Texas Supreme Court AirBnB Decision.

4 Replies

The Texas Supreme Court gave a major win to short term renters in Texas today.  Here is a great article about it.

https://www.texastribune.org/2018/05/25/airbnb-hom...

In short, Texas HOAs will find it basically impossible to restrict rentals of any length.

That includes AirBnB, Homeaway, sober living, transitional housing, habilitation services and so on.

PS Yes that means a person can rent a home in an HOA for one day and use the pool, golf course, ski lake, or whatever other amenities the owners get.

@Account Closed , this decision turns on the narrow question of what constitutes residential use of the property, as opposed to business use. HOA rules and ordinary leases often require residential use, and the HOA had a weak argument in stating that renting a place to stay for a short time is not a residential use.

Many HOAs have deed restrictions that say homes may not be rented for terms shorter than a minimum, such as 30 days or six months. The HOA in this case did not have a minimum rental duration and therefore had to rely on the residential use argument.

Nothing in this case is going to allow short-term rentals in communities that require all leases to have long terms. 

The court's opinion is at http://www.txcourts.gov/media/1441730/161005.pdf 

Originally posted by @Account Closed :

The Texas Supreme Court gave a major win to short term renters in Texas today.  Here is a great article about it.

https://www.texastribune.org/2018/05/25/airbnb-hom...

In short, Texas HOAs will find it basically impossible to restrict rentals of any length.

That includes AirBnB, Homeaway, sober living, transitional housing, habilitation services and so on.

PS Yes that means a person can rent a home in an HOA for one day and use the pool, golf course, ski lake, or whatever other amenities the owners get.

Completely disagree with the statement

 In short, Texas HOAs will find it basically impossible to restrict rentals of any length.

@Bob H. I have talked to several lawyers that work on both sides of this issue. The lawyers that work for HOAs wanted the court to say it was not a "Residential-purpose" for a very specific reason. It is MUCH easier to write a restriction for non-residential use. The HOA in this case wanted to basically make it a violation to ever advertise on a short term rental site. Then the advertisement itself would be all the evidence they needed now they will need to see the lease.

I have heard estimates of more than 100 pages for an enforceable restriction against short term leases that will not be easily worked around.  They also say it would most likely require that the lease form be included in the restriction.  Otherwise you will just have people do a long term lease with 24 hours termination clause.

Each mistake could mean what happened in this case. The HOA attempts to fine him. He files a lawsuit. He keeps doing it for years. The HOA pays a fortune in his legal fees. Chances are they have insurance to pay.

It is also very important to remember, in Texas most HOAs do not have first lien position.  Even if they do have first lien position they cannot foreclose solely for fines and attorney's fees.

One thing HOAs never want to talk about is the noncollectibles.  Of course they are probably legally required to provide the reasons why the money became noncollectible but they normally consider that training people how not to pay.

People on this site are always wanting to talk about getting an LLC. This is actually where I would suggest it. Get one entity to own the house another to hold the mortgage. Stop paying the mortgage if the fines and attorney fees get really high.

Realtors should come down against restricting short-term rentals because the temporary lease-back would be prohibited. True, a restriction could be narrowly tailored to exclude everything *except* an ABB-type lease, but that exposes the HOA restriction to other challenges.