J. Patrick Sutton Cases & Issues Blog

Whatever rights you think you bought, you didn't

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.
J. Patrick Sutton Cases & Issues Blog