555 S.W.3d 339
Tex. App.2018Background
- Timothy Raub purchased a lot in the Sunset Bay subdivision, built a three-story single-family house, and began advertising and renting it short-term on VRBO starting in 2012. Typical stays were 3–7 days.
- Adjacent lot owners John and Debbie Schack sued Raub and the Property Owners Association (POA), claiming the subdivision Declaration prohibited short-term vacation rentals under three provisions: (1) a Dwelling Restriction ("one single family dwelling unit per Lot"), (2) an Occupancy Restriction (limits on who may "live" there as a single household unit), and (3) a Commercial Enterprise Restriction ("No commercial enterprise of any sort shall be situated on any tract").
- The POA initially ordered Raub to stop short-term leasing, then adopted a nonbinding Interpretation concluding short-term rentals were not prohibited.
- At trial the jury found Raub did not violate the Commercial Enterprise Restriction and resolved POA-related claims largely for the defendants; the trial court entered judgment for Raub and the POA and awarded attorney’s fees to both defendants.
- On appeal the court considered covenant construction under Texas law (de novo), evaluated jury submission and evidentiary rulings, and applied recent Texas precedent interpreting restrictive covenants in the short-term rental context.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Dwelling Restriction forbids short-term rentals (structural vs. use restriction) | Schack: "one single family dwelling unit per Lot" restricts use and therefore forbids renting to transient vacationers | Raub/POA: language is structural—limits building type (one dwelling per lot), not how it is used | Court: Dwelling Restriction is structural only; no violation (single-family dwelling was built) |
| Whether the Occupancy Restriction bars short-term rentals or requires permanent residence | Schack: phrase limiting occupancy to those who "live" as a household prohibits temporary stays/short-term rentals | Raub/POA: "living as a household unit" is ambiguous as to duration; does not plainly prohibit short-term rentals so courts should not add restrictions | Court: Occupancy Restriction is a use restriction but does not ban short-term rentals absent language addressing duration; rentals allowed if occupants fit the Declaration's definition of "family" |
| Whether Raub’s rentals constituted a prohibited "commercial enterprise" (jury question, sufficiency of evidence, and charge wording) | Schack: VRBO listings, payment of hotel taxes, LLC formation, and rental practices demonstrate an on-site commercial enterprise akin to a hotel | Raub/POA: Commercial activity occurred off-site (internet advertising, booking); on-tract use was residential with no employees or services—so not a commercial enterprise on the tract | Court: Focus is on on-site indicia of business; evidence of on-site commercial activity was lacking, so jury verdict for Raub stands; any charge error or emphasis on developer’s view was harmless given absence of evidence supporting Schacks' claim |
| Admissibility of VRBO reviews, photos, other evidence; and attorney’s fees award | Schack: excluded guest reviews and photos would show occupants were not "families"; trial court should have denied fees to POA and Raub | Raub/POA: guest reviews are hearsay/not adopted by Raub; photos and tax records had limited relevance; DJA fees may be awarded equitably even to partially prevailing parties | Court: VRBO reviews were hearsay and not party admissions; photos and tax reports were properly excluded or had limited relevance; fee awards to Raub and POA were within trial court’s discretion and not inequitable |
Key Cases Cited
- Calcasieu Lumber Co. v. Harris, 77 Tex. 18 (Tex. 1890) (property owner’s right to lease as incident of ownership)
- Wilmoth v. Wilcox, 734 S.W.2d 656 (Tex. 1987) (restrictive covenants must be clearly worded to be enforced)
- Pilarcik v. Emmons, 966 S.W.2d 474 (Tex. 1998) (covenants examined as a whole in light of circumstances at creation)
- Stephenson v. Perlitz, 532 S.W.2d 954 (Tex. 1976) ("only one residence per lot" construed as structural limitation)
- MacDonald v. Painter, 441 S.W.2d 179 (Tex. 1969) ("residential purposes" contrasted with business uses)