The Fourth Court of Appeals in San Antonio has upheld a Bexar County trial court’s determination that restrictive covenants / deed restrictions limiting use of property “solely for residential purposes” prohibits use of a home as a short term rental (“STR”).
The Opinion released on 11/16/16 was a victory for the Timberwood Park Owners Association, Inc. who filed suit to enforce restrictive covenants applicable to the residential subdivision located in far north Bexar County. However, the Court’s ruling will likely serve as a major setback for Texas homeowners seeking to participate in the the nationally-burgeoning STR industry promoted by sites such as VRBO, HomeAway and Air BNB.
These companies — long touted as leaders in the “share economy” — were not parties to the suit. However, their model is increasingly under legal attack across the country, including in major Texas cities. In its ruling, the 4th Court acknowledged that the Austin (Third) Court of Appeals had reached a different conclusion under similar circumstances, but expressly disagreed with the Austin court’s opinion and characterized its reasoning as “not persuasive.”
The restrictive covenant at issue in the case, Tarr v. Timberwook Park Owners Association, Inc., provided:
All tracts shall be used solely for residential purposes, except tracts designated on the above mentioned plat for business purposes, provided, however, no business shall be conducted on any of these tracts which is noxious or harmful by reason of odor, dust, smoke, gas fumes, noise or vibration . . . .”
It was undisputed that the property owner was using his home within the subdivision (and subject to the restrictions) for STRs. However, the owner argued that nothing in the language of the restrictive covenant recited above prevents a homeowner from leasing his home on a short-term basis. He further argued that, since the individuals to whom he leases are using the home for living purposes, there was no violation the requirement that the home be used for residential purposes.
The County Court, and on appeal the 4th Court, found these arguments unpersuasive.
Instead, the Court focused on the distinction between the “transient” nature of STRs, and the legal definition of “residential” purposes. The Fourth Court applied its own reasoning from a 97 opinion, and re-iterated that the term “residence” “generally requires both physical presence and an intention to remain.” Thus, the Court stated, “[i]f a person comes to a place temporarily, without any intention of making that place his or her home, that place is not considered the person’s residence…. Instead, those persons are using a home for transient purposes.” (quoting Munson).
The Fourth Court concluded that “One leasing his home to be used for transient purposes is not complying with the restrictive covenant that it be used solely for residential purposes.”
Given the split in authority between the Austin and San Antonio Courts of Appeals, and the extremely popular nature of STRs in a tourist-destination state like Texas, this issue may well not be resolved on a state-wide basis until the Texas Supreme Court weighs-in.
