Condo Hotels: Appeals Court Upholds Occupancy Covenant in Blue Harbor Case

The Wisconsin Court of Appeals has upheld a strict 29-day continuous occupancy limit for condominium owners at the Blue Harbor Resort in Sheboygan, affirming a lower court's order that declared the restriction valid and enforceable. In a decision dated June 3, 2026, and authored by Judge Lazar, the court rejected an appeal by a group of unit owners who sought to overturn the rule in favor of permanent residency.

The court ruled that the restriction, which was detailed in the condominium's 2004 Declaration and an Amended Restrictive Covenant, is clear and unambiguous, meaning the owners are bound to the terms they agreed to when purchasing their properties.

The background of the dispute traces back to a 2003 development agreement between the City of Sheboygan, its Redevelopment Authority, and developers to build a downtown resort, hotel, convention center, and water park. As part of the resort complex, the 64-unit condominium was specifically designed to restrict continuous occupancy to 29 days to encourage transient tourism and allow visitors to use the units. The property was officially approved under an "R-1 Transient Residential" building code classification, which governs sleeping accommodations where occupants stay for less than 30 days. The court noted that the owners purchased their units with full awareness of these terms, which were intended to support an investment-owner model rather than traditional permanent residential use.

The plaintiff unit owners argued that the restriction was unreasonable and had been effectively removed by an April 2021 vote from the Sheboygan Redevelopment Authority to waive the rule. However, the appellate court found that while the Redevelopment Authority voted to grant a waiver and authorized staff to modify the paperwork, no actual written amendments were ever executed or recorded. Because amending the condominium documents legally requires the explicit written agreement of multiple required parties—including the City, Blue Harbor, and unit owners holding at least 80 percent of the association's votes—the unfulfilled vote had no legal effect. Consequently, the court concluded that the 29-day occupancy limit remains in full force and effect.

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