IN A WORD: YES!
Homeowners Associations (HOA) are nonprofit corporations established by subdivision developers to maintain the common areas and amenities of a community. The powers of the HOA and regulations on homeowners vary widely and are set forth in the ‘Deed Restrictions’ (“Restrictions”) that were filed with the County Clerk when the community was first established. In addition to the Restrictions, Chapter 204 of the Texas Property Code sets forth the. powers granted to the HOA and its Board.
A ‘hot’ issue for HOAs is whether short-term rentals (re: Airbnb) should be allowed. Short-term rentals are where a homeowner rents out their house, or part of their house, for short periods of time, typically one to ten days to travelers and visitors. In Texas, owners of short-term rentals are required to pay Hotel Occupancy Tax on the rental income[1],
HOAs have long allowed owners to rent out their homes on long term leases (one or more years). However, with the growth of the ‘gig’ economy, some owners have turned short term rental of their homes into a full-time business. It is not uncommon for long time residents to be upset with this change, seeing their community transform into a more transient environment. The fear is that this trend will degrade the quality of life and value of homes in their neighborhood.
The growth of short-term rentals is not specifically dealt with in many Deed Restrictions for communities that were established decades ago. If there is no prohibition in the current Deed Restrictions, what can an HOA do now to limit them?
A Houston Court of Appeals case decided on August 18, 2020[2] decided that under certain circumstances, Sect. 202.010 of the Texas Property Code gives the Board of Directors of a townhome HOA the authority to regulate and limit short-term rentals. This is a significant decision. A Board can act on its own, without the need to change the Restrictions or get approval from the homeowners. Where there are resistance and objection to short-term rentals, HOA boards will now be able to react quickly to prohibit, limit, or regulate them, and the courts will be open to the enforcement of such regulation.
For more information on how to implement an effective program to regulate short-term rentals in your HOA community, contact the Law Office of Elliott Klein, PLLC.
[1] https://comptroller.texas.gov/taxes/hotel/airbnb-faq.php
[2] JBrice Holdings LLC v Wilcrest Walk Townhomes Ass’n, decided August 18 ,2020