J. Patrick Sutton Cases & Issues Blog

All the wrong arguments about STR's

Rabid opponents of short-term rentals either seek out positions in which to ban them (elected and appointed local officials, hoa boards) or else bully and sue their neighbors to get their way. That's all fair and good — it's democracy in action, and proponents of property rights ought to get out in force to protect those rights.

The problem, in my experience arguing cases at every level of the court system and before city officials, comes in convincing local officials — judges, politicians, and city staffers alike — to break through the incendiary claims and arguments and analyze the
real issue. The basic problem that opponents hate to acknowledge is that every argument against STR's applies equally to long-term rentals as to short-term ones: landlords make money, landlords advertise, landlords use property managers, too many renters at the house, etc. More importantly, every landlord has an obligation to have decent tenants who respect neighbors — just as every owner should. Bad neighbors are bad neighbors whether they are owners or renters, and there are plenty of both kinds. The problem with everyone's occupancy of residential homes is that people can create nuisances, noise, trash, and other kinds of poor behavior, either sometimes or often. But that has nothing to do with the duration of someone's occupancy. All durations are equally bad and equally good in the sense that whoever is occupying a property can be bad for any duration or good for any duration. The proper target of regulation of leasing is what it has always been: respectful behavior by whoever is occupying a home. But what has happened instead is that opponents — just like the prohibitionists back in the day — demonize every property owner who leases and try to ban leasing — and not just STR's, either. At some point, higher-level elected officials and judges are going to have to step in and say, right, whatever else we do, we don't ditch freedom, whatever its faults. We regulate it and make money on it through taxation. That, of course, is the American way.Content may continue . . .

The Pace of Angry Change Ramps Up

Just my observation over the past couple of years, and quickening substantially since Donald J. Trump won the Republican nomination: Baby boomers with the time and wherewithal are taking over condos and HOA boards, and they are champing at the bit to remake their communities into the narrow slice of humanity that reflects their own demographic. I see it in a hundred little things and with almost every new HOA case I handle or consult I have. The single most persistent theme is the desire to transform ordinary condos and subdivisions into owner-occupied, single-family communities, where renting of any kind is forbidden and where new rules are imposed requiring some form of blood relation and permanent, full-time owner occupancy even to the exclusion of part-time owners. It is a stunning development, and it is generating a lot of courtroom brawls.Content may continue . . .

Getting down to what is really real in STR cases

In an alarming convergence, Donald Trump's incendiary campaign statements appear to be emboldening opponents of leasing and short-term rentals to say what they really mean: they want every subdivision to be gated and patrolled so that "people who don't belong here" can be kept out. Some HOA's have deed restrictions that allow them to build walls and curtail leasing, but many do not, and most non-HOA subdivisions do not. Those that do not increasingly wish they did, however, and they are seizing on the only deed restriction wording available — "residential use only" — to argue that homes that are rented are businesses because landlords earn money, or that people who do not establish "permanent" residency are not entitled to use or lease a home! If opponents of STR's get their way, residential leasing and owner second-home stays will become forbidden; all subdivisions will require mandatory, full-time owner-occupancy.Content may continue . . .

Do amendments to restrictive covenants apply retroactively?

After years of having the issue crop up but not get resolved, I've finally litigated the question whether amendments to deed restrictions can be applied to the detriment of owners who relied on the prior deed restrictions. I am pleased to report that my client prevailed in a state district court, based on the legal theories of estoppel and equity (unclean hands). My client was able to continue renting out a property under leases already in force when the subdivision amended its restrictions to ban short-term rentals.Content may continue . . .

Two recent STR wins

I have had two more clients obtain summary judgments in the past three weeks validating short-term rentals under common deed restriction wording. In one case, neighbors were arguing that short-term rentals are always a business use. In the other case, an HOA dropped that argument, instead arguing that an HOA has power to make rules banning STR's even when the deed restrictions already allow leasing without duration restrictions. See Kendrick v. Siddiqi. One of the cases later settled out of court with confidential terms.

Note that in the Kendrick v. Siddiqi case, the court expressly prevented the owner from engaging in individual instances of renting that are commercial in character, such as venues for events, while allowing short-term rentals as a general matter. That is, renting for short terms is an owner's right, but if an owner does engage in a business use unrelated to lease duration, that is a separate kind of violation of deed restrictions. Analytically, that is a very satisfying, logical result and is similar to other judgments my clients have won. Duration limits are not related to whether there is a business use.Content may continue . . .

Home businesses and HOA's

If you live in an HOA and wish to run a business from your home, you are best advised to spend an hour with me at my consult rate to determine your rights. It's $245 well spent if you can avoid hassles from the HOA. I can't offer general advice because the wordings of HOA declarations -- your contract with the HOA and other owners -- vary so much.

You can also search this blog for some of my articles on the subject.Content may continue . . .

More HOA perversity

It occurs to me that there's another way in HOA's have a perverse incentive to continue litigation in the face of a loss. Where an HOA has made a suspect rule or brought a suspect lawsuit against a homeowner, at that point the HOA may be trying to fend off one or a few owners who instigated the rule or lawsuit. That is, if the HOA doesn't press its case, it may get sued by the owners who are insisting on the rule or lawsuit. In this way, the HOA can be squeezed -- unable to settle the lawsuit without someone suing the HOA for failing to enforce the rules, yet unable to prevail in the litigation because the HOA's case is so weak. The only beneficiaries, in this scenario, are the usual suspects: the lawyers! Content may continue . . .

The perversity of HOA's

HOA boards have perverse incentives to keep litigating bad cases because the board members never face any real consequences.Content may continue . . .

Motion for Summary Judgment Filed against Balcones Woods Club HOA

Today, my client filed a motion for summary judgment immediately following Balcones Woods's answer. Balcones Woods is arguing that cases involving room rentals and without express leasing rights dictate that an owner with express leasing rights in the HOA declaration cannot rent for short terms. My client's motion puts those arguments to rest. A judgment in my client's favor would render it almost impossible for the Balcones Woods HOA to bully other owners as it did Mr. Cribbs.

The summary judgment is set to be heard by the court on November 1, 2013, in Travis County Court at Law.Content may continue . . .

Balcones Woods Club HOA bullies homeowner over short-term rentals

The Balcones Woods Club HOA in Austin just up and decided, with no justification, to send my client a cease-and-desist letter threatening litigation over my client's short term rentals. The Balcones Woods declaration not only authorizes leasing, but says NOTHING about limitations on leasing, and certainly has no minimum leasing term. My client specifically relied on that before purchasing.

The HOA has said that leasing is a "business use," in effect barring everyone at Balcones Woods from leasing. The overwhelming tide of cases addressing the question whether short-term renting constitutes a "business" have rejected the argument categorically. The HOA has not even tried to put a number to the minimum lease term -- what is it, Balcones Woods, 30 days? 10 days? 90 days? There is no principled basis for the HOA to impose a number short of amending its declarations, which it hasn't even tried to do.

My client sued Balcones Woods. Make no mistake: had my client not acted to protect their rights, the HOA would've spared no expense to bankrupt my client or dispossess them of their home. The only way to fight power-mad, bullying HOA's is to get judgments invalidating their actions so that NO ONE ELSE in the HOA can be victimized. In my past cases like this, the HOA directors who made these colossal goofs got the boot, as did the lawyers and property managers who enabled the misguided actions.

The case is Cribbs v. Balcones Woods Club, Inc., and the lawsuit is here. The Motion for Summary Judgment seeking immediate resolution of the legal issue is here. It is set to be heard by the court November 1, 2013, at 2:00PM.
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Texas Monthly Article on HOA's and one of my clients

Reporter Jay Root has written a long exposé of the HOA industrial complex. He focuses on Texas State Senator John Carona, who heads up a large property management company that stands behind thousands of HOA's. The lead-in and conclusion feature one of my clients, a homeowner getting foreclosed on by the Brookfield HOA in Pflugerville, Texas for bogus fines that spiraled into thousands of dollars of handling charges and attorney's fees. My client, Shawn Riggs, got mad and hired me, and then Jay Root got hold of the story. The main focus of the article is about Senator Carona's empire building in the HOA field while serving in the Texas Legislature. The HOA abuse featured in the article doesn't surprise me, but the machinations behind the scenes does. I strongly recommend that anyone planning to buy into an HOA community read this article.Content may continue . . .

Talk to me about the HOA before you buy that house!

If you're planning to buy a home in a subdivision, or a condo in a condo association, you should budget $250-$500 to sit down with me to talk about what you're getting into. I do a review of the HOA governing documents first, then sit down with you to discuss what living in an HOA generally, and the proposed HOA specifically, may be like. I have noticed that most people who hire me to do this end up looking for a different house -- either one not in an HOA, or else one in an HOA without much power.

Vested interests in the real estate brokerage industry aren't all that interested in making sure buyers know the risks of buying into an HOA. Sellers certainly don't want to tell you how awful their HOA may be. I have no such vested interest -- in fact, the reverse, since a large part of my practice is HOA litigation in which I represent homeowners. Trust me, you don't want to get involved with that!Content may continue . . .

Final Judgment in Briarcliff Property Owners Assoc. v. Hays -- Short Term Rental Ban Invalidated

On February 26, 2013, following a December 2012 jury trial, the Travis County District Court entered judgment in favor of my client, Marvin William Hays, as against Briarcliff Property Owners Association, invalidating the HOA's short-term rental ban and awarding $40,000 in attorney's fees plus costs of suit to Hays. The final judgment is here. The final judgment incorporates the summary judgment orders earlier in the case that invalidated the rental ban.

The trial itself, which was over issues the HOA asserted after its rental ban got invalidated as a matter of law, focused on whether Hays had ever rented to "non single families" -- for any term, short or long. Hays had conceded at trial that he had not tried to determine whether and how his renters were related (for example, by blood, marriage, adoption, etc.) since the HOA had never bothered to regulate rentals of any kind prior to March 2011, when it issued its ban on all short-term rentals. Thus, the HOA won $2,400 in fines at trial, reflecting a jury finding of 12 days of non-single-family rentals in 2009 and 2010.

The HOA spent around $150,000 to obtain $2400 in fines, even though its short-term rental ban went by the wayside entirely. The central purpose of its lawsuit against homeowner Hays failed.

What does "single family" mean? No one knows, really -- the jury wasn't asked to decide that, and the judge didn't impose a definition for the jury to use. I address that issue in a separate blog entry.

In March 2013, the Village of Briarcliff enacted short term rental regulations addressing the kinds of concerns residents had about STR's. The HOA is a subset of the Village, and the city ordinances apply to everyone. STR's are allowed but restricted, as in many communities.Content may continue . . .

Another JPS win on short-term rentals

On June 14, 2012, a judge in Travis County, Texas clarified a prior grant of summary judgment in favor of my client on the issue of short-term rentals. Under a basic grant of the leasing right under a subdivision declaration, the trial court ruled that whole-house rentals to one family at a time are a residential use, not a business use. The clarification of the prior order completely guts an HOA's attempt to take away both short term and long-term rental rights from owners of the subdivision.Content may continue . . .

Court decisions hold that short-term rentals are not a "business or commercial use" under typical, basic HOA declaration wording

Two very recent cases bolster the other extant cases in holding, uniformly, that a homeowner's engaging in short-term rentals with a residential dwelling house is not a "business or commercial use" under typical, basic HOA wording that grants express leasing rights but does not otherwise regulate leasing. Typically, the only restriction found in declarations -- especially older ones that HOA's haven't amended -- is for "business or commercial uses." That's a common municipal ordinance restriction too. With the rise of HomeAway, VRBO, and other rental and home-sharing sites, short-term renting is a contentious issue. The problem in the HOA context is that many declarations are simply silent as to any leasing restrictions, leading the average homeowner to believe he or she has an untrammeled right to lease out a home for whatever term, short or long, so long as the renters aren't causing problems. If an HOA declaration is silent, an HOA needs to amend its declarations to address the issue. A silent declaration does not allow an HOA to take away rental rights. Content may continue . . .

Short-term rental ban rejected by Travis County court

In a clear victory for homeowners and property rights, a Travis County court has rejected an HOA ban on short-term rentals. Briarcliff Property Owners Association, Inc. v. Marvin William Hays, Jr., Cause No. D-1-GN-11-002233 (Order of March 14, 2012).Content may continue . . .

MORE HOA Leasing and Renting Crackdowns

HOA's Boards are unilaterally deciding to clamp down on short-term rentals even when the governing documents don't allow that or the HOA has been allowing such rentals for years or even decades. There are good defenses and counterclaims to such suits.Content may continue . . .

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.Content may continue . . .

Downtown Austin Condo Buyers, Beware!

Some downtown Austin condos assert they can impose leasing caps without getting a super-majority of owners to amend the filed declarations. Their arguments don't stand up to scrutiny.Content may continue . . .

HOA Restrictions Against Home-Based Businesses and Commercial Activities Are Outmoded and Unfair

HOA's often forbid "commercial" activities or "non-residential" activities. The new reality of the internet-connected world is that home-based business are important to the new economy, can be compatible with the residential character of a neighborhood, are usually lower-impact on the environment, and offer new freedoms for individuals. HOA's need to re-think their approach to this issue and stop bludgeoning homeowners with lawsuits that threaten their livelihoods. Content may continue . . .

HOA's, the CAI, and Gaming the System

Under Texas HOA law, the one sure winner in every dispute is the lawyers. One particular provision of the Texas Real Estate Code is particularly pernicious in driving HOA's and homeowners into litigation. Say it ain't so, Texas Legislature!Content may continue . . .

The Fundamental Flaw with HOA's

The governing documents (CC&R's -- covenants, conditions, and restrictions) and governing laws for the running of homeowners associations (HOA's) are too legalistic, abstruse, and technical for non-lawyers (i.e., your neighbors) to understand and enforce. That's why lawyers and property managers are getting rich at the expense of homeowners stuck with HOA's. We elect local governments and hire local officials to handle the complexities of property rights. HOA's should handle parties, beautification, and gripe sessions, not foreclosures and restrictions on others' freedoms.Content may continue . . .

HOA's and Freedom

HOA's are scary, and their trade group is even scarier.Content may continue . . .
J. Patrick Sutton Cases & Issues Blog