Texas Court Says Short Term Rentals of Owner’s Property Were Prohibited Business Purposes

Texas Appellate Court decision (November 16, 2016).

In this case, a homeowner (“Owner”) brought an action against his homeowners’ association (“Association”) challenging deed restrictions which provided that homes must be “used solely for residential purposes.” After Owner had been renting his home for short periods of time (typically one to seven day periods), the Association notified him that he was in violation of the applicable deed restrictions because he was using his home as a commercial rental property rather than for residential purposes as required by the restrictions. The Owner disagreed and filed an action against the Association for breach of the restrictive covenant and seeking a declaration from the court that the applicable deed restrictions do not impose duration limits on leasing. The trial court ruled in favor of the Association and the Owner appealed.

In considering the case, the appellate court stated the following regarding the interpretation of restrictive covenants: (i) general rules of contract apply to the interpretation of restrictive covenants; (ii) the court’s duty in interpreting a restrictive covenant is to ascertain the drafter’s intent from the instrument’s language; (iii) restrictive language is construed to give effect to their purposes and intent and to harmonize all provisions so none are meaningless; (iv) although not favored, covenants that restrict the free use of land will be enforced if clearly worded and are for a lawful purpose; (v) unambiguous restrictive covenants are liberally construed to give effect to their purpose and intent; and (vi) ambiguous restrictive covenants are strictly construed against the party seeking enforcement.

The Owner argued that the restrictive language in question did not prevent owners from leasing their homes on a short-term basis. In response, the Association contended that short-term renters are not “residents” who are using the property for residential purposes; instead they are using the property for transient purposes.

Applying the above rules of interpretation, the appellate court stated that the drafters of the restrictive covenant intended to draw a distinction between residential and transient uses. Finding that the term “residence” requires both physical presence and an intention to remain, the court stated that “if 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.” Thus, the court concluded that the Owner was using his home for transient purposes rather than residential purposes and, as such, he was in violation of the restrictive covenant that required Owner’s property to be used “solely for residential purposes.”

See case decision:Tarr_v._Timberwood_Park_Owne