the PRE. Accordingly, accepting the Tribunal's factual findings, we conclude that defendant has satisfied the legal requirements to qualify for the PRE. We therefore reverse the Tribunal's decision and remand for entry of a judgement granting petitioner's request for PRE for the 2013, 2014, and 2015 tax years. We do not retain jurisdiction.”
The Michigan Court of Appeals decision did not specify how many rental days is too many to qualify for the Principal Residence Exemption so it is likely there will be additional controversy and/or court cases dealing with this issue.
Here are a few helpful links dealing with this topic:
http://caselaw.findlaw.com/mi-court-of-appeals/1881127.html
http://publicdocs.courts.mi.gov:81/OPINIONS/FINAL/COA/20171128_C336333_21_336333.OPN.PDF
https://www.wnj.com/Blogs/Appellate/December-2017/COA-A-Petitioner-is-entitled-to-a-Principal-Resid
Disclaimer: I am not an attorney. I recommend that you contact an experienced real estate attorney for further explanation on this Michigan Court of Appeals ruling and how it could potentially impact your real estate.
Jonathan Oltersdorf, Oltersdorf Realty, LLC
Phone: 231-271-7777
E-mail: jonathan@oltersdorf.com