Ridgepoint Rentals, LLC v. James W. McGrath and Bernadine L. McGrath
09-16-00393-CV
Tex. App.Dec 7, 2017Background
- Ridgepoint Rentals (owned by Stefan Ractliffe) bought Lot 18 in Oak Terrace Estates and rented the house as short-term vacation/weekend rentals advertised on VRBO, charging $300–$450/night and grossing about $50,000 annually.
- The governing 1971 Deed Restrictions limit use to "residential purposes only" and expressly exclude "hospitals, clinics, duplex houses, apartment houses, boarding houses, hotels, and all other commercial uses."
- McGrath neighbors sued, seeking temporary and permanent injunctions to stop rentals of less than 90 days and removal of short-term rental advertising; Ridgepoint counterclaimed for declaratory relief and asserted waiver/abandonment defenses.
- The trial court granted a temporary injunction, later granted summary judgment for the McGraths and a permanent injunction enjoining short-term rentals under 90 days; Ridgepoint appealed.
- The interlocutory appeal of the temporary injunction was dismissed as moot after the final judgment; the appeal of the summary judgment proceeded.
- The court concluded the deed restriction was unambiguous and that Ridgepoint’s short-term rentals constituted a non-residential, commercial/hotel use expressly prohibited by the restrictions, and affirmed the permanent injunction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether short-term rentals violate the deed restriction limiting use to "residential purposes only" | Deed excludes hotels/commercial uses; short-term rentals are transient lodging (hotel-like) and thus non-residential and prohibited | Deed silent on lease duration for main dwelling; temporary occupancy limits only apply to outbuildings; short-term leasing of main dwelling is allowed | Short-term rentals (weekend/week-long stays) are non-residential commercial use (hotel) and violate the deed restrictions; summary judgment for plaintiffs affirmed |
| Whether deed is ambiguous so as to preclude summary judgment | Deed language is clear that "residential purposes" excludes hotels and other commercial uses, so unambiguous | Argues ambiguity because duration limits appear only for temporary structures (para.13) and not main dwelling | Deed is unambiguous; plain language controls and must be given its ordinary meaning; no ambiguity found |
| Whether evidence raised fact issues of waiver/abandonment or widespread short-term rental practice in subdivision | McGraths: no evidence of other short-term rentals in same section; no enforcement waiver shown | Ridgepoint: alleged long-standing leasing in subdivision that could show waiver/abandonment | No competent evidence of widespread short-term rentals in the relevant section; waiver/abandonment defense not established |
| Whether temporary injunction bond amount issue remains appealable | McGraths sought injunction; bond set at $1,000 by trial court | Ridgepoint argued bond inadequate given rental income; requested review | Moot: interlocutory appeal of temporary injunction (and bond) was mooted by later final judgment; appellate court refused to decide bond issue |
Key Cases Cited
- Benard v. Humble, 990 S.W.2d 929 (Tex. App.—Beaumont 1999) (construing "single-family residence purposes" restriction to prohibit short-term rentals of 90 days or less)
- Munson v. Milton, 948 S.W.2d 813 (Tex. App.—San Antonio 1997) (restrictive covenant limiting use to residential forbids transient lodging; distinguishes residence from temporary presence)
- Tarr v. Timberwood Park Owners Ass'n, Inc., 510 S.W.3d 725 (Tex. App.—San Antonio 2016) (followed Munson in holding short-term stays prohibited by similar deed restrictions)
- Wenske v. Ealy, 521 S.W.3d 791 (Tex. 2017) (ambiguity of restrictive covenants is a question of law for the court)
- IKB Indus. (Nigeria) Ltd. v. Pro-Line Corp., 938 S.W.2d 440 (Tex. 1997) (trial courts should not make factual findings in summary judgment rulings; such recitations are surplusage)