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By Eric Gomez, Attorney and Counselor

Short-term rentals have become one of the fastest-growing methods for property owners to generate an income stream from residential investment properties. By “short-term” I am referring to rental arrangements for residential properties of less than 6 months.

A complication is beginning to occur where property owners are engaging in short-term rentals in neighborhoods with an existing property owners association (POA) or homeowners association (HOA). Many established POAs and HOAs have declarations that include language that may appear to prohibit short term-rental uses. “For residential proposes only” is an example of what comes to mind. What follows is an inevitable showdown between an individual’s property rights vs. the rights of the collective to control develop and enforce agreements.

The law is constantly changing because this issue is among the most litigated in Texas courts at the moment. Presently, it is important to focus on 1) the language, and 2) the process. By “language” I mean what the restrictions actually say. The wording matters and you need an experienced attorney to help with an interpretation. “Residential purposes only” is no longer sufficient to prohibit short-term rentals. Conversely, the state of the law in Texas is that there is not a vested property right for property owners to be able to maintain a short-term rental in the face of a successful amendment. Most POA/HOAs usually have clauses in their declarations that say something like, “these Declarations are subject to amendment at any time.” The courts view this type of clause as constructive notice that will allow a POA/HOA to change the rules mid-stream against a preexisting short-term rental use provided that the amendment process is precisely followed. That is why the “process” is so important to pay attention to as well. You must determine whether the specific amendment process was followed by the POA/HOA in order to restrict previously permissible uses.

Finally, there is a grassroots political side to all of this that I like to call “cookies and beer mobilization.” Taking cookies and beer to your neighbors and introducing yourself is a great way to gain votes or to destroy them depending on which side you’re wanting to influence.

Please let me know if I can help shed some light on your particular situation. Call (512) 894-5426 or email [email protected].