Just about every set of bylaws has them – restrictions on “commercial” activity and the requirement that a home/unit be used only for “residential” purposes. However, litigation regularly erupts over whether certain activities are commercial or residential in nature.

With regard to adult foster care facilities and whether they constitute commercial or residential activity in community associations, a recent opinion from the Michigan Court of Appeals, Saunders v. Counts, is instructive in that we might generally expect our state courts to rule in favor of adult foster care facilities. Although it is an unpublished opinion, and the court explicitly stated that the opinion should not be construed such that “…restrictive covenants or deed restrictions can never work to bar operation of an adult foster care facility,” the opinion confirms that it would be generally inadvisable to oppose operation of adult foster care facilities within a Michigan community association.

The Saunders plaintiffs sought an injunction against operation of an adult foster care facility within the association. Their main argument relied on a Michigan Supreme Court decision, Terrien v. Zwit, where the court found a children’s day care center to be both residential and commercial in nature, and therefore the community association’s prohibition on commercial use meant that the day care was not allowed. However, the Saunders decision recognizes major differences between children’s day care, where there is no permanent residency, and an adult foster care facility, where people maintain their legal addresses, their own rooms, and their belongings.

Additionally, the court detailed prior case law and legislation supporting the argument that Michigan’s public policy strongly favors integration of adults with special needs in residential communities, moving away from past practices of institutionalization.

We also note the court tacitly recognizes that there is some commercial aspect to adult foster care facilities:

“We recognize that restrictions for residence purposes are particularly favored by public policy and are valuable property rights, and that restrictions which are clear on their face, reasonable in scope, and do not violate public policy are to be upheld.  However, for the reasons stated above, we apply with caution the principle that contracts in contravention of public policy are not enforceable, and affirm the trial court’s grant of summary disposition to defendants.” (Internal citations omitted.)

Follow this link to read Robert Meisner’s past Q&A column published by Hometown Life on this subject.