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Tarr v. Timberwood Park Homeowners Association, 556 S.W.3d 274 (Tex. 2018) was decided in May 2018. Since this case, the issue of short term leasing has been discussed almost weekly in my office. I have read countless articles from both sides of the spectrum. Short term leasing companies are lobbying hard to keep their services available to homeowners. HOAs are fighting hard against allowing short term leasing in their communities.
Short term leasing brings its own set of challenges for HOAs and neighbors. There have been increased crime, parties that cause significant damage to property, increased nuisance complaints, declining homes available for purchase, and many other important issues that plague Texas communities. Though, how do homeowners reconcile the contractual right to privately agree to restrictive covenants and a property owner’s right to lease their property? I think this issue will come up more and more over time. These concepts have not been broken down and argued to the extent that they resolve the balancing act between the rights of the whole neighborhood and the rights of the individual homeowner. Here is the summary of the cases as it stands today.
Tarr v. Timberwood Park Homeowners Association, 556 S.W.3d 274 (Tex. 2018)
The court in this case very specifically stated that if the Association wanted to amend it declarations, it could have. The Association could have required the owner to lease the property 30 days or more, etc. The court focused on the plain meaning of the words within the Association’s restrictions. The Association argued that the act of leasing the property on VRBO was commercial which the Declarations prohibited. They also stated that the Declarations required that the homes be used as a single family residence. The court determined that the language is ambiguous and wound their way through legal analysis to determine if short term leasing violated the Association’s restrictions. The court concluded that because the tenants were eating, relaxing, sleeping, etc., they were engaging in activities most people engage in at a residence. Also, single family residence means that only one house should be built on a lot, the wording has nothing to do with the actual use. The court stated that because the landlord was not engaging in commercial behavior on the lot, then the act of leasing is not commercial under the definition in the Declarations. The court concluded that the homeowner did not violate the Association’s deed restrictions under the facts of this case.
Jbrice Holdings LLC v. Wilcrest Walk Townhomes Ass’n, Inc., 638 S.W.3d 712 (Tex. App. Houston 14th 2020) and Adlong v. Twin Shores Prop. Owners Ass’n, No.09-21-00166-CV (Tex. App. Beaumont 2022)
Both cases referenced above were decided in 2020. The courts concluded that the Association (depending on the Declarations) has a right to amend its dedicatory instruments to restrict leasing by homeowners. In Adlong, the court stated that three conditions must be met to amend deed restrictions, 1. The instrument creating the original restrictions must establish the right to amend and the method to amend, 2. The right to amend implies those changes contemplating corrects, improvement, or reformations rather than the complete destruction of the terms, 3. The amendment must not be illegal or against public policy. Covenants are enforced when they are “confined to a lawful purpose” and unambiguous. Texas does favor free use of property but the court sees covenants as contractual rights and enforceable. The homeowners in Adlong stated that they bought the property because the restrictions allowed short term leasing and they should not be subject to the new rules restricting leasing. The court rejected that argument because the homeowners were on notice that the HOA could amend the restrictions and there was a method to amend. The homeowners continued to argue in the case that the restrictions increasingly limited their free use of property and thus a burden on their land. But, the court also rejected those arguments because the homeowners did not reference any information or case law regarding their assertion.
Again, I don’t think these arguments are over. Both concepts, leasing and the right to restrict through restrictive covenants, are well established rights and have been discussed thoroughly separately. But, we are seeing these concepts merge now with short term leasing.