J. Patrick Sutton Cases & Issues Blog

Leasing Cap at Downtown Austin High-Rise Condo Invalid

Where the filed condo declaration explicitly granted owners the right to lease, and a condo board enacted a rule that denied 70% of unit owners that right by means of a "lease cap," an arbitrator has declared the rules inapplicable to plaintiffs, who purchased prior to the effective date of the lease cap. The arbitrator's award states that amendment to the declaration is required to impose a lease cap.
In an arbitration award of May 25, 2011, my clients, a group of unit owners, prevailed against their condo property owners' association (HOA) in a dispute over the HOA board's imposition of a leasing cap not authorized by the condo declaration filed as of record with Travis County. The Board enacted rules in August, 2010, denying 70% of the unit owners the right to lease their units. All owners wishing to lease had to apply for a "leasing permit," and permits were limited to 30% of all units. The condo declaration explicitly stated: "units may be leased." The condo board argued it had the authority to make rules that would protect unit owners' ability to sell their units more easily in light of lender guidelines denying loans in situations where a minority of a given condo building is leased to non-owner occupants. However, the condo board in this case could point to no cases or authorities supporting its position. In fact, plaintiffs pointed out, there are many condo declarations filed in Travis County that explicitly allow a condo Board to enact whatever rules are necessary to comply with lender guidelines. But there was no such language in the declaration at issue in this case.

The arbitration award only addresses the situation of buyers who purchased prior to the enactment of the leasing rules. The arbitrator's award says nothing regarding the leasing rights of buyers who purchased subsequent to the enactment (and filing in the county records) of the leasing rules.
J. Patrick Sutton Cases & Issues Blog