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

We are often asked to give a “quick” opinion regarding the enforcement of deed restrictions. The only quick opinion we can usually give is that if the Board does not act fast, it will very likely lose its right to enforce the restriction.

This can be a frustrating response. Clients frequently want to know the likelihood that they will prevail in a lawsuit before filing one. A thorough case evaluation can take time. In many circumstances, there is no pressing urgency to file suit, so spending a few weeks, or even a few months, gathering information and exploring self-help options to resolve a dispute may eliminate the need for court intervention. However, in the case of deed enforcement, delay can be fatal.

Courts expect homeowner associations to vigilantly enforce deed restrictions in order to demonstrate that they are not arbitrary or being selectively enforced against disfavored homeowners. There are also statutory “limitations” periods after which a deed restriction cannot be enforced in court. Thus, immediately upon discovering a violation, the Board must act. It can, and should, seek the homeowners’ cooperation, but must demand a quick response. Where a violation is not promptly addressed, the association should not delay in filing suit and establishing the seriousness with which it views the issue.

The recent Texas Court of Appeals decision in Reed v. Lake Country Property Owners Association, Inc., is instructive. The facts in Reed were hardly unusual: the Reeds were parking a camper and trailer in their driveway and backyard in violation of a deed restriction. In 2005, the POA informed the Reeds of the violation. The Reeds attempted a solution shortly thereafter, but it failed to comply with deed restrictions. However, the POA did not raise the issue again for more than two and a half years. Six years later, during which time the violation continued, the POA, represented by Fort Worth law firm McDonald Sanders, P.C., filed suit.

The Reeds mounted a vigorous defense, arguing, among other things, that the POA waited too long to file suit and had waived its right to enforce the deed restriction. The trial court disagreed, ordering the Reeds to comply with the restriction and to pay the POA nearly $17,000 in costs and attorneys’ fees. Unfortunately, the appeals court reversed.

The Court explained that, typically, a lawsuit to enforce a deed restriction must be brought within four years of the violation. Where a violation is corrected, a later violation of the same restriction ordinarily restarts this four-year “limitations” period. The POA argued that while the Reeds’ camper had been parked on their property in violation of a deed restriction since 2004, since the Reeds removed the camper for up to two weeks at a time several times a year to travel, the four-year limitations period recommenced each time, rendering the 2013 lawsuit timely. The Court disagreed and sent the case back to the trial court to reconsider whether the POA had waited too long to enforce the restriction. The POA now faces additional time-consuming and costly litigation that could have been avoided.

The attorneys of Lang & Associates, PLLC are committed to helping homeowners’ associations protect their rights and the value of their members’ homes. Lang Ferrer lawyers have nearly two decades of experience representing HOAs across Texas and litigating high-profile cases in state and federal courts around the country. Lang & Associates offers competitive rates and is focused on solving problems rather than on generating attorneys’ fees. Contact Lang & Associates, PLLC today to learn more about how we can help you.