Tuesday, May 31, 2022


            In November 1997 James Caswell signed a long-term lease with AHTNA. James was the Tenant; AHTNA the Landlord. The Lease contained options for the Tenant to extend the lease term. There were two conditions to each option exercise. First, James could not extend if he was in default. Second, James had to furnish AHTNA a written option exercise notice at least 90 days prior to the expiration of the then-current lease term.

            Rent payments were timely tendered to AHTNA and each was accepted and processed. James failed to furnish notice of option exercise at the end of the primary term, but instead he remained at the Premises and continued to pay rent after the expiration of the term.

            In May 2018 AHTNA filed an eviction complaint against James, stating that James was unlawfully possessing the property. AHTNA alleged that since James had failed to furnish written notice of an option exercise, James had no present right to occupy any portion of the Property.

            In response, James argued that his continued possession of the Property was lawful because he had exercised a renewal option by furnishing a check in December 2017 with the memo “2018 annual lease” included in it. And that since AHTNA accepted the payment without complaint, the notice provision of the Lease requiring written option exercise notice is waived.

            A two-day eviction hearing was held in August 2019. The court granted an eviction judgment to AHTNA, finding that the original Lease term had expired, James had not furnished the required renewal notice, and AHTNA had not waived the notice requirement.

            James appealed.

            Without much discussion other than distinguishing between situations where a Landlord cashed 36 monthly rent checks without objection after the expiration of a lease term versus the one or two checks tendered by James to AHTNA, the Supreme Court determined that the option exercise notice requirement was not waived. The mere tender of a few rental payments after the date of Lease expiration would not have the effect of renewing or extending the Lease term.

            AHTNA wins again; James loses again. See Caswell v. AHTNA; Alaska Supreme Court, Case No. S-17866, May 20, 2022: https://scholar.google.com/scholar_case?case=8554620272696289214&q=caswell+v.+ahtna&hl=en&as_sdt=6,44&as_vis=1.

            Lessons / Questions / Observations:

1.      Observations. I didn’t tell you that this case comes to us from Alaska. I also didn’t tell you that this case involves a limestone-mining operation. Does that make a difference to your non-Alaskan commercial or residential application? The Alaskan Supreme Court did not reach any conclusions based on the use of the property.

2.      Lesson For Tenants and Subtenants: Read the Lease carefully and if written notice is required, furnish it exactly as stated to preserve your valuable extension / renewal rights.

3.      Lesson For Landlords and Property Managers: If written notice is required and not furnished, then you may be able to avoid lease renewals even if you accept a few rent payments after the term has expired.

4.      Question For Landlords and Property Managers. Have you considered revising your Leases to provide that the mere delivery of rent checks after term expiration, even if deposited by Landlord, will not serve to extend the lease term?

                                                                                    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.


Monday, May 2, 2022


             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 HOA’s bylaws.

            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 unenforceable.

            The trial court found that JBrice had violated the residential-use restriction, and enjoined JBrice from leasing its townhomes for less than seven days.

            JBrice appealed.

            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 townhome rentals.

            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, 2022: https://scholar.google.com/scholar_case?case=14753999770752180428&hl=en&as_sdt=6,44.

            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.