J. Patrick Sutton Cases & Issues Blog
short-term rentals

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 . . .

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 . . .

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 . . .

Welcome, SXSW STR tenants, to Austin: Police State

Austin is now a city where code police surveil ordinary people exercising ordinary property rights and going about their daily lives on their own land. Code officers train lenses on owners and tenants. They come onto the land and interrogate people. They stick lenses to window glass and shoot photos of people engaged in private, intimate activity. They issue code violations — believe it or not — for advertising on the internet.

Nosy neighbors peer through binoculars into private homes. They shoot photos of license plates and people relaxing in back yards and on porches. They confront and abuse tenants. They call in harassing, often false and extravagant claims. They stick their noses into the private affairs of human beings with lawful rights to occupy residences.

Welcome, visitors, to sunny Austin, Texas: Police State. Don't be alarmed when the code police and the neighbors knock on your door asking to explain who you are, where you're from, how many people are in your home, what their ages are, what you plan to do while in the home, and how long you plan to stay. It's all part of the Austin Experience.

I will be adding to the body of this blog over the coming days with a longer commentary and analysis of Austin's new STR ordinances and bans, including the various ways in which it may violate the Texas and U.S. Constitutions, along with a discussion of how a few elected officials have created an enormous new surveillance and enforcement superstructure that tramples upon fundamental personal and economic liberties.
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The City of Austin's Kafkaesque Short-Term Rental License-Denial Scheme

Based on what I see in my practice, the City of Austin appears to be systematically trying to prevent further Type 1 (owner-occupant) short-term rental licenses. When homeowners pay for an STR license and comply with all the requirements, the City of Austin doesn't then issue the license. It keeps people's money, but it then apparently uses the information it has just gotten to do drop-in inspections on the applicant's home. If an inspector observes someone there that the inspector may believe is a renter (whether confirmed or not), a notice of violation gets issued. The notice of violation then serves as the basis for the City of Austin to deny the homeowner the STR license the City refused to issue when it was paid for! Then, when the homeowner tries to figure out why the City won't issue the license, the homeowner gets a runaround — "complaints have been made" and other vague explanations — and cannot get a satisfactory answer as to anything. At the Code Department internal appeals process, the department pulls out a file full of information that was never previously provided to the homeowner, ostensibly with many "complaints." The appeal is denied.

So, while Type 1 short-term rentals are supposed to be legal in Austin, the City is now making them
de facto illegal by blocking the issuance of licenses.

Stay tuned for further developments.
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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 . . .

Big Win for STR Rights In Texas in Austin Court of Appeals

The Texas Third Court of Appeals in Austin has issued an important decision validating short-term rentals in a case I briefed and argued both at trial and on appeal. To summarize briefly, if restrictive covenants do not define "residential use" to limit leasing based on duration, then the restrictive covenants will be interpreted to favor the free and open use of property. Thus, the court will not write into the restrictive covenants any minimum duration for rentals. The case is Zgabay v. NBRC Property Owners Assoc., No. 03-14-00660 (Tex. App. — Austin August 28, 2015). This will be, for the time being, the leading case authority on this issue in Texas. However, I have other cases percolating in other appellate districts, and I expect one or more of these to go up on appeal in the coming months.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 . . .

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 . . .

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 . . .

Update on Balcones Woods Clubs STR Case

Just before the court was to hear the plaintiff homeowner's motion for summary judgment on undisputed HOA declaration wording, the parties worked out a settlement whereby the homeowner kept the right to continue short-term rentals. The handwriting was on the wall, IMLO, as to how the court would rule, so I think the HOA acted sensibly in not continuing to contest the homeowner's right to rent for short terms. 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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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 . . .
J. Patrick Sutton Cases & Issues Blog