Can an HOA prohibit renting? (Texas)

Started by RonM19 • 9 replies • 410 views

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RonM19 (Texas)
Posts: 41

Posted:

I'm VP of our small HOA - we have about 15 homes here in a very small gated community. Our current CCRs have "renting of all or part of any property" on the list of "prohibited activities" along with shooting, raising farm animals, etc. We've been reviewing the CCRs, and wondered if we really can do that. The Texas Property Code 209.016 doesn't really address the question. It simply says (excerpt):

"...nothing in this section shall be construed to prohibit the adoption or enforcement of a provision in a dedicatory instrument establishing a restriction relating to occupancy or leasing."

Various online Q&A pages focus on HOA restrictions such as limiting what percentage of lots can be rented, setting minimum lease terms, etc. I can't find any discussion anywhere about prohibition.

We REALLY don't want to allow renting of any kind here. Wouldn't prohibiting renting be "establishing a restriction" per the code? I guess this is really a matter of interpretation; there's really nothing explicit to go on. I just wondered if anyone else here had dealt with this decision.

Thanks

TimB4 (Tennessee)
Posts: 21,059

Posted:

From what I'm reading, and I am not an attorney, providing your restriction (no rental of property) is in the Declaration of Covenants (aka deed restrictions), then you should be good to go.

However, it wouldn't hurt to have a local attorney versed in HOA and contract law give you a professional opinion.

AugustinD
Posts: 1,027

Posted:

Quote:

Posted By RonM19 on 08/23/2022 7:32 AM
I'm VP of our small HOA - we have about 15 homes here in a very small gated community. Our current CCRs have "renting of all or part of any property" on the list of "prohibited activities" along with shooting, raising farm animals, etc. We've been reviewing the CCRs, and wondered if we really can do that. The Texas Property Code 209.016 ["REGULATION OF RESIDENTIAL LEASES OR RENTAL AGREEMENTS"] doesn't really address the question. It simply says (excerpt):

"...nothing in this section shall be construed to prohibit the adoption or enforcement of a provision in a dedicatory instrument establishing a restriction relating to occupancy or leasing."

My take:

TPC 209.016 does address the question. To me, it says that TPC section 209.016 allows HOAs to adopt and enforce restrictions related to rentals, as long as federal law, all other state statute sections, the declaration and case law do not say otherwise.

Is the covenant prohibiting renting that your HOA currently has the result of an amendment? If not, then your HOA is in excellent shape to enforce the covenant prohibiting rentals. I base this on a lot of discussion here accompanied by reading a lot of case law. The case law on short-term rentals has in particular exploded in the last 20 years.

If the covenant is due to an amendment, let's talk more.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Along with reviewing the restriction with an attorney, you may want to amend it to beef up the language - for example, explicitly prohibit hotel-style or corporate rentals to keep the Airbnb crowds out.

I'm also not a lawyer, and am speculating here. But I've seen a few court cases where the judge ruled that the hotel-style "rentals" are not in fact rentals at all (which I firmly agree with). You don't want to give investors a valid argument that their Airbnb is actually not prohibited since it's not a rental. (In the cases I saw, the judge ruled that the STR wasn't a rental, which were allowed in those communities, but was a business and so was a violation of that restriction.

Investors, especially corporate investors, often have deep pockets, so HOAs/COAs need to have the law on their side if they want to prevent their communities from becoming Rental Paradises.

RonM19 (Texas)
Posts: 41

Posted:

It's not from an amendment, it's original language that has been in the CCRs since the subdivision was built about 18 years ago.

The point about STRs is a good one. Although it's extremely, extremely unlikely that anyone will rent their house out as a STR, that door may still be open, judging from some recent court decisions where, as you mentioned, an Airbnb wasn't considered a "rental."

AugustinD
Posts: 1,027

Posted:

Quote:

Posted By RonM19 on 08/23/2022 10:31 AM
The point about STRs is a good one. Although it's extremely, extremely unlikely that anyone will rent their house out as a STR, that door may still be open, judging from some recent court decisions where, as you mentioned, an Airbnb wasn't considered a "rental."

I think these court decisions, where the court ruled against the airbnb, involved Declarations that allowed rentals but prohibited commercial businesses. Your HOA's Declaration has always prohibited rentals.

I continue to think your HOA is in good shape to keep out long-term rentals, short-term rentals, airbnbs et cetera.

KerryL1 (California)
Posts: 14,550

Posted:

Looks like code allows "establishing a restriction relating to occupancy or leasing." But a restriction is not a prohibition. So it seems to me you need to know about Texas law.

(In CA, HOAs may not prohibit rentals)

AugustinD
Posts: 1,027

Posted:

Quote:

Posted By KerryL1 on 08/23/2022 11:36 AM
Looks like code allows "establishing a restriction relating to occupancy or leasing." But a restriction is not a prohibition. So it seems to me you need to know about Texas law.

Like perhaps KerryL1 probably recalls, I think there is some case law making this distinction. But I think not for a situation where state statutes do not prohibit the prohibition (sic) of rentals; where the covenants are presently un-amended; and where these un-amended covenants say rentals are prohibited.

MarshallT (New York)
Posts: 414

Posted:

As long as there are no state laws that require associations to allow rentals, and you've got the restriction in your CC&Rs, you can indeed enforce this.

You may need to clarify language to incorporate Airbnbs. And don't hesitate to reach out to an attorney if you have doubts.

AugustinD
Posts: 1,027

Posted:

Quote:

Posted By MarshallT on 08/24/2022 6:41 AM
As long as there are no state laws that require associations to allow rentals, and you've got the restriction in your CC&Rs, you can indeed enforce this.

You may need to clarify language to incorporate Airbnbs.

I thought about whether amending, in the hope of making the present rental prohibition even "stronger," was a good idea. I came down on the side that amending poses risks and could either weaken or at least complicate the HOA's position. As in:

-- In a court dispute, the amendment could be argued to be an admission by the HOA that the original prohibition of rentals does not apply to AirBnBs. So the attorneys for those owners who run AirBnBs in the HOA might argue.

-- Subsequent to this, the attorneys for the AirBnB owners would say that the amendment is not reasonable and requires 100% consent, at a minimum, to be lawful (and so enforceable as a contractual term). (Per my reading of the case law, the reasonableness test applies to amendments but not the original, un-amended Declaration.)

In light of the case law, I think the current prohibition is as strong as it can be and should not be messed with.

Such are my thoughts, anyway.

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