The Texas Supreme Court recently overruled a trial court and an appellate court, holding that the owner of single-family residential structure could indeed use it as a short-term rental property for parties and the like even though the covenant of the Timberwood Park Owners Association restricted use of the property to a residential purpose.
The court observed that the restriction was only applicable for the type of structure at issue, not its use. Further, where the covenant did restrict use to a “residential purpose,” the covenant failed to define what counted as a “residential purpose.” For that reason, the court applied common definitions of those terms and held that short-term renters were still using the property as a residence. The fact that the use was for a short time was not of consequence.
While the Tarr case dealt with a homeowner association, cities throughout the state are reasonable to be concerned. Many cities rely on distinctions between residential and commercial uses when regulating short-term rentals.
The key, therefore, will be for each municipality to protect its laws by including specific language that is tailored to the unique goals and needs of each community. Also critical will be the location of the language in the body of such regulations themselves. The Tarr cases demonstrates that simply having a definition for a structure, for instance, will not suffice if the definition of the use is itself either nonexistent or vague.
Smart cities will consult with their legal counsel moving forward to handle this problem proactively in order to avoid the costs that could be associated later with litigation to resolve disputes.