Jerry Brice bought two townhomes through
his company, JBrice Holdings. JBrice then offered the townhomes for lease on a
vacation rental website. The listings advertise the townhomes for rent for a
two or three-night minimum.
The townhomes in the subdivision are
subject to recorded neighborhood deed covenants. The covenants authorize Wilcrest
Walk Townhomes Association to enforce the covenants and govern the community.
One of the Wilcrest Walk covenants govern
leasing activity. Leases must be in writing and tenants must comply with the
neighborhood covenants. The leasing covenants permit owners to lease their
properties, so long as the lease and the tenants comply with the covenants and the
Another covenant limits townhome
occupancy to a “private single-family residence for the Owner, his family,
guests, and tenants,” but also states that “Other than the foregoing, there
shall be no restriction on the right of any townhouse owner to lease his unit.”
The HOA demanded that JBrice stop
leasing its townhomes for short-term rentals. In response, JBrice sued to
enforce the covenant granting it the right to lease, subject to the restriction
that the lease and tenants comply with the HOA’s rules.
The HOA responded by adopting new rules
requiring owners to remit hotel taxes, effectively banning rentals of less than
30 days. So JBrice amended its petition, claiming that the new rules are
The trial court found that JBrice
had violated the residential-use restriction, and enjoined JBrice from leasing
its townhomes for less than seven days.
The court of appeals reviewed the
Property Code, and determined that, based on Texas law, HOAs have the authority
to regulate property uses within their neighborhoods.
Time for the Texas Supreme Court to
step in when JBrice again appealed.
The HOA argued in the Texas high
court that JBrice’s utilization of its townhomes to generate rental income is a
commercial use, not residential. And, such use violates the HOA covenants. And
further, in the view of the HOA, a short-term occupant’s use is not residential,
but rather courts should classify such occupants as licensees like hotel and motel
guests, instead of true tenants.
JBrice responded by stating that a “residential
use” requirement does not restrict short-term rentals that generate income for
a property owner, absent express language in deed covenants. JBrice further
observed that the Wilcrest Walk deed covenants set no minimum duration for
Citing a recent Texas Supreme Court
case, we knew this would go badly for the HOA when the first line of the
Opinion is “The law favors owners’ right to use and enjoy their property.”
JBrice wins; Wilcrest Walk loses. See JBrice Holdings v. Wilcrest Walk
Townhomes Association; Texas Supreme Court, Case No. 20-0857, April 22,
Lessons / Questions / Observations:
1. Observation. STR use restrictions are, stated in one word or less, disfavored. Courts will do what they can to allow the unfettered use of property, unless burdensome restrictions are crystal clear and imposed prior to the owner’s purchase.
2. Lesson. If a property developer or Property Owners Association desires to limit short-term leasing, then at least in Texas those restrictions must use those words. Any grey area will be interpreted to allow the owner to lease the property.
3. Question. One might wonder if cities and counties will consider regulating STR uses as part of their health, safety, and welfare mandate, and generate income by requiring licensure.
Stuart A. Lautin, Esq.*
* Board Certified, Commercial (1989) and Residential (1988) Real Estate Law, Texas Board of Legal Specialization
Licensed in the States of Texas and New York
Reprinted with the permission of North Texas Commercial Association of REALTORS®, Inc.