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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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 . . .