By Deborah Goonan, Independent American Communities
This Independence Day, IAC reflects upon recent events that indicate that the courts and real estate developers are rethinking the management industry’s decades-old attempt at restricting property rights by way of restrictive covenants.
Residents of property governed by homeowners’ associations are increasingly challenging the HOA’s rights to enforce restrictive covenants, rules and regulations. Likewise, with increasing frequency, HOAs are compelled to back off of unauthorized or arbitrary enforcement, and show respect for individual rights.
Let’s look at two examples.
1. Short term rentals are “residential” uses, unless explicitly restricted by Covenants
Just a few weeks ago, in Kenneth H. TARR v. TIMBERWOOD PARK OWNERS ASSOCIATION, INC., the Supreme Court of Texas, reversed a court of appeal’s judgment in favor of a homeowners association that had restricted a homeowner’s right to rent his property using VRBO (Vacation Rentals By Owner), to various people for a week or two at a time.
Timberwood Park Owners Association argued that short-term rentals were not allowed under the CC&Rs, which limit use to residential purposes and prohibit business purposes.
Tarr argued that the Covenants did not specifically exclude his right to rent his property, regardless of the duration of tenant occupancy.
The Supreme Court ruled in favor of the homeowner, Kenneth Tarr.
We hold that Tarr has not violated the Timberwood restrictive covenants by entering into short-term vacation rental agreements. Accordingly, the trial court should not have entered summary judgment for the association, and the court of appeals erred in affirming the trial court’s judgment. We reverse and remand the case to the trial court for proceedings consistent with this opinion.
How did the Supreme Court arrive at their decision?
The parties’ arguments were as follows: (emphasis added in bold)
Tarr argues that “residential purposes” must be read in comparison to “business purposes,” focusing on the activities in which the people in possession of the property partake. So Tarr juxtaposes activities such as eating, sleeping, praying, and watching TV with activities such as blacksmithing, shop-tending, event-hosting, and automobile repair. In addition, Tarr refutes that duration of use can be considered in conjunction with the character of the use; “residential purposes” does not in and of itself differentiate between owner occupancy and tenant occupancy or imply duration limits on either. As for the “business purpose” prohibition in the covenant, Tarr contends that merely renting one’s property or realizing a profit therefrom does not convert a homeowner’s use into a business use. And if it did, he argues, then long-term leasing arrangements would likewise be forbidden. Because these covenants often remain silent as to the minimum amount of time one must use a home for it to qualify as a residential use, Tarr questions the soundness of cases that impose ninety-day limitations, require physical, permanent occupancy, or examine an intent to remain. Instead, Tarr urges this Court to conclude that because the covenants are silent as to leasing arrangements or minimum-duration-of-use requirements, such activities are permissible—as what is not expressly proscribed is allowed. This construction, Tarr insists, best effectuates the original grantor’s purpose and intent.
The association, on the other hand, focuses on the transient and temporary nature of Tarr’s renters’ use of the property. Because the tenants have no intent to remain beyond the short term for which they have leased the property, their use is merely transient as opposed to residential. To support this definition of “residential,” the association relies upon various Texas and federal regulatory definitions of “residence.” So the association not only contrasts “residential purpose[s]” with “business purposes,” but also with “transient purposes.” And as proof that Tarr’s use is a business use, the association notes that he pays hotel taxes and that he formed an LLC to manage the property.
In other words, the association interpreted the CC&Rs in favor of restricting owner rights to use their properties for short-term rentals (STRs), merely because STRs result in “transient” occupancy of a single family residence.
The court’s analysis notes that, unless the Covenants define “residential use” and “business use” otherwise, renting one’s home is a residential use. An Association cannot enact rules with regard to duration of occupancy, in order to redefine the Covenants.
Generally speaking, “residential use” is one that involves activities generally associated with a personal dwelling. Similarly, a “residential building” is a building which is used for residential purposes or in which people reside, dwell, or make their homes, as distinguished from one which is used for commercial or business purposes. The phrase “residential purposes” does not mean only the occupying of a premises for the purpose of making it one’s “usual” place of abode; a building is a residence if it is “a” place of abode.
The covenants in the Timberwood deeds fail to address leasing, use as a vacation home, short-term rentals, minimum-occupancy durations, or the like. They do not require owner occupancy or occupancy by a tenant who uses the home as his domicile. Instead, the covenants merely require that the activities on the property comport with a “residential purpose” and not a “business purpose.” We decline to add restrictions to the Timberwood covenants by adopting an overly narrow reading of “residential.”
For this reason, we disapprove of the cases that impose an intent or physical-presence requirement when the covenant’s language includes no such specification and remains otherwise silent as to durational requirements.
We recognize that another court may reach a different conclusion if the covenant it reviews defines “residential” or “business” uses by specifically enumerating prohibited conduct. See, e.g., Munson, 948 S.W.2d at 815 (analyzing a covenant that defined “business use” to include “[m]otel, tourist courts, and trailer parks”).
Regardless of whether you personally approve of STRs, this case is important because it emphasizes the point that HOAs cannot simply make up rules that contradict or “add to” restrictive covenants.
2. Developer rewrites rules for display of American flag
Meanwhile, also in Texas, 74-year-old Betsy Reker asserted her right to fly an American flag from a pole attached to her front porch. The management company had informed the homeowner in writing that her flag is in violation of HOA rules, because it too large — the HOA’s rules (arbitrarily) limit the size of the flag to 2 feet by 18 inches.
The homeowner contends that a flag that tiny is hardly worth displaying at all.
After Reker contacted NBC Dallas-Fort Worth, CMA Management met with the developer (who apparently still controls the HOA), and a rule change is reportedly “in the works.” Oh, and no one has been fined.
HOA Orders Great-Grandmother to Take Down American Flag
HOA may now change its rules
By Scott Gordon
Published at 4:40 PM CDT on Jul 3, 2018 | Updated at 5:40 AM CDT on Jul 4, 2018
A homeowners association in North Richland Hills may change its rules after ordering a 74-year-old great-grandmother to take down the American flag in front of her house.
“I love my house and I love my neighbors, but the HOA I think is kind of using a bullying tactic,” said Betsy Reker.
On Monday, she received a letter from the association’s “compliance coordinator.”
The letter said the flag violated the association’s rules and gave her 10 days to take it down.
“Please remove American flag on front of house,” the letter said. “Your Association’s rules exist to preserve property values and maintain the overall appearance of the community.”
The association’s rules limit flags to just 2 feet by 18 inches.
Rob Koop, a spokesman for the association’s management company, CMA Management, said a change to the flag rule is in the works.
After NBC DFW reached out to CMA for comment, the company contacted the developers of the neighborhood, Koop said.
“They’re open to changing the rules now,” he said. “There’s a willingness to change the rules” to include average-sized flags like the one Reker posted on her home.