The Kentucky Court of Appeals recently ruled on a property dispute involving Chad A. Steele and Lindy D. Steele against SRH, LLC. The court's decision, rendered on August 21, 2026, addresses the enforceability of restrictive covenants in a subdivision. This ruling affects not only the parties involved but also sets a precedent for future cases regarding property use restrictions in residential areas.
The case began when the Steeles, who own a lot in the Kentucky Lake Subdivision, filed a complaint against SRH, LLC, alleging that SRH was violating a restrictive covenant by using its lots for commercial short-term rentals. The Steeles claimed that the subdivision had a general scheme of development aimed at maintaining its residential character. They sought an injunction to prevent SRH from continuing its rental activities.
In response, SRH argued that its lots were not subject to any such restrictive covenant, as there was no mention of it in their deed or chain of title. The dispute escalated to the Marshall Circuit Court, which ruled in favor of SRH, granting summary judgment and dismissing the Steeles' claims. The Steeles then appealed the decision to the Kentucky Court of Appeals.
The court's ruling clarified the legal standards surrounding restrictive covenants in property law. The judges, including Judge Taylor, concluded that the Steeles could not enforce the restrictive covenant against SRH because it was not included in SRH's deed or chain of title. The court stated, "a restrictive covenant must appear in the chain of title of the burdened parcel in order to be enforceable." This ruling was based on existing Kentucky law, particularly the precedent set in the case of Oliver v. Schultz, which established that such covenants must be recorded to be binding.
Furthermore, the court examined the Steeles' argument that a general scheme of development existed in the subdivision. The judges found that while many lots in the subdivision had restrictive covenants, SRH's lots did not. The court emphasized that the absence of a recorded restrictive covenant in SRH's chain of title meant that SRH was free to use its property as it saw fit, including for short-term rentals.
In a related matter, SRH had filed a counterclaim against the Steeles for abuse of process, alleging that the Steeles had filed their complaint with ulterior motives. However, the court dismissed this counterclaim, ruling that the Steeles' actions were aimed at enforcing what they believed to be a valid restrictive covenant. The court noted, "the purpose of movants’ lawsuit was to enforce a restrictive covenant against Defendant/Counterclaimant."
This ruling has significant implications for property owners in Kentucky, particularly those living in subdivisions with similar restrictive covenants. The court's decision reinforces the importance of having clear, recorded restrictions in property deeds to ensure that they are enforceable. It also highlights the challenges faced by homeowners trying to maintain the character of their neighborhoods in the face of commercial activities.
The court's decision may set a precedent for future cases involving property use restrictions. Homeowners may need to be more vigilant in ensuring that any restrictive covenants are properly recorded and included in the chain of title to avoid similar disputes. This ruling could also influence how developers and homeowners associations draft and enforce covenants in new subdivisions.
As for what’s next, the Steeles and SRH have the option to appeal the court's ruling to the Kentucky Supreme Court, although it is unclear if they will pursue that route. There may also be related cases pending that could further clarify the legal landscape surrounding property use restrictions in Kentucky.