Tennessee town's Airbnb legal drama drags on as new board members continue suing neighbors

Yard signs welcoming or not welcoming vacationers to Lone Mountain Shores have come down, but residents say the sharp divide over short-term vacation rentals is very much alive in the Norris Lake development, where newly and narrowly elected board members will continue to pursue an inherited contentious court case against neighbors.

Lone Mountain Shores, established in 1998 and now home to more than 500 voting members, is split down the middle between pro-renters who want the right to rent their home through sites like Airbnb and Vrbo and anti-renters who say the rentals violate the community's rules and attract disruptive outsiders.

Last fall, when the anti-renter board of the Lone Mountain Shores Owners Association sued two dozen residents who used their homes as short-term vacation rentals, the residents sued back, kicking off a fierce legal fight that's about to enter its second year.

The Tennessee Supreme Court threw a curveball at the case when it ruled Oct. 17 that the covenants, or legally binding rules, of a development on Center Hill Lake in Middle Tennessee were too ambiguous to prohibit short-term vacation rentals, even though they limited property use to "residential purposes."

The case closely mirrored the one in Lone Mountain Shores, where the covenants say properties must be used for "single family residential purposes," but do not specifically prohibit short-term vacation rentals. Pro-renters said they thought the state Supreme Court ruling could hand them their case.

Since the board initiated the lawsuit, neighbors have known who stands with them and who does not. Backyard fences have become battle lines. Community meetings have simmered with tensions between the board's supporters and detractors.

Three of the five seats on the board, including president, were up for election in September. Each side put candidates up, and anti-renters took all three seats by slim margins, dashing pro-renters' hopes that the expensive lawsuit could be dropped.

Claudio Biltoc, the new president of the HOA board, defeated his challenger, Fred Maess, one of the defendants sued by the board last November, by a 193-183 vote. In a campaign statement, Biltoc, who bought land in Lone Mountain Shores in 2021, called the election the "most critical" in the neighborhood's 25-year history.

He also pledged to accept the outcome of the court case, saying he would not use community funds to appeal it.

If the court finds the covenants do not prohibit Airbnbs, Biltoc said he would work with rental owners to develop a code of conduct for their renters. If the court finds the covenants do prohibit Airbnbs, he said he would work with them to avoid further appeals.

"I will not attack opponents or their actions or their supporters’ actions," Biltoc said in the campaign statement. "There is too much anger, vitriol, and frankly personal attacks here and politics in general."

Biltoc and his predecessor, anti-renter Mark Jonckheere, declined to speak for this article. Jonckheere, who told Knox News in August that he initiated the lawsuit to get clarity on a longstanding debate, said then that "the law is clear and on our side in this matter."

Fred Maess, the pro-renter candidate for president in the board elections, lives full-time outside of Cincinnati and rents his home in Lone Mountain Shores when he's away. If he had won, he said he would have pulled the case out of court to seek a community compromise, though previous efforts at compromise have failed.

"I don't want to spend another $10,000 improving my property if I think that, you know, I'm gonna have to hire another lawyer, for example, or they may not allow short-term rentals, and I'm gonna need to sell my property," Maess told Knox News. "It's made us hold back on a lot of things that we'd like to do down there."

In addition to countersuing the board, a smaller group of rental owners sued board members personally over allegations of civil conspiracy, saying the board cost homeowners thousands of dollars by misleading them on their intentions to prohibit short-term rentals.

Jason Jordan, a homeowner in Lone Mountain Shores and a plaintiff in the suit, is among the 85% of residents who live part-time on the mountain. He said the recent Tennessee Supreme Court ruling on vacation rentals could end the board's effort to turn the neighborhood into a "private retirement community."

“Members of the Lone Mountain Shores HOA Board attempted to eviscerate our property rights and end a longstanding practice of renting out our homes without the support of the community, and without the support of the law,” Jordan said in a press release.

In its first year, the lawsuit has involved cease and desist letters, a judge's recusal and an order that the HOA turn over its ballots. Judge John D. McAfee disqualified himself from hearing the case in January, citing "familiarity with a named party." The case was handed instead to Judge Elizabeth Asbury.

Here are highlights from the case, and a further hint about how it could shake out.

Judge: Tennessee HOA must turn over secretive ballots

Given the slim margins by which new anti-renter candidates rode to victory in the board election in September, several pro-renters said they expect a legal challenge to the election ballots. It would not be the first time pro-renters took the board to task over election transparency.

In July, some homeowners initiated a recall vote to oust the HOA board members who they claim have spent more than $100,000 on legal fees to sue their own members. Then-president Jonckheere held onto his seat by a vote of 176-174 and the accounting firm hired by the HOA to count ballots said eight were deemed ineligible by the board.

The firm offered no explanation for why eight ballots were disqualified, igniting suspicion about the security and fairness of the vote.

On Aug. 4, just four days after the results of the recall vote were released, the Circuit Court in Claiborne County issued a subpoena to the accounting firm on behalf of the defendants. The firm was commanded to produce all communication between it and the HOA, all ballots in its possession and all documents related to the election results.

By September, the court itself ordered the HOA to present the list of eight ineligible ballots and any documents to support why they were disqualified.

“The Board has repeatedly refused to provide its homeowners with basic and essential information regarding the Board’s actions since they took office,” said Ryan Sarr, attorney representing the homeowners, in a release following the order.“We are very pleased with the Court’s decision and look forward to receiving this information which the Board has so desperately tried to keep from us.”

In the more recent board elections, the same accounting firm said it received 367 out of 560 eligible ballots and that around 67% of members voted. It said two ballots were unsigned and therefore were not counted.

But many residents did not receive their ballots, said some of the board's detractors. In an email on Sept. 10, the board's secretary emailed members to say that many residents had not received their ballots and the voting deadline was extended. She said the problem was perhaps caused by the USPS processing center in Knoxville.

Defendants may follow the same pattern of issuing a subpoena and trying for a court order to get information on the allegedly missing ballots, though no such motion has yet been filed.

New Lone Mountain Shores HOA might ask court to end lawsuit before trial

At his first board meeting as president on Oct. 24, Biltoc gave a hint about the board's next move, said residents in attendance at the private meeting. Biltoc said the board's attorney might file for summary judgment sometime in the next three months, according to Paul Schmutzler, a pro-renter and former HOA president.

If the court granted the board summary judgment, it would rule in their favor based on the facts presented, avoiding a trial. If the request for judgment is denied, the case is likely to move towards a civil trial, extending the dispute further.

The intensely local debate, played out in private neighborhood meetings and message boards, is part of a national conversation about the place of companies like Airbnb. New York City cracked down on short-term vacation rentals, and more cities across the country have soured on Airbnb, saying it has contributed to housing shortages for locals.

Tennessee law allows an HOA to prohibit short-term vacation rentals through covenants and restrictions, though it broadly supports the right of homeowners to rent their properties. Lone Mountain Shores might be the emblem of a state divided between the right to enforce contracts and property rights.

"On a neighborhood community level, I don't think anything's changed," said pro-renter resident Ruthann Geib after the board elections. "I think a lot of us are just gonna put our hands down and let the board show its true colors and we'll see what happens. And we'll wait for the court."

Daniel Dassow is a growth and development reporter focused on technology and energy. Phone 423-637-0878. Email daniel.dassow@knoxnews.com.

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This article originally appeared on Knoxville News Sentinel: Tennessee mountain town has new HOA, same Airbnb legal drama