Texas homeowners in the HOA-Industrial Complex
September 23, 2024 11:49
Over the past year, I've noticed a disturbing change in HOA management in Texas. Specifically, it appears that association management has gotten consolidated into a mere handful of very large management companies. So large, in fact, that they resemble mortgage collection companies.
That's no coincidence.
These large association management firms aim to drive down costs and increase revenues through consolidation, cost-cutting, and abuse. What homeowners experience is lost payments, unexplained or unjustified charges, an inability to speak with anyone competent or knowledgeable at the association management companies, and then the imposition of thousands of dollars in attorney's fees along with the filing of foreclosure. It's like the bad old days of the mortgage crisis, where ordinary people were caught up in a Kafkaesque system designed to punish and frustrate them.
I've also noticed that HOA industry lawyers formerly of the better sort seem to have succumbed to the temptation to become collection and foreclosure mills.
So, on top of all the other reasons Texas homeowners should be scared of buying into a subdivision, particularly one with an HOA, add to the list becoming victims of corporate overlords. Content may continue . . .
That's no coincidence.
These large association management firms aim to drive down costs and increase revenues through consolidation, cost-cutting, and abuse. What homeowners experience is lost payments, unexplained or unjustified charges, an inability to speak with anyone competent or knowledgeable at the association management companies, and then the imposition of thousands of dollars in attorney's fees along with the filing of foreclosure. It's like the bad old days of the mortgage crisis, where ordinary people were caught up in a Kafkaesque system designed to punish and frustrate them.
I've also noticed that HOA industry lawyers formerly of the better sort seem to have succumbed to the temptation to become collection and foreclosure mills.
So, on top of all the other reasons Texas homeowners should be scared of buying into a subdivision, particularly one with an HOA, add to the list becoming victims of corporate overlords. Content may continue . . .
Texas Supreme Court denies review of amendments to restrictive covenants which take away existing property rights
October 21, 2022 12:36
Today, the Texas Supreme Court declined to review the decisions of the Austin, Beaumont, and Houston 14th Court of Appeals which hold that an amendment to restrictive covenants which takes away pre-existing property rights (in those cases, the right to rent for short terms, among other things) is immediately enforceable against all owners.
The denial of review means that three very harsh decisions stand. Anyone who owns or buys real property in a subdivision thinking they have specific property rights needs to consult an attorney about whether those rights will continue. I don't see how anyone can now price real property since a majority of neighborhood owners can vote to take away preexisting rights. I am at a loss to understand how Texas, historically a property-rights state, can join the small minority of states which all rights to be taken away after closing. It is now up to the Legislature to act. Content may continue . . .
The denial of review means that three very harsh decisions stand. Anyone who owns or buys real property in a subdivision thinking they have specific property rights needs to consult an attorney about whether those rights will continue. I don't see how anyone can now price real property since a majority of neighborhood owners can vote to take away preexisting rights. I am at a loss to understand how Texas, historically a property-rights state, can join the small minority of states which all rights to be taken away after closing. It is now up to the Legislature to act. Content may continue . . .
Texas Supreme Court to take up issue whether a homeowner must sue all other homeowners in a subdivision when an HOA is sued
September 12, 2022 10:03
If you sue an HOA, do you have to sue all the individual homeowners too? HOA's say you do because they want to create an insurmountable burden to challenging board actions.
Last year, my clients, the Kappmeyers, sued an HOA in Rockport whose board unilaterally amended the restrictive covenants without getting a vote of the owners. The HOA, despite claiming that it now represented all the owners (because it gave itself that power), then demanded that my clients sue all 700 other owners in order to keep the lawsuit alive. The HOA argues that since every homeowner is "affected" by a lawsuit which challenges a board's authority, every homeowner must be sued. Obviously, an ordinary homeowner suing an HOA for the HOA's own actions cannot reasonably sue 700 people. Nevertheless, both the trial court and the court of appeals held that my clients must.
I've taken an informal poll of lawyers and non-lawyers, and no one I've spoken with (except the lawyers for the HOA in this case) believes it is fair, just, or legally valid to require a homeowner to sue all other subdivision homeowners any time the HOA itself is sued.
The Kappmeyers took their complaint to the Texas Supreme Court using a procedure called "mandamus," which allows an issue to go up on appeal before a lawsuit is completed. On September 2, 2022, the Texas Supreme Court agreed to take up the case. It is set to be heard on December 1, 2022. Arguments can be viewed live, in real time, by following links on the Texas Supreme Court's website. Content may continue . . .
Last year, my clients, the Kappmeyers, sued an HOA in Rockport whose board unilaterally amended the restrictive covenants without getting a vote of the owners. The HOA, despite claiming that it now represented all the owners (because it gave itself that power), then demanded that my clients sue all 700 other owners in order to keep the lawsuit alive. The HOA argues that since every homeowner is "affected" by a lawsuit which challenges a board's authority, every homeowner must be sued. Obviously, an ordinary homeowner suing an HOA for the HOA's own actions cannot reasonably sue 700 people. Nevertheless, both the trial court and the court of appeals held that my clients must.
I've taken an informal poll of lawyers and non-lawyers, and no one I've spoken with (except the lawyers for the HOA in this case) believes it is fair, just, or legally valid to require a homeowner to sue all other subdivision homeowners any time the HOA itself is sued.
The Kappmeyers took their complaint to the Texas Supreme Court using a procedure called "mandamus," which allows an issue to go up on appeal before a lawsuit is completed. On September 2, 2022, the Texas Supreme Court agreed to take up the case. It is set to be heard on December 1, 2022. Arguments can be viewed live, in real time, by following links on the Texas Supreme Court's website. Content may continue . . .
The deed restriction amendment issue is now before the Texas Supreme Court
May 18, 2022 07:35
Readers of this blog are aware that all over the state, subdivisions are abruptly "amending" restrictive covenants to impose new restrictions on property use. Owners who bought property before the new restrictions were adopted are being told they have lost the rights they purchased! I have been shepherding these cases through trial courts and courts of appeals throughout the state, and now two of the cases have been consolidated in the Texas Supreme Court. The linked petition provides the background and the cases nationwide on this issue. I am hopeful that we will, for the first time, get a statewide answer to this very important question.Content may continue . . .
Texas Supreme Court grants review in STR case
December 16, 2021 09:56
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 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 reason new restrictions imposed by "amendment" should not be enforceable.
October 16, 2021 07:52
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?
September 04, 2021 10:53
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 . . .
The cruelty of architectural control committees
March 31, 2021 07:54
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 . . .
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 . . .
HOA's Are Just 2d Mortgages By Another Name
January 05, 2021 12:36
I've been getting more calls from media lately about HOA problems, and it occurred to me that there are strong parallels between the mortgage industry and the HOA-Industrial-Complex:
1. When you get a purchase-money mortgage to buy a house, the bank takes your house if you don't pay. When you buy into an HOA, the HOA takes your house if you don't pay assessments. In essence, buy agreeing to be a "member" of an HOA, you are buying a club membership to use the pool, amenities center, roads, and common areas, but unlike a normal club membership, if you don't pay, you lose your house. My colleagues on the HOA side of the Bar will be happy to foreclose on you and then charge you many thousands of dollars to extricate yourself from their clutches.
2. The mortgage and HOA industries have consolidated into giant collection entities. Banks and HOA's both hire large, third-party corporations whose job is to collect your money, hit you with late fees and fines if you don't, and then take your home at foreclosure. Rumor has it that investors are ready and willing to learn about these foreclosures and pounce on purchasing such homes at foreclosure. In both cases, too, the would-be party in charge (Bank, HOA) is really just the tail wagging the dog. Banks don't hold mortgages any more; they're sold off and securitized, then held by trusts. Big HOA's can't be run by ordinary people, as a rule, so HOA's have to hire the big association managers, which are rapidly consolidating into big, faceless companies.
So when you think you're buying into a "community," think again. When you think you're getting a mortgage from a "bank," think again. The communities and banks are screens for wealthy, powerful entities whose sole aim is to capture a huge revenue stream from . . . ordinary people. Content may continue . . .
1. When you get a purchase-money mortgage to buy a house, the bank takes your house if you don't pay. When you buy into an HOA, the HOA takes your house if you don't pay assessments. In essence, buy agreeing to be a "member" of an HOA, you are buying a club membership to use the pool, amenities center, roads, and common areas, but unlike a normal club membership, if you don't pay, you lose your house. My colleagues on the HOA side of the Bar will be happy to foreclose on you and then charge you many thousands of dollars to extricate yourself from their clutches.
2. The mortgage and HOA industries have consolidated into giant collection entities. Banks and HOA's both hire large, third-party corporations whose job is to collect your money, hit you with late fees and fines if you don't, and then take your home at foreclosure. Rumor has it that investors are ready and willing to learn about these foreclosures and pounce on purchasing such homes at foreclosure. In both cases, too, the would-be party in charge (Bank, HOA) is really just the tail wagging the dog. Banks don't hold mortgages any more; they're sold off and securitized, then held by trusts. Big HOA's can't be run by ordinary people, as a rule, so HOA's have to hire the big association managers, which are rapidly consolidating into big, faceless companies.
So when you think you're buying into a "community," think again. When you think you're getting a mortgage from a "bank," think again. The communities and banks are screens for wealthy, powerful entities whose sole aim is to capture a huge revenue stream from . . . ordinary people. Content may continue . . .
The Consequences of Tarr v. Timberwood Park
September 06, 2018 14:19
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 . . .
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 . . .
STR Article in Texas Tribune
April 23, 2018 15:57
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 . . .
Amendments to Restrictive Covenants That Take Away Property Rights Need to Be Challenged
March 30, 2018 08:41
As the short-term rental battles become ever more pitched, more subdivisions (and HOA's) are wielding the power to amend their restrictions — a majority or supermajority votes to amend the restrictions to bar short-term rentals or even leasing generally. Over the past several years, I have become increasingly concerned about this majority-rules approach. On the one hand, it's a fair vote, right? But on the other hand, clients come to me who purchased property precisely because of the leasing rights granted in the restrictive covenants. They purchase in anticipation of leasing income, whether for short terms or long terms. Is it fair for such fundamental property rights to be taken from owners who relied upon them when purchasing? I believe not.
Texas law is far from clear on the issue of how far amendments to restrictive covenants can go. However, in the context of city ordinances, it's clear that cities cannot take away vested property rights from owners who purchased property under one set of rules guaranteeing those rights. In addition, the Texas condominium laws require a 100% owner vote for fundamental changes in ownership rights. Finally, other states that have squarely addressed the issue of restrictive covenant amendments which take away important property rights have protected owners who purchased under one set of rights.
I believe this is an important issue that needs to be taken all the way up to the Texas Supreme Court. There needs to be clarity as to how far a majority of owners can go in taking away the vested property rights of other owners in a subdivision. Content may continue . . .
Texas law is far from clear on the issue of how far amendments to restrictive covenants can go. However, in the context of city ordinances, it's clear that cities cannot take away vested property rights from owners who purchased property under one set of rules guaranteeing those rights. In addition, the Texas condominium laws require a 100% owner vote for fundamental changes in ownership rights. Finally, other states that have squarely addressed the issue of restrictive covenant amendments which take away important property rights have protected owners who purchased under one set of rights.
I believe this is an important issue that needs to be taken all the way up to the Texas Supreme Court. There needs to be clarity as to how far a majority of owners can go in taking away the vested property rights of other owners in a subdivision. Content may continue . . .
KAOS, CONTROL: Declarant Turnover Of HOA
March 16, 2018 13:11
I'm calling this post "KAOS and CONTROL" because of the complexity, confusion, and bumbling in the process of subdivision developers' turnover of power to the HOA's of the subdivisions they create. KAOS is that period after some homes are sold in a new subdivision but before all homes are sold or before the developer has fully relinquished CONTROL. (And of course, KAOS is the arch-nemesis of CONTROL). It's a rickety scaffolding for an in-joke, but hey, I'm not above strained analogies.
There is often a lengthy period of years when owners are in the dark about what is happening as their community gets built, extended, and even radically changed during the many years the original developer still has almost complete control over the subdivision and its HOA. During that time, developers can engage in abuse or shenanigans to the detriment of the owners who previously bought in under a certain set of assumptions — how big the community would be, how expensive the assessments would be, what amenities would get built, what kinds of homes would be built, etc. Owners are surprised to learn that developers have so much power under the governing documents and Texas law that the developers can maintain almost complete control for not just years, but decades. Any idea that the HOA represents the owners is a joke because the developer controls all or most board of directors seats indefinitely, and developers routinely appoint their friends, family, and employees to those HOA Boards. Obviously, those directors are beholden to the developer, not the community at large, despite the fact that they have fiduciary duties to the community. Often, they just ignore those duties and rubber-stamp whatever the developer needs and wants.
Content may continue . . .
There is often a lengthy period of years when owners are in the dark about what is happening as their community gets built, extended, and even radically changed during the many years the original developer still has almost complete control over the subdivision and its HOA. During that time, developers can engage in abuse or shenanigans to the detriment of the owners who previously bought in under a certain set of assumptions — how big the community would be, how expensive the assessments would be, what amenities would get built, what kinds of homes would be built, etc. Owners are surprised to learn that developers have so much power under the governing documents and Texas law that the developers can maintain almost complete control for not just years, but decades. Any idea that the HOA represents the owners is a joke because the developer controls all or most board of directors seats indefinitely, and developers routinely appoint their friends, family, and employees to those HOA Boards. Obviously, those directors are beholden to the developer, not the community at large, despite the fact that they have fiduciary duties to the community. Often, they just ignore those duties and rubber-stamp whatever the developer needs and wants.
Content may continue . . .
All the wrong arguments about STR's
June 20, 2017 10:29
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 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
November 04, 2016 10:30
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
July 09, 2016 10:29
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?
June 24, 2016 10:26
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
September 06, 2014 10:38
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 . . .
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
August 24, 2014 14:59
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 . . .
You can also search this blog for some of my articles on the subject.Content may continue . . .
More HOA perversity
August 20, 2014 10:41
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
August 17, 2014 12:22
HOA boards have perverse incentives to keep litigating bad cases because the board members never face any real consequences.Content may continue . . .
Balcones Woods Club HOA bullies homeowner over short-term rentals
September 15, 2013 16:05
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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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
May 21, 2013 09:17
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!
April 02, 2013 08:44
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 . . .
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
March 25, 2013 13:16
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 . . .
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
June 17, 2012 13:59
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
April 29, 2012 13:43
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
March 14, 2012 10:10
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
September 23, 2011 14:16
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
May 27, 2011 12:50
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!
May 16, 2011 15:35
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
February 20, 2011 10:17
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
September 18, 2010 14:04
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
June 23, 2010 15:09
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
April 30, 2010 09:15
HOA's are scary, and their trade group is even scarier.Content may continue . . .