New Ruling on Short-Term Rentals May Impact Your Texas Community

Posted on Monday June 25, 2018

Short-term rentals continue to be a point of discussion for many homeowners associations (HOAs) since the initiation of two new state house and senate bills in the Texas legislature last year.  There have been many conflicting appellate court cases in Texas regarding HOAs that restrict properties to residential use and the lack of definition of rental or leasing activity.


In May 2018, in the Tarr v. Timberwood Park1 case, the Texas Supreme Court ruled in favor of the homeowner citing that the covenants only addressed the property must be used for residential purposes. The court interpreted the fact that short-term renters use the entire home including the kitchen for daily living to comply with this restriction.  Notably, the governing documents did not specifically address any guidelines related to rental or leasing activity, minimum lease terms, prohibit transient or vacation use, or impose single-family residential use requirements.


While this may seem like a big win on the side of short-term rentals, the court did state the interpretation was confined to the particular restrictive covenants of Timberwood Park.  This ruling leaves open the possibility that another court may reach a different conclusion if the covenant it reviews better defines residential or business use and/or outlines specific rental or residential use restrictions.
 
What does this mean for your community? 
 
According to Alex Valdes, attorney for Winstead PC in Austin, HOA boards should review their governing documents and ensure there are restrictions that specifically address rentals.  “A simple residential use requirement will likely not be enough to stop short-term rental activity in a community,” commented Valdes.  “The governing documents should contain rental rules and should, ideally, also address transient or vacation use.”
 
If your HOA governing documents do not address rentals or minimum lease terms, then now is a good time to work with your community association management company and legal counsel to propose amendments and review the amendment procedures. 
 
Looking for more insights about how to develop a solid community association rental policy and other strategies for code enforcement? Contact our client relations team at FirstService Residential.
 
Learn more about the impact of short-term rentals on communities:
 
The Big Deal about Short-Term Rentals in Texas Communities
 
Airbnb & Short-Term Rentals: How the Sharing Economy Can Impact Your Multi-Family Building
 
Airbnb & Short-Term Rentals: How to Reduce Risks to Your Multi-Family Buildings and Residents
 
The Ups and Downs of Community Rental Policies: What Every Association Should Know

1 Case 16-1005, decided May 25, 2018, by the Supreme Court of Texas.


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