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:,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.

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