J. Patrick Sutton Cases & Issues Blog

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

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

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

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

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

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

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

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

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City of Dickinson Short-Term Rental Ban Declared Unconstitutional

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

Injunction Against Hollywood Park, Texas Short-Term Rental Ban

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

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

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

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

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

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

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

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

As of this writing, with the federal court's decision only a week old, it is unknown what Austin will do. It can appeal, or it can finally throw in the towel now that state and federal courts have invalidated the monopoly on short-term rentals it gave to permanent Austin residents at the expense of everyone else in the United States.
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Emergency - Texas SB 929 May Hurt You

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

City of Fort Worth gets sued in a challenge to its STR ban

On June 16, 2023, my group of 100-odd homeowners sued the City of Fort Worth, challenging its 2018 ban on short-term rentals. Stay tuned for details. Content may continue . . .

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

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

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

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

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

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

Texas Supreme Court lets Grapevine STR owners' win stand

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

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

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

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

Huge win for short-term rental rights

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

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

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

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

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

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

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

The Onslaught Against Historically-Vital Leasing and Short-Term Rental Rights Continues

My caseload is now overwhelmingly property-rights oriented, particularly as regards leasing and short-term leasing. Property owners' right to lease out their properties, including short-term renting, are under determined assault all over Texas, in cities and subdivisions. I have represented hundreds of property owners defending time-honored leasing rights. I currently represent property owners in constitutional challenges in state and federal courts to municipal bans on short-term rentals, as well as all kinds of challenges to subdivision and HOA bans on STR's. Read on for more info. Content may continue . . .
J. Patrick Sutton Cases & Issues Blog