J. Patrick Sutton Cases & Issues Blog

Don't Count On Leasing (and possibly other) Rights in Subdivisions: Texas Supreme Court declines to take up short-term rental amendment cases

Today, January 26, 2024, the Texas Supreme Court declined to take up decisions from the Austin and Houston courts of appeals which allow majorities in subdivisions to take away leasing rights from existing owners. The cases are:

  • Chu v. Windermere Lakes Homeowners Ass'n, Inc., 652 S.W.3d 899, 902 (Tex. App. – Houston [14th Dist.] 2022)
  • Angelwylde HOA, Inc. v. Fournier, No. 03-21-00269-CV, 2023 WL 2542339 (Tex. App. – Austin Mar. 17, 2023)
  • Cauthorn v. Pirates Prop. Owners' Ass'n, No. 01-22-00401-CV, 2023 WL 5535665 (Tex. App. – Houston [1st Dist.] Aug. 29, 2023)
  • Cottonwood Trail Investments, LLC v. Pirates Prop. Owners' Ass'n, No. 01-22-00400-CV, 2023 WL 5535664 (Tex. App. – Houston [1st Dist.] Aug. 29, 2023)

So thus far, the Beaumont, Austin, and Houston Courts of Appeals allow leasing rights to be taken away by amendments to restrictive covenants.

My clients the Bayliffs have just filed a petition in the Texas Supreme Cout in a case involving the sale of the common-area parkland. The Austin Court of Appeals — yet again — allowed a majority to amend the covenants to permit the common elements to be sold off and converted to a home lot.
BLF LLC v. Landing at Blanco Prop. Owners Ass'n, No. 03-22-00423-CV, 2023 WL 8607028 (Tex. App. – Austin Dec. 13, 2023, pet. filed) (mem. op.).

That leaves 10 other courts of appeals which have not addressed the issue whether amendments can take away important rigths, including Dallas, Fort Worth, Tyler, San Antonio, El Paso, Amarillo, and Corpus Christi.

While it is impossible to predict how this issue will get resolved in those other appeals districts, the existence of decisions in Austin, Beaumont, and Houston is a problem for everyone. Anyone planning to buy a home in a subdivision has got to be advised that rights they
think they are buying may be taken away immediately after purchase.

It is vital that all buyers of subdivision homes in Texas (whether there is an HOA or not) consult an attorney before doing so. Texas law does not allow subdivisions with HOA's to require a 100% vote for amendments, so it becomes difficult for most buyers to escape the problem of amendments which take away rights.

Content may continue . . .

City of Dickinson Short-Term Rental Ban Declared Unconstitutional

On January 4, 2024, my clients, who own a home in Galveston County which they rent out for short terms, got the City of Dickinson's ban on short-term rentals declared unconstitutional on multiple grounds. After the final hearing on my clients' claim for attorney's fees, the judgment will be final, allowing the City to seek an appeal. Content may continue . . .

Injunction Against Hollywood Park, Texas Short-Term Rental Ban

On December 22, 2023, my clients — homeowners in Hollywood Park, Texas, a small city in the San Antonio metro area — got a preliminary injunction in federal court barring the town from enforcing a ban on short-term rentals. My clients had purchased and improved homes based on the lack of any restrictions, intending to both live in the homes and rent them out at other times. The federal court, determining that the trend in the law is to protect the rights of owners who have historical leasing rights, enjoined enforcement of the town's new ban while the case proceeds to trial. Content may continue . . .

In important win for Austin homeowner, federal court strikes down City of Austin Short-Term Rental Ordinance

On August 1, 2023, the U.S. District Court in Austin, Texas struck down the City of Austin's ban on short-term leasing by non-resident owners.

My clients, the Andings, live in Houston. They bought a second home in Austin in 2014. They sought to rent it out when not using it. The City of Austin in 2016 banned anyone who is not a permanent occupant of their Austin home from renting out that home.

In 2019, the Austin Court of Appeals (state court) struck down this ban on non-resident owners on the basis that it took rights away retroactively in violation of the Texas Constitution, but the City of Austin still refused to allow non-resident owners to rent out their homes for short terms, asserting that the 2019 decision was narrow, applying only to owners who
already had licenses as of 2016. The Andings still couldn't get their STR license.

In late 2022, separately, the 5th Circuit U.S. Court of Appeals struck down a similar ordinance in New Orleans on the basis that it unconstitutionally discriminated against interstate commerce.

Despite all this, the City of Austin
still refused to issue my clients, the Andings, a short-term rental license.

With the 2022 5th Circuit precedent in hand, the Andings filed suit in federal court in Austin. On August 1, their claim was vindicated. The federal court struck down the Austin STR ban
on two separate and independent bases — retroactivity per the 2019 Austin Court of Appeals authority, and interstate commerce per the 2022 5th Circuit U.S. Court of Appeals authority.

As of this writing, with the federal court's decision only a week old, it is unknown what Austin will do. It can appeal, or it can finally throw in the towel now that state and federal courts have invalidated the monopoly on short-term rentals it gave to permanent Austin residents at the expense of everyone else in the United States.
Content may continue . . .

Emergency - Texas SB 929 May Hurt You

Those relying on the new Texas law — SB 929 — which seems to help short-term rental rights should contact a lawyer immediately. You can lose vital property rights and a great deal of money if you comply with, or pursue remedies under, that new law. I think the law is a calamity for property owners who lease out their homes, including for short terms. Content may continue . . .

5th Circuit U.S. Court of Appeals reverses federal district court, allowing challenges to New Braunfels' STR ban to proceed to trial

On June 16, 2023, my clients' right to challenge the City of New Braunfels' ban on short-term rentals were vindicated by the 5th Circuit U.S. Court of Appeals.

My clients sued in federal district court to overturn New Braunfels' ban on short-term rentals. The federal district court summarily dismissed the case, concluding that my clients could not even state a valid legal claim. My clients were not even allowed to conduct any discovery into whether the City's rationale for banning short-term rentals had any factual basis.

The 5th Circuit, in New Orleans, reversed at lightning speed on June 16 after oral argument on June 7! And while the opinion is very short, it is momentous. For one thing, it is a
published decision, meaning it constitutes legal precedent. For another, it establishes that homeowners (and other litigants) have a right to force the government to demonstrate that it has some rational basis for its laws. Had my clients lost in the 5th Circuit, it would become nearly impossible for anyone to challenge city ordinances which trample on property rights.

For now, the City of New Braunfels apparently intends to ask the 5th Circuit to reconsider its decision. If it declines, then the case goes back to the trial court for discovery into the City's basis for its ordinance and then final trial.

On the same day as the 5th Circuit reversed and allowed the case to go to trial, my clients in Grapevine
similarly won the right to go to final trial when the Texas Supreme Court upheld their win on appeal. Content may continue . . .

Texas Supreme Court lets Grapevine STR owners' win stand

On June 16, 2023, the Texas Supreme Court declined the City of Grapevine's request to ban short-term rentals, upholding my clients' claims and continued temporary injunction barring enforcement of a short-term rental ban.

At the end of 2021, the Fort Worth Court of Appeals held in a case brought by my homeowner clients (
City of Grapevine v. Muns, 651 S.W.3d 317 (Tex. App. - Fort Worth 2021)) that the homeowners fighting the city's ban on short-term rentals stated valid constitutional challenges. The City of Grapevine asked the Texas Supreme Court to step in and reverse, but the Court declined to do so. The Fort Worth Court of Appeals' decision stands.

What happens now is that the case goes to final trial before the Tarrant County District Court. With it having been established that homeowners fighting city bans on STR's state valid claims under the Texas Constitution, all that remains is for the trial court to determine whether such claims should succeed on my clients' facts.

When the Texas Supreme Court declined to reverse the Fort Worth Court of Appeals' decision, two justices on the Supreme Court
went out of their way to invite a cleaner, final case to be presented for review and decision. Content may continue . . .

Huge win for short-term rental rights

In a huge win for short-term rental rights, on August 22, 2022, the Fifth Circuit U.S. Court of Appeals in New Orleans held that a city cannot ban non-resident owners from renting out their homes for short terms. See Hignell-Stark v. City of New Orleans, 46 F.4th 317 (5th Cir. 2022).

New Orleans, like the City of Austin, forbids homeowners who do not make a home their "primary residence" from renting out their homes for short terms. Which means that, as in a case I'm handling here in Austin, a homeowner who has their homestead in Houston but a second, vacation home in Austin is forbidden from renting out their Austin home for short terms. Sound unfair?

It is. It violates the U.S. Constitution's prohibition on discriminating against interstate commerce. The effect of the ordinance is to limit STR's exclusively to Austin residents, a clear, plain violation of the Commerce Clause of the U.S. Constitution. So the Fifth Circuit ruled the New Orleans ordinance void. If STR's are allowed (with a license, for instance), the court concluded, a city must allow
anyone who owns a home to obtain a license.

This, obviously, spells doom for the City of Austin's STR ban, which expressly denies non-occupying-owners the ability to get an STR license. My clients are now moving forward with injunction requests to prevent the City from enforcing its ordinance against those to whom it has refused to issue licenses.
Content may continue . . .

Texas Supreme Court grants review in STR case

On December 10, 2021, the Texas Supreme Court agreed to hear a case brought by a homeowner client of mine. The case is JBrice Holdings LLC v. Wilcrest Walk Townhomes Ass'n, Inc., No. 14-17-00790-CV, 2020 WL 4759947, at *1 (Tex. App. - Houston [14th Dist.] Aug. 18, 2020, review granted Dec. 10, 2021).

The homeowner bought homes whose restrictive covenants gave owners "the right to lease with no restriction." The trial court determined that "the right to lease with no restriction" means that leases must be for more than 7 days. The Houston 14th Court of Appeals then affirmed the trial court but on somewhat different grounds, holding that an HOA's board can adopt rules barring "transient use" even if renting is unrestricted. My client's petition complained loudly that the lower courts were simply writing new restrictive covenants and justifying it by using different words to refer to restricting leasing. The Texas Supreme Court's grant of review suggests that at least some justices on the Supreme Court are troubled when an owner buys a "right to lease with no restriction" which is then restricted by an HOA board acting alone.

The Texas Supreme Court provides a longer case summary. Oral argument is set for February 3, 2022. The briefs are all available on the Supreme Court's website.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 . . .

No, A City Can't Ban STR's says the Austin Court of Appeals

An important new decision from the Austin Court of Appeals agrees: No, a city can't ban STR's outright. On November 27, 2019, the Third Court of Appeals decided Zaatari v. City of Austin, Appeal No. 03-17-00812-CV and invalidated the City of Austin's ban on short-term rentals by owners who do not claim a home as a homestead. The opinion held that a ban is an unconstitutional retroactive law. Why retroactive? This is the critical holding: because the right to rent for all durations is a fundamental property right protected by the Texas Constitution.

This dovetails nicely with a case I handle, Muns et al. v. City of Grapevine, pending in the Tarrant County District Court and Fort Worth's Second Court of Appeals, in which the trial court has temporarily enjoined the City of Grapevine STR ban while the court of appeals decides some gateway jurisdiction questions. Based on Zaatari, one would expect the Grapevine case to go much the same way — invalidating the Grapevine ban because it retroactively takes away a settled property right.

The new Zataari decision was not unanimous — it drew a dissent from one of the new justices on that court. I expect a lot more fireworks on city ordinance cases in the next year!
Content may continue . . .

City Ordiances and STR's

One STR issue that is heating up is whether city ordinances that ban short-term rentals are vulnerable to legal challenge. I believe they are, and on several constitutional grounds. A Texas appeals court in Houston recently allowed such a challenge to proceed based on the theory that imposing such an ordinance on a homeowner who purchased based on STR rights had it taken away — an unfair “taking” of property. See Village of Tiki Island v. Ronquille, 463 S.W.3d 562, 565 (Tex. App. - Houston [1st Dist.] 2015).

The Austin STR ordinance seems to me to be unconstitutional on several grounds. I represent one client in a challenge to the ordinance based on its vagueness in not making clear whether leases of 30 days or more are exempt. The City of Austin is requiring an STR permit even for long-term leases if tenants do not physically occupy a property for the entire term of their lease, in effect making it impossible for any landlord to avoid the STR ordinance. If the City knocks on the door and the tenant says she is only staying for three days, the City issues a citation for renting without an STR license even if the lease is for 30 days or more! Obviously, when someone leases a property, they need not actually stay there if they don't wish to. Any owner who wishes to avoid the STR ordinance necessarily leases for 30 days or more, but that's no safe harbor in Austin.Content may continue . . .

Can A City Ban STR's?

I have been working on short-term rental issues for 9 years, first in the context of deed restrictions, and more recently in the context of city ordinances. Until I saw some recent city ordinances which outright BAN STR's, I had sort of assumed that a City could, if it writes an ordinance carefully, ban STR's.

I've changed my tune. I've wracked my brain trying to see how a city — particularly a Texas city — can pick out one type of interest of land -- residential lease — and prevent an owner from allowing other human beings to stay at that land under just that one kind of possessory interest. Where I land is that it seems unlikely to me that any city will be able to prove that DURATION OF LEASE provides a rational basis for BARRING RESIDENCY. Furthermore, I think that the Legislature has already preempted cities from outright BARRING STR's — after all, Texas raises revenue from them by taxing them expressly. Could a city ban all hotels? Sounds absurd, right? The Legislature already regulates hotels and earns revenue from the Hotel Tax. How, then, can cities ban the very activity which the Legislature wants to allow?

The issues go deeper, actually, impinging upon fundamental liberty interests. People structure real property possessory interests in all sorts of ways, none of which are readily distinguishable from leasing when it comes to minimum duration of stay. The law allows these various ways of structuring possessory rights. Why would a tenant have fewer possessory rights than, say, the co-owner of an LLC?

As this issue heats up, I expect to see — and argue — very direct challenges to the very power of a city to ban STR's. Without action by the Legislature, my current view is that cities cannot do it. They can regulate many other aspects of real property use — nuisance, noise, occupancy (with an asterisk, since, again, the Legislature has already regulated that area) — but I strongly doubt they can bar a class of people from using property in the normal residential manner. Content may continue . . .

Ways In Which Texas Cities Trounce Property Owners' Constitutional Rights

Some anecdotes from real life:

  • The City of Austin issues a bed-and-breakfast license. Neighbors repeatedly call in the property for "renting for short terms." Meanwhile, the B&B is up and running and has bookings extending into the future. The City of Austin, on a Friday, revokes the B&B license, asserting it issued it "in error." On Saturday, Austin Code Enforcement officers descend on the B&B and commence issuing citations for "renting for short terms without a short-term rental license."

  • The City of Grapevine allows STR's for years and collects local short-term occupancy taxes from property owners who rent out their homes for short terms. The City tells owners there are no regulations in place for STR's. Many property owners invest in properties in reliance on their right to rent for short terms. A search reveals no ordinances which regulate STR's. Abruptly, the City of Grapevine announces that it is barring STR's effective in 45 days.

What's wrong with this picture? Content may continue . . .

The Consequences of Tarr v. Timberwood Park

After my client prevailed in the important Tarr v. Timberwood Park case in the Texas Supreme Court, the consequences have been exactly what Ken Tarr (and I) had hoped: the regulation of short-term rentals has moved to the community for a vote. All over the state, subdivisions and HOA's are instituting the amendment process to get restrictive covenants changed. Cities are considering or passing ordinances. So, instead of tricking and surprising people with strained interpretations of old rules, subdivisions and cities are enacting new ones. While there was a lot of grumbling about the Texas Supreme Court's refusal to act as the legislature on the STR issue, I think lawyers all over the state are telling their clients to move the issue to the voting hall instead of trying to harass people with unfair, expensive lawsuits.

Alas, if only that were unalloyed good news. Most of the action statewide is to ban STR's, though in varying degrees depending on bogus rationales — owner-occupied vs. non-owner-occupied, for example, or 25% of homes only. Those kinds of regulations present all sorts of problems and unfairnesses.

In addition, some of the amended restrictions I have seen are not very clear. Some of the city ordinances are not only unclear, but either draconian or outright unconstitutional. While I am heartened that people are exercising the vote, I am concerned that, as has happened in Austin, hastily-written or ill-conceived STR regulations are just going to generate more litigation. Good for lawyers, of course; bad for everyone else.

Also, I continue to believe that where owners already have a vested property right in renting a property for short terms, both constitutional and Texas statutory requirements forbid an abrupt taking of such rights. However, as I have blogged before, Texas law is not clear or settled in this area. That issue, too, is likely to result in litigation.

Perhaps the saddest part of the shift of STR regulation to local voting is that badly-written restrictions and ordinances still put the onus on individual homeowners to fight The Man. I've taken in many calls and had many meetings where I advised that a restriction or ordinance had serious flaws, but the time and expense to litigate the issues is too expensive for most ordinary homeowners to undertake.

Probably the right answer is for the Texas Legislature to regulate this area comprehensively. In that way, local ordinances will not be allowed to conflict with state law, and state law can be more carefully composed based on input from everyone.
Content may continue . . .


My client, Ken Tarr, has now prevailed in a case that protects Texas property owners statewide. On May 25, 2018, the Texas Supreme Court, in a unanimous decision authored by Justice Brown, held that short-term rentals are not barred by the widespread, typical "residential use only" deed restriction. Even more importantly, the case announces a rule that restrictions cannot be interpreted into existence where silence reigns. Wow! We can now say with some confidence that what is not expressly forbidden by deed restrictions is allowed. Seems like a no-brainer, but it's been a long time coming — I've been litigating short-term rental cases for 9 years, pushing them forward across the state in hopes of getting one up to the Supreme Court.

"Residential use only" is the commonest deed restriction and zoning ordinance and goes back over 100 years. Opponents of short-term rentals insist that short-duration leases constitute the operation of a business at a home, a logically untenable position for any number of reasons — not the least of which is that the tenants are not doing anything different on day 31 than they were doing on day 29. The Texas Supreme Court, joining at least 19 other states, rejected the business-use argument in a lengthy, carefully-reasoned, and logically unassailable opinion. The new decision is sufficiently exhaustive that it seems destined to become the leading state supreme court opinion in this area of the law. Content may continue . . .

STR Article in Texas Tribune

I was interviewed as part of a new article in the Texas Tribune about short-term rentals. It's an informative summary of legislative and legal battles over the issue in Texas. I commend it to you. 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.
Content may continue . . .
J. Patrick Sutton Cases & Issues Blog