Why this is the most consequential Kentucky association decision of the year

Most Kentucky community-association law in 2025 and 2026 has been made in opinions marked “NOT TO BE PUBLISHED,” which under the Rules of Appellate Procedure are non-binding and citable only in limited circumstances. Steele is the exception. It is published, and it states a rule that reaches a very large number of older Kentucky subdivisions.

The exposure is structural, not unusual. Kentucky has many neighbourhoods platted before recorded declarations became standard practice, where the developer imposed restrictions deed by deed as lots sold. That works perfectly — until one deed in one chain omits them. After Steele, that omission is not a technicality a court will look past on a general-scheme theory.

Three features of the case make it worse for the neighbours, and each is common:

• No recorded declaration before the first conveyance. This is the single fact that decides the case. A declaration recorded against the whole tract before lots are sold puts every subsequent chain on notice.
• The plat did not help. A handwritten “commercial” on one lot is not a recorded instrument evidencing a restriction on the others, and the court said a reasonable attorney would not read it as one.
• Actual notice is irrelevant. Under Oliver, whether SRH knew about the neighbourhood's restrictions does not matter. The question is what a title search in its own chain would reveal.

What this means for short-term rental enforcement specifically

Kentucky neighbourhoods routinely rely on a “residential use only” or “no commercial use” covenant to resist Airbnb and VRBO listings, and the substantive question — whether short-term renting is a commercial use — has a body of Kentucky authority behind it. Steele shows that the substantive question can be irrelevant.

Before an association or a neighbour group spends money on that argument, the prior question is whether the covenant burdens the specific lot. That is a title question, answered by pulling the chain of title for the offending parcel, not by pointing at what the rest of the street's deeds say.

Two related Kentucky decisions round out the picture. In January 2025 the Court of Appeals affirmed dismissal of a neighbours' pre-emptive declaratory-judgment action aimed at a prospective short-term rental, on ripeness and mootness grounds — you generally need an actual, ongoing use, not a plan. And in August 2025 the court enforced a “residential purposes only and no commercial use permitted except for farming or agricultural purposes” covenant against a commercial event venue, reversing a circuit court that had read agricultural policy into the covenant to create ambiguity. The covenants in that case were not in doubt; only their meaning was.

What a board or a neighbour group should actually do

• Audit the chain, lot by lot, before you enforce. An association that assumes uniformity because “everyone has the same restrictions” is assuming the fact Steele disproves. The audit is a title search, and it is far cheaper than the litigation.
• Find out whether a declaration was ever recorded against the parent tract, and when. Recorded before the first lot conveyance, it binds; recorded afterwards, it reaches only lots conveyed after it, and only if it is in their chains.
• Do not rely on the plat. Notations, labels and even a “subject to restrictions” line on a plat are not a substitute for a recorded restrictive instrument.
• Consider curing prospectively. Where gaps exist, the routes are the ones the declaration and the Planned Community Act already provide — an amendment adopted under KRS 381.791 for a planned community, or individual owners recording restrictions against their own lots. Neither reaches a lot whose owner does not consent, which is exactly why the gap persists.
• The demand letter is safe. The abuse-of-process holding means a board that writes in good faith and loses does not thereby buy a tort claim. It is not a licence to threaten litigation the board knows is baseless.

One caution on relying on it

The opinion was rendered on 21 August 2026 — three weeks before this was written. Under the Rules of Appellate Procedure the windows for a petition for rehearing and for a motion for discretionary review to the Supreme Court of Kentucky run from rendition, and the case does not appear on the Supreme Court's list of cases in which discretionary review has been granted, which was last updated on 24 August 2026. That list shows granted motions only; a pending, undecided motion would not appear on it.

Treat Steele as not yet final. It is the current published statement of Kentucky law on chain-of-title covenants, and it should be re-checked before it is relied on in a demand letter or a title opinion.