A particularly vexing problem for homeowner associations is the growth of Airbnb, VRBO, and similar short-term rental arrangements that bring a series of transient vacationers into a residential community.  Associations and the courts have struggled with how to respond to this phenomenon and balance the desires of a community against the proclaimed right of an individual homeowner to utilize his property as he sees fit.  Two recent decisions of the Texas Courts of Appeals highlight the problem and illustrate the need for Associations to regularly review Deed Restrictions and amend them to respond to new challenges.

In Zgabay v. NBRC Property Owners Association, the Austin Court of Appeals was asked whether a restrictive covenant requiring that properties be used only “for single family residential purposes” prohibited short term rentals.  2015 Tex. App. LEXIS 9100 (Tex. App.—Austin Aug. 28, 2015, pet. denied).  The Court held that it did not.  The Court noted that association deed restrictions permitted homeowners to post signs advertising their homes for sale or lease.  Thus, notwithstanding anything else under the deed restrictions, it was clear that “leasing of homes” was permissible under the covenants.  Id., at *5.  The question then became whether the deed restrictions imposed a duration on a lease-term.  Id., at **5–6.  Finding nothing in the deed restrictions that required a minimum lease term, the Court found in favor of the homeowner.  Id., at *8.

A different decision was reached by the San Antonio Court of Appeals.  In Tarr v. Timberwood Park Owners Association, the Court held that a deed restriction providing that properties in the community could be “used solely for residential purposes” prohibited short-term rental arrangements.  No. 04-16-00022-CV, 2016 Tex. App. LEXIS 12245 (Nov. 16, 2016, pet. filed).  The homeowner argued that since nothing in the deed restrictions prohibited leasing on a long-term basis, the deed restrictions could not be fairly read to prohibit short term leasing.  The Court disagreed.  It held that “residence” “generally requires both physical presence and an intention to remain.”  Id., at *9 (quoting Munson v. Milton, 948 S.W.2d 813, 816 (Tex. App.—San Antonio 1997, writ denied).  “Thus, ‘[i]f a person comes to a place temporarily, without any intention of making that place his or her home, that place is not considered the person’s residence.”  Id. (quoting Munson, 948 S.W.2d at 817).  The Court reasoned that because there is “a distinction between ‘residential’ purposes and ‘transient’ purposes[,] . . . [o]ne leasing his home to be used for transient purposes is not complying with the restrictive covenant that it be used solely for residential purposes.”  Id.; see also Benard v. Humble, 990 S.W.2d 929 (Tex. App.—Beaumont 1999, pet. denied) (same).

The Tarr case is presently on appeal to the Texas Supreme Court; if the Supreme Court takes up the case, it should provide critical guidance to homeowners and community associations on this critical issue.

— Shannon A. Lang