2026-09-10 · Kentucky · Courts

What happened. The Kentucky Court of Appeals held on 21 August 2026 that a restrictive covenant appearing in 168 of a subdivision's 174 deeds could not be enforced against the lots whose own chain of title never carried it. The decision is marked TO BE PUBLISHED, which makes it precedent rather than persuasive.¹

Steele v. SRH, LLC, Nos. 2025-CA-0192-MR and 2025-CA-1011-MR (consolidated), came from Marshall Circuit Court. Judge Taylor wrote; Judges Combs and Moynahan concurred. Both appeals were affirmed.

The facts

The Steeles and SRH, LLC own lots in Kentucky Lake Subdivision in Marshall County. The Steeles bought lot 17 in July 2016, and their deed contained a restrictive covenant prohibiting use of the lot for commercial purposes. SRH bought lots 18 and 20 in April 2022, and, in the court's words, “neither the deed nor any deed in its chain of title contained a similar restrictive covenant prohibiting” commercial use.

SRH then advertised its property for short-term rental. The Steeles sued to stop it.

The developer had never recorded a deed of restrictions or a restrictive plat covering the whole subdivision. The restriction lived only in individual warranty deeds, given by the developers to some but not all buyers. The recorded plat showed 174 lots and had the word “commercial” written on one of them.

The holding

The court worked through Bishop v. Rueff, 619 S.W.2d 718 (Ky. 1981), which had once allowed a restriction to bind an owner on constructive or actual notice even though it was outside the chain of title. It then applied the case that narrowed Bishop — Oliver v. Schultz, 885 S.W.2d 699 (Ky. 1994), in which the Kentucky Supreme Court “specifically sought to clarify ‘the law in this area’” and held a covenant enforceable only where it is contained in a recorded instrument in the grantee's chain of title, or in a recorded instrument that would put a reasonably prudent attorney on notice when performing a title search.

On the plat, the panel was direct:

“[A] reasonable attorney would not have been put on notice that any lot within the subdivision was restricted in use by reviewing the subdivision plat.”

And on the doctrine the Steeles needed:

“In order to establish a reciprocal negative easement, a recorded instrument evidencing the restrictive covenant must be placed in the grantee's chain of title. Here, no such recorded instrument exists.”

SRH's lots were therefore not burdened, and summary judgment for SRH was affirmed. The court never reached whether short-term rental use would have breached the covenant, because the covenant never attached.

The second appeal: the demand letter was not abuse of process

SRH had counterclaimed for abuse of process, alleging the Steeles sued to coerce it into stopping the rentals knowing no covenant bound its lots. The circuit court dismissed that counterclaim, and the Court of Appeals affirmed that too. Bringing a covenant-enforcement action that ultimately fails is not, without an ulterior purpose, abuse of process.

1. Steele v. SRH, LLC, Nos. 2025-CA-0192-MR & 2025-CA-1011-MR (Ky. App. 21 Aug. 2026) (to be published) — opinion PDF ↩
2. Breen v. Leuthauser, No. 2024-CA-0214-MR (Ky. App. 3 Jan. 2025) (not to be published) — pre-emptive short-term rental challenge dismissed as unripe ↩
3. Cooper Hart v. Back, No. 2024-CA-1245-MR (Ky. App. 1 Aug. 2025) (not to be published) — residential-use covenant enforced against a commercial venue ↩
4. KRS 381.791, Amendment of declaration — Termination of declaration and association ↩