J. Patrick Sutton Cases & Issues Blog

The reason new restrictions imposed by "amendment" should not be enforceable.

I've filed some 20 cases around the state on behalf of subdivision clients whose rights are being taken away by "amendments" to restrictive covenants, I've continually tried to whittle down the theory of the case to something both "legal" — in a technical sense — and readily comprehensible, even pithy. My current thinking is . . .Content may continue . . .

Sell the horses you were allowed to have? Are you kidding me?

I've filed a new case on behalf of client who bought a 6-acre lot with a home. The deed restrictions specifically allowed "agricultural" uses and one large animal per acre. After my client bought four horses and built expensive outbuildings and fencing, a majority of neighbors got together to "amend" the restrictive covenants to prohibit agricultural uses and horses. I cannot think of a more fundamental kind of property right — except leasing! — which has been effectively confiscated from an owner. More and more, I believe that the bundle of rights that are fundamental to property ownership cannot be taken away without an owner's consent, to the point where they convey with the land despite a purported "amendment" which seeks to take them away. More on that in a later post.Content may continue . . .

A Response To Defenders of Architectural Control Committees

I received a tart email in response to a prior blog post about architectural control committees, and I want to respond to it here. The sender defended architectural control committees on two bases, which I address in turn.

(1)
The homeowners who serve on the committees are volunteers. Yes, they are, and with distressing frequency precisely because they wish to exercise control over people. The problem is not, at heart, the volunteers, who are often excellent people trying their best. The problem is the whole premise: that laypersons volunteering from year to year, without construction, design, or architectural backgrounds, are the appropriate way to dictate the development of a subdivision over the course of decades. The system invites incompetence and abuse. Architectural control ought to be a technical exercise carried out by compensated professionals not beholden to any HOA, association manager, HOA lawyer, or subdivision owners.

(2)
Some homeowners who serve on ACC's are excellent. Absolutely 100% true. But I am in the unique position of seeing the abusive situations because I get the calls from all over the state. I have no idea what the percentages are, and hopefully it's not more than, say, 10% of the ACC committeemembers who are crummy. But that's in a state of 25 million people, the majority of whom live in subdivisions, and the majority of which subdivisions have some form of architectural control committee. Content may continue . . .

The Onslaught Against Historically-Vital Leasing and Short-Term Rental Rights Continues

My caseload is now overwhelmingly property-rights oriented, particularly as regards leasing and short-term leasing. Property owners' right to lease out their properties, including short-term renting, are under determined assault all over Texas, in cities and subdivisions. I have represented hundreds of property owners defending time-honored leasing rights. I currently represent property owners in constitutional challenges in state and federal courts to municipal bans on short-term rentals, as well as all kinds of challenges to subdivision and HOA bans on STR's. Read on for more info. Content may continue . . .

The cruelty of architectural control committees

In Texas, developers who have a concept or a vision how a subdivision ought to look empower "architectural control committees" (ACC's) to continue reviewing architectural plans after the developer leaves. These committees are, with increasing frequency, deeply hostile and abusive to the very homeowners whom they are supposed to serve.

The problem is that developers make a ton of money doing what they do, while ACC's are just homeowners who volunteer their time. Who is going to volunteer gobs of time to reviewing architectural plans and deciding whether the plans are "harmonious" with the rest of the subdivision? My views on this are well-known: it's an invitation for busy-bodies, control freaks, and people with axes to grind. And as the world changes to connected-homes and different kinds of living arrangements, ACC members become intransigent, standing in the way of innovation and necessary change. To take just one example, before the Legislature intervened a few years ago, ACC's would routinely refuse to allow rainwater storage systems and solar power panels. And boy, did they hate it when they could no longer forbid them, though, it should be said, they still find ways to make it hard for owners to get them approved. Sigh.

Texas law makes the problem worse, actually. The Property Code gives ACC's broad discretion in rejecting building plans, and courts often assume that HOA's and ACC's a pass on almost anything they want to do to other homeowners. It is understandable that a developer had a concept or vision, but what is not understandable is the often gratuitous pettiness and intransigency of volunteers who seize control of ACC's long years after the developer leaves the scene. Yes, the job is thankless, and Yes, there are many perfectly fine and even excellent ACC's. But that's because enough people rise above temptation to make it work. This process should never have been left to unpaid volunteers without credentials. The whole scheme is an invitation to abuse. And it's not as if home buyers have a meaningful choice — most new subdivisions in the state are now architecturally controlled. Developers want to sell a concept, understood; but the whole notion that it will be executed, ultimately, by your neighbors, seems to me fundamentally misguided.

But, as with so many bad things, good for the lawyers. Content may continue . . .

Foreclosures for HOA dues and fines are an immoral scourge

Many years of practicing law relating to homeowners associations teaches me that no one should ever have their primary home (homestead) foreclosed on because of HOA dues, fines, or assessments. While it is, unfortunately, the law, the law in this instance is unfair, immoral, and unconscionable. Lawyers in this state who enable HOA's in taking away people's homesteads and tacking on thousands in attorney foreclosure fees to the bill — dwarfing the actual bill from the HOA — have abandoned conscience, in my opinion. They take part in a monstrous system. I have observed the means, methods, and motives of those who participate in the HOA-Industrial-Complex, and I believe the law has in essence sanctioned oppression and overreach of ordinary people by those with great means. No one should become homeless because of HOA dues, period. No one should be forced to pay lawyers thousands of dollars for the process of collecting HOA dues by any means. There should be strict limits on the interest, penalties, and fees that can be charged by an HOA, just as there are in all sorts of other contexts, and there should never, ever be a foreclosure against a homestead for such sums. Content may continue . . .

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!Content may continue . . .

Unfair Attorney Fee Recovery Statute - Tex. Prop. Code § 5.006

Texas has a special law devoted to the recovery of attorney's fees in deed restriction litigation, and it is deeply flawed, unfair, and in my view, unconstitutional. The law, at Tex. Prop. Code § 5.006, states that the party who brings a lawsuit for breach of restrictive covenant can recover attorney's fees. The courts have interpreted this to mean that the homeowner who gets sued for breach of restrictive covenant (deed restriction) cannot recover attorney's fees even if he or she defeats the lawsuit. Unfair? You bet. What it does, in practice, is force someone who thinks they might get sued for breach of restrictive covenant to race to the courthouse and sue first. In that way, the person who thinks he or she may be a target can preserve an attorney-fee claim by using a special procedure (called "declaratory judgment").

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When Subdivisions are Cities In All But Name

Lately, I've had a number of subdivision governing documents ("declarations," "CCR's," etc.) come across my desk that are just bizarrely lengthy and complicated. As I've said in previous posts, it's not reasonable to expect homeowners without law degrees to read and understand these documents. I realize that's the whole point — that lawyers and association managers have to run the show behind the scenes, generating fees in the process. But then we have the odd situation where homeowners are supposed to be able to control their own communities, but in effect the communities are run by a permanent bureaucracy of unelected, highly-paid technocrats. Can you say "Yes, Minister"? Content may continue . . .

The Wet Condo Problem

At any given time, I have three or four cases involving condominiums where the condo association's ("HOA") neglect has caused some form of damage within individual units. With the coming of global warming and the volatility of Central Texas weather, the most common fact pattern is water infiltration, usually from a leaking roof, bad flashing, building design defect, or other water control system failure (landscaping, hardscaping, plumbing). People often call me after an HOA (or property manager) has said, "We don't have to pay for any damage inside of units."

Bogus. Anyone who has either a contractual duty or a common-law duty to repair and maintain property is potentially liable if that failure results in damage to someone else. While it's true that an condo HOA is not required to repair and maintain individual units in most cases, a condo HOA
is responsible for its own breaches of contract or negligence if its failure to repair or maintain common elements (roof, foundation, etc.) causes damage to an individual unit.

These are often difficult cases because if an HOA is not keeping itself in repair, it's often because it doesn't have the cash. But that's not an excuse for not acting. HOA's are still required to do their duty, even if that means raising money by assessing all the owners or taking out loans to do it. HOA responses that "we don't have the money" are in essence an admission that the HOA is a failed entity that needs to be placed in the hands of a court-appointed receiver. Moreover, an HOA's failure to keep its property in good repair harshly penalize one or two owners at the expense of those not affected. Thus, ground-level units at one end of a building may be sodden and moldy, but those one or two owners are made to suffer while all the other units get a free ride to ignore serious building issues.

There are ways to solve these cases, but I have yet to see one that was solved quickly or without hardball lawyering. HOA's that are essentially failed have no one in charge to make litigation decisions. Condo boards that are unwilling to do their jobs and assess all owners to make repairs simply sit on these cases, intransigent, until forced by the court to act, since they can then point to a court order as the basis for assessing everyone. They also usually demonize the victims — people whose homes are, in many cases, rendered unlivable by constant water inundation and mold.
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Architectural Control Committee Swagger

I've seen it over and over in my HOA practice over the past 9 years: HOA architectural control committees that run amok and terrorize subdivisions by substituting their judgment for that of homeowners in even the most trivial of design and construction matters. Most horrifying are the icy building-plan-rejection letters in which the ACC (or a member thereof) assumes the tone of autocrat, dismissing the homeowner's proposals summarily and ordaining a list of things the ACC requires. It is, frankly, scary — but then, I chose not to live in an HOA. As will be seen, however, even avoiding living in an HOA doesn't insulate a homeowner from those who live to pass judgment on others.

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Texas Supreme Court Rejects HOA ban on STR's

Today, April 1, 2016, the Texas Supreme Court denied the HOA's request for review of the homeowner's significant win in NBRC PROPERTY OWNERS ASSOCIATION v. CRAIG ZGABAY AND TAMMY ZGABAY, No. 15-0730. The Third Court of Appeals in Austin rejected an HOA's arguments that the deed requirement of "residential use" bars short-term rentals (i.e., that they are a "business use" of property).

This was an important victory for homeowner rights since the Austin Court of Appeals held that when deed restrictions are unclear, they must be construed in favor of property owner's rights and against the party seeking to enforce an asserted restriction. The HOA was essentially arguing that HOA's always win because they say so. The HOA's petition was briefed well and at length by both sides, so the Texas Supreme Court's rejection of the HOA's petition is significant. The HOA argued that the Texas Supreme Court should clarify the standards for interpreting deed restrictions. The Zgabays argued that it was pointless for the Texas Supreme Court to take the case since
no method of interpretation could yield a win for the HOA. The Zgabays' argument prevailed.

I have another all-but-identical case coming up in the Fourth Court of Appeals in San Antonio. That's the
Tarr v. Timberwood Park HOA case. Similar cases are also pending in various trial courts. You would think HOA's would see the writing on the wall, but that's usually not their style. I suspect we'll continue to see them fight these cases in San Antonio, Dallas, and Houston to the bitter-end.Content may continue . . .

An innovative approach to short-term occupancy even where STR's are not allowed

Part of the fallout from my successful prosecution of the Zgabay case validating short-term rentals when deed restrictions only allow "residential use" is that HOA's are now doing what they always should have done in the first place: get together proper votes of all owners to amend the deed restrictions. However, that can hit very hard those persons who purchased properties based on the deed restrictions in place at the time of purchase — that is, where short-term rentals were not barred at the time of purchase, but then the right to rent for short terms got taken away by a valid amendment to the deed restrictions. Content may continue . . .

More on STR Win in Austin Court of Appeals

Letting the Zgabay decision sink in has yielded insights into what the Third Court of Appeals was doing. The Court's opinion is simplicity itself — the facts, after all, were undisputed — but its implications are far-reaching for Texas homeowners and give them a leg-up when fighting arbitrary HOA or neighbor interpretations of deed restrictions.Content may continue . . .

NIMBY STR's

Those who want to ban STR's and who demonize the owners often use, enjoy, and make money from short-term rentals themselves. Like, are you for real?Content may continue . . .

Pots calling kettles black -- HOA's that sue owners for working from home offices

HOA officers and directors engage in business use in their own homes all the time, yet they still sue other owners for prohibited "business use" of the same type, oblivious to their hypocrisy.Content may continue . . .

You can't escape HOA's even when you try!

I've been involved in a spate of cases where my clients purposely bought properties in subdivisions without mandatory HOA's, yet my clients STILL find themselves persecuted by HOA's!Content may continue . . .

HOA's are local-local governement

I think it's not generally appreciated by people who buy into subdivisions that HOA's are really local-local government. The deed restrictions are like a mini-Constitution that defines the powers of local-local HOA government. All too often, a small circle of owners maintain a tight grip on the board of directors of the HOA, effectively running an oligarchy — and sometimes a dictatorship. Many owners aren't willing to get involved, so a small group of owners gets to dictate the rights of the larger group unless and until a victimized owner is willing to sue — always a risky and expensive proposition. Too, the small circle of owners who run things have effective control of the voting processes, and they can make it hard for activist outsiders to get voted in.

Anyone who is thinking of buying into an HOA should consider that the value of the property they are buying is affected by the HOA and its board, plus the restrictive covenants themselves. A bad board can all but ruin the value of properties within a subdivision or condo. Even a good board is not a solution, because good boards in time can get voted out. Every year may bring a change, which at a minimum creates uncertainty. The only real constant is the behind-the-scenes players — the attorneys and property managers who effectively keep HOA's going, year-in and year-out. I call this the "HOA-Industrial Complex." Often, the Complex gets behind boards that behave badly, enabling actions that harm individuals without the resources to fight or defend themselves. Boards that allow the Complex to run HOA's without real human sensitivity not only harm the value of property, but tear apart communities. Often, the Complex argues that it's looking out for the community interest, when in reality it is looking out for itself at the expense of a community.

While I see no prospect of serious reform in the near future, at least the deed restrictions, as a writing that binds the parties, are a check on HOA power and abuse, and every homeowner has a right to seek relief when an HOA doesn't abide by its own mini-Constitution.

In addition, it's not generally appreciated that a small group of owners can usually force a special meeting of the membership to amend the mini-Constitution, such as to remove onerous restrictions on property uses. This is not a particularly difficult process, and it's not nearly as risky or expensive as litigation. Content may continue . . .

More STR cases -- losses, appeals

Having prevailed in a number of short-term rental cases in Travis County over the past several years, the going has been harder elsewhere. I have had a client lose on this issue against an HOA in Comal County in a case that is now on appeal and has been orally argued in the Texas Third Court of Appeals in Austin. The oral argument in that case was lively, and I am hopeful that the opinion will provide clear guidance (one way or the other) to homeowners seeking to rent for short terms in the absence of clear leasing wording in deed restrictions. The HOA's are now arguing that "residential use" means that short-term rentals are always banned. However, the HOA argument is that "residential" requires an "intent to remain permanently." My argument has been that that standard applies to both owners and tenants equally, so it would require owners to occupy their own homes permanently even if the property at issue is a vacation home or investment property. I don't see how that can be the law in the absence of clear deed restriction wording to the contrary. "Residential use," that is, applies equally to owners and renters, so you can't single out renters who don't stay permanently for a ban; you'd also have to ban owners who don't reside permanently at the homes they own. The other problem is that HOA's are no longer specifying what number of days constitutes an "intent to remain." My clients have no idea what the standard is and how to comply. In any event, all the "intent to remain" cases out there are cases where someone is seeking a state benefit, like in-state tuition, and not surprisingly there can be a minimum residency requirement before someone is affirmatively allowed a government benefit. I don't see how that relates to deed restrictions that are trying to ban "business use" and have nothing to do with the duration of a tenancy or owner-occupancy.

I also just learned that a client of mine was denied a win in Bexar County on this issue (this is the Tarr v. Timberwood Park HOA case in the Bexar County Court at Law #3), but I have not yet seen the court order. The HOA was arguing for "intent to remain permanently," however, so presumably the trial court agreed with the HOA to some extent. The procedural posture of the case means that the court isn't actually declaring the meaning of the restrictive covenants at issue in denying my client's motion for summary judgment. It may be some time before the practical effect of the court's ruling is known. I will update the blog accordingly.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 . . .

More HOA STR bans, and more HOA losses

HOA bans on STR's without clear declaration wording to support such bans still aren't gaining traction. My client won a case last week, I've got another coming up August 20, and another on September 3.Content may continue . . .

HOA's & STR's

It seems to me, from my small corner of the world, that things are heating up in the area of HOA's seeking to ban short-term rentals without amending their declarations. Readers of this blog will recall that my clients prevailed in such cases in the past, usually securing significant attorney-fee awards. But the lack of reported cases in Texas on the precise issue seems to embolden HOA's anyway, figuring the worst that happen is their insurance carriers will pay for the fallout!

The issue is that many HOA declarations ("declaration of conditions, covenants, and restrictions," AKA, "deed restrictions") are absolutely silent on the duration of allowed leasing. They allow leasing but do not purport to limit the length of time an owner must tailor the lease to. In Texas, leasing is an important property right and is considered a "use," and limitations on uses generally have to be done in the declaration. It's hard to amend a declaration, so HOA's try the short-cut of a board vote on new "rules" that take away leasing rights. IMLO, that's a no-go. A handful of persons cannot take away a fundamental property right that someone relied on when purchasing land.

The online leasing sites HomeAway, AirBNB, and others have made it very easy for homeowners to market their properties for STR's, and in Austin, for example, new city ordinances expressly allow STR's subject to licensing and rules. It's the way the world is going. If an HOA wants to take away the right completely, it needs a supermajority of all owners to do it. That's not easy, but it's not insurmountable. Content may continue . . .

The Problem with Duplex Condominium HOA's

In the Austin area, urban infill has put a premium on maximizing the square footage of new houses on expensive urban lots. Developers and builders are responding by building what used to be called "duplexes" but are increasingly being called "condominiums." The distinction has largely to do with permitting and zoning. 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 . . .

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 . . .
J. Patrick Sutton Cases & Issues Blog