Tarr v. Timberwood Park Owners Ass'n, Inc.
556 S.W.3d 274
| Tex. | 2018Background
- Kenneth Tarr purchased a single-family home in a subdivision (Timberwood Park Unit III) subject to recorded restrictive covenants and later rented it via short-term (1–7 day) vacation rental agreements advertised on VRBO; aggregate rentals totaled 102 days in 2014.
- Tarr formed an LLC to manage bookings and remitted state and local hotel occupancy taxes; no on-site office, signage, employees, or hotel-like services existed at the house.
- Timberwood deed restrictions: (1) "All tracts shall be used solely for residential purposes, except tracts designated... for business purposes..." and (2) a separate paragraph limiting structures to single-family residences with specified construction standards.
- The homeowners association alleged violations (business use and multi-family/transient rentals), fined Tarr, and denied his appeal; Tarr sued for declaratory relief.
- Trial court granted summary judgment for the association, enjoined short-term rentals and awarded fees; the court of appeals affirmed, reasoning "residential" implies physical presence and intent to remain. The Supreme Court reversed and remanded.
Issues
| Issue | Plaintiff's Argument (Tarr) | Defendant's Argument (Association) | Held |
|---|---|---|---|
| Whether short-term rentals violate the deed's “residential purposes” restriction | "Residential purposes" is contrasted with "business purposes"; covenants say nothing about duration or temporary tenancy, so short-term rentals are permitted | Short-term/transient rentals are non-residential (and commercial); "residence" implies physical presence and intent to remain | Held for Tarr: covenant unambiguously limits on-property conduct to residential (living) activities; temporary occupancy for living purposes remains residential and is not barred |
| Whether renting to non-family groups violates the "single-family residence" restriction | Single-family clause limits the type of structure, not the occupants or use; Tarr’s house is a single-family dwelling | The covenant should be read to forbid multi-family or transient occupancies | Held for Tarr: single-family provision is structural (limits buildings), separate from the use restriction, and does not prohibit renting to non‑related occupants |
| Whether receipt of income, formation of an LLC, and payment of hotel taxes converts the use into a prohibited business | Income/LLC/remote booking do not change that on-property use is residential; business indicia occur off-site | Formation of an LLC, hotel taxes, and short-term rentals show commercial enterprise | Held for Tarr: off-site management, Internet bookings, and tax payments do not alone make the on-site use non‑residential; no evidence of business activity occurring on the tract |
| Standard of construction for restrictive covenants (strict vs. liberal) | Court should not add restrictions where the deed is silent; silence permits use | Section 202.003(a) directs liberal construction to effectuate covenants' purposes | Court avoided resolving the statute/common-law conflict because outcome is same here: covenants unambiguously silent on duration/temporary leasing, so adding limitations is improper |
Key Cases Cited
- Munson v. Milton, 948 S.W.2d 813 (Tex. App.-San Antonio 1997, pet. denied) (discusses "residence" as physical presence plus intent to remain)
- Pilarcik v. Emmons, 966 S.W.2d 474 (Tex. 1998) (restrictive covenants are interpreted as contracts; ambiguity is a question of law)
- Davis v. Huey, 620 S.W.2d 561 (Tex. 1981) (purchasers are bound by recorded covenants if they have notice; covenants confined to lawful purposes will be enforced)
- Stephenson v. Perlitz, 532 S.W.2d 954 (Tex. 1976) (distinguishes use restrictions from structural restrictions; "residence purposes" differs from a limitation on building type)
- MacDonald v. Painter, 441 S.W.2d 179 (Tex. 1969) ("residence purposes" means use for living purposes as opposed to commercial)
- Permian Basin Ctrs. for Mental Health & Mental Retardation v. Alsobrook, 723 S.W.2d 774 (Tex. App.-El Paso 1986, writ ref'd n.r.e.) ("single-family" language limits structure type, not occupancy/use)
- Pinehaven Planning Bd. v. Brooks, 70 P.3d 664 (Idaho 2003) (short-term residential rentals constituted residential use where occupants engaged in living activities)
- Slaby v. Mountain River Estates Residential Ass'n, 100 So.3d 569 (Ala. Civ. App.) (holding temporary occupancy for ordinary living activities is a residential use)
- Santa Monica Beach Prop. Owners Ass'n v. Acord, 219 So.3d 111 (Fla. Dist. Ct. App. 2017) (distinguishing inns/bed-and-breakfasts with on-site business indicia from private short-term residential rentals)