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!
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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 . . .

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.
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Tags: Tarr v. Timberwood Park

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 . . .

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 . . .

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 . . .

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

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 . . .

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 . . .

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 . . .

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

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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Tags: balcones woods club, balcones woods

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 . . .

Tags: briarcliff hoa

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 . . .

Tags: homeaway, briarcliff hoa

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