J. Patrick Sutton Cases & Issues Blog

Deed restriction amendments that take away preexisting rights may not be enforceable

After Tarr v. Timberwood Park held that short-term rentals are allowed under common deed restrictions, HOA's and subdivision owners began amending deed restrictions to bar leasing and require mandatory, physical occupancy of homes for long terms. I get calls every week now from people who always had broad leasing rights who suddenly find that a majority of their neighbors have voted to take away their leasing rights and, even worse, mandate physical occupancy of homes. Is that allowed? Read on!
I am litigating cases all over the state now on this issue. In every case, my clients had wide-open leasing rights, but in the past year or two, a majority of their neighbors decided to vote to take away leasing rights. How can that be fair? People buy homes premised on leasing income and freedom to not live in the house at any given time. Does the power of a majority to amend deed restrictions mean they can just take away what you depended on when you bought?

I strongly believe the answer is No, and I have developed a legal theory, supported by the large majority of states in the U.S. that have addressed this issue, that new restrictions which could not reasonably have been expected based on the rights granted by the original restrictions are not enforceable against owners who bought their properties before the new restrictions were recorded. I have had one trial so far and expect more in the coming months, and my clients will be pushing these cases into appeals and, ultimately, toward the Texas Supreme Court. It is an important issue because there are many circumstances where taking away a right afforded under prior restrictions works profound hardship.

There are more examples than I can count, but here's a good one: You buy a lot in a subdivision with a minimum square footage requirement for new homes of 1000 sq. ft. Right after you buy, a majority of the other owners, who don't like you and your riff-raff family and Ford F-150, decide to make the minimum square footage 3000 sq. ft. You cannot afford that, so your purpose in buying the property has been completely frustrated. Enforceable? In a recent trial, an HOA's lawyer said Yes: a majority can do whatever it wants and impose any kind of new restriction. I say: No. This cannot possibly be the law. My clients are now challenging that position all over the state, and I hope to report on these case developments in the coming months.
J. Patrick Sutton Cases & Issues Blog