On March 24, 2022, both the Austin and Beaumont Courts of Appeals held that after someone buys a home, a majority of their neighbors can vote to impose new restrictions or take away fundamental property rights which existed at the time of purchase. These are the first two of many cases I am prosecuting on behalf of clients around the state. Both the new cases involve short-term rentals, but their implications are vast. In effect, it means that no purchaser of real property can assume that the property rights they are buying will exist a month after closing. If a majority of the other owners decide to change the bargain, whatever rights were in effect before are toast. The cases are:

Adlong v. Twin Shores POA, No. 09-21-00166-CV (Tex. App. - Beaumont March 24, 2022)

DeGon v. Poole Pointe Subdiv. HOA, No. 03-20-00618-CV (Tex. App. - Austin March 24, 2022)

Notably, the Austin court said that because the original restrictive covenants promoted "residential use," it was a reasonable extension of those to forbid STR's because they are a commercial use. In my opinion, that directly conflicts with Texas Supreme Court precedent — and Austin Court of Appeals precedent — holding that STR's are a residential use.

It is anticipated that this will next go to the Texas Supreme Court. In the meantime, the jurisprudence is telling buyers of real property that they cannot assume that any of the rights they are buying will continue. It is now, in my view, virtually impossible to value a piece of real property based on the bundle of rights it seems to confer because those rights are, at best, temporary. Content may continue . . .

In a case I recently argued in the Austin Court of Appeals, Myers v. Tahitian Village POA, No. 03-21-00105-CV (Tex. App. - Austin Jan. 6, 2022), the court held that when restrictive covenants do not authorize assessments, an HOA board can adopt, impose, and collect assessments without any apparent limit. In a conclusion I find chilling, the court said this:

"[T]he Restrictive Covenants, as amended, deleted a provision that required property owners to pay an annual charge to the POA. The Restrictive Covenants, however, are silent as to the POA’s power to make other assessments. Consequently, the Restrictive Covenants do not prohibit all assessments; the amendment simply removed the provision authorizing the POA to impose an annual charge on the subdivision’s property owners."

In that case, after the homeowners voted in the late 1990's to delete every charge which the HOA was authorized to charge originally, in 2016 a new HOA board came in and wrote new "bylaws" for itself which gave the board the power to charge and collect "assessments." Then the board adopted all sorts of new charges, fees, and fines, some running into the thousands of dollars. The Austin Court of Appeals approved this.

It gets worse. Texas law (Ch. 209 of the Property Code) forbids HOA's from denying homeowners the right to vote in HOA affairs. But that is exactly what the new Myers v. Tahitian Village allowed the HOA to do. The HOA's bylaws purport to forbid any entities (LLC's, corporations, trusts, etc.) from voting, and one of the plaintiffs in the Myers case is an LLC. In fact, many of the owners in the subdivision are entities — there are some 6000 homes there, and many lots are undeveloped. The HOA board voted to adopt bylaws which prevent anyone but natural persons from voting in director elections, thereby disenfranchising potentially hundreds of property owners who might vote to oust the board.

My clients, the homeowners, have asked the Texas Supreme Court to take up the case and reverse it. In the meantime, one can reasonably expect HOA boards to begin adopting all sorts of "rules" and "bylaws" which effectively undo or get around any limitations on board power contained in restrictive covenants. It's a three-alarm fire, and yet, as usual, I fully expect the HOA-Industrial Complex to line up behind it because it generates piles of cash and lifetime-membership-boards, while it appears that no one is going to step up to protect buyers of real property from this calamitous result. Content may continue . . .

Judging from the volume of calls and new cases in my office, abuse and overreach by homeowners' associations and architectural control committees is now an epidemic. Most Texans now live in subdivisions governed by HOA's. Yet HOA's are, for the time being, immune to the very sorts of lawsuits which keep governments in check because they are not, technically, "government." In fact, they are — they levy taxes, impose penalties, patrol streets, and pass rules intended to govern people's behavior. The various stopgaps the Legislature imposes every few years are not just insufficient, but actually make things worse. The law surrounding HOA's is now so complicated that homeowners who run HOA's cannot understand the law and run afoul of the law constantly, generating lawsuits. There is no way around the fact that the increasing complexity of HOA laws means that lawyers have their fingers in every pie. By trying to salvage privatized local government, the Legislature just keeps making things more convoluted, expensive, and worse.

In no particular order, here are some of the most intractable problems which point up how powerful HOA's are becoming:

1. HOA boards and ACC's, without any vote of all the owners in the subdivision, write and record new documents endowing boards and ACC's with new powers not authorized by the restrictive covenants. Sometimes, these entities just create themselves and declare they are in control because they style themselves as a "homeowners association." These are horrible forms of abuse because small groups of owners are simply giving themselves control and then meting out punishments. And I am finding that trial courts and courts of appeals go along with it for reasons I cannot fathom and in stark contradiction to what the law has long been understood to be. HOA's seem to get a pass just because they declare they are in charge.

2. HOA boards and ACC's summarily impose fines and penalties against owners with the due process rights which Texas law affords owners (Texas Property Code Chapter 209). They create fines, fees, and charges without any authority.

3. HOA boards defy controlling law and sue owners for things that are not, in fact, breaches of restrictive covenant, knowing that few owners can afford to fight. Here again, local judges seem to defer to HOA boards. Why are they not deferring to property rights and individual rights?

4. Majorities of owners are targeting individuals with "amendments" to restrictive covenants which either take away preexisting rights or else impose harsh new burdens. The whole basis of the bargain is being thwarted and undermined.

From my vantage point, HOA's — and groups of owners merely claiming to be HOA's — are out of control. The lawyers who represent them seem happy to argue positions so deeply repugnant to basic liberty that one wonders whether they do not stop to consider how the positions they argue might not come back to haunt them; in the meantime, they're getting rich off the jury-rigged system I call the HOA-Industrial Complex. Content may continue . . .

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 . . .

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 . . .

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

After Tarr v. Timberwood Park held that short-term rentals are allowed under common deed restrictions, HOA's and subdivision owners began amending deed restrictions to bar leasing and require mandatory, physical occupancy of homes for long terms. I get calls every week now from people who always had broad leasing rights who suddenly find that a majority of their neighbors have voted to take away their leasing rights and, even worse, mandate physical occupancy of homes. Is that allowed? Read on!Content may continue . . .

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

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

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 . . .

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 . . .

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 . . .

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

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

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

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

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

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

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 . . .

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 . . .

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 . . .

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 . . .

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

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 . . .

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 . . .

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

Tags: duplex

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 . . .

Tags: homeaway, vrbo

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 . . .

Tags: vacation home,homeaway,vrbo,short-term rentals