Apple iPhone 6s plus with Airbnb application on the screen.Following his transfer to Houston, Ruel Benda decided to keep his posh gated neighborhood Rodeo Drive house and started advertising it on AirBNB. His profits were so good that he began renting for 7 days or less. Insisting that Benda’s home use was commercial and not residential, a violation of his property owners association’s (POA) recorded  Covenants, Conditions and Restrictions, the POA fined him. Benda sued. Did he win? Can Benda continue to rent his house?

It depends. No, if Ruel Benda lived in San Antonio. Under these facts a San Antonio appellate court concluded that the POA deed restrictions prevented such rentals and granted the POA’s injunction denying further rentals.

Yes, if Benda lived in Austin where, under very similar facts, the Austin Court of Appeals found no violation of a restrictive covenant under similar circumstances, determining  that the covenant restricting homes to be used “for single family residential purposes” was ambiguous. The Austin court “resolve[d] the ambiguity against the Association and in favor of the [homeowner’s] free and unrestricted use of their property.” The San Antonio Court respectfully disagreed with the Austin Court of Appeals and did not find its reasoning persuasive.

Like Uber, the AirBNB kerfluffle has landed in the news in Chicago, Spokane, (requires a license) and even Arlington County near Washington, D.C. – just in time for Inauguration Day.  Even San Antonio is considering municipal regulations that would affect properties not otherwise subject to a property owner’s association.

Tilting the Scales in Your Favor. Avoid being surprised. If you are in a property owner’s association, read your documents. While many POAs have more detailed restrictions against short term rentals (STR) of POA homes, some enforce their rules and others don’t. Likewise, while smaller counties and cities are not actively enforcing requirements to report and pay hotel occupancy taxes upon home rentals, many cities like Austin, San Antonio and Houston are.                                                                                 

Under Texas law, an STR is rental of a property for less than 30 days and the guest is charged $15 or more per day. Texas hotel occupancy tax due to the Texas Comptroller is six percent of the room cost. Counties are authorized to impose a hotel occupancy tax also.

And, by the way, your income from the STR may well be taxable. As my colleague Drew York wrote a couple of months ago, whether the income is taxable depends upon a “Master Exception” to the Internal Revenue Code. Check out our September article Do I Owe Income Taxes When I Rent Out My Home?

Winn Blohn knew the storm was coming before it lifted the roof and parts of the second floor from his home. Hiding behind the kitchen counters during the fifteen seconds of swirling glass and falling debris, Winn knew the roof was gone. Now, it’s too early to tell if the next call should be for a builder or a bulldozer. When Hugh Peigh, Winn’s landlord, stopped by to express his sympathy and to offer his pickup truck for cleanup, Hugh asked if Winn’s monthly rent payment was in the mail. Who is responsible, Winn Blohn or Hugh Peigh? Who pays, how much and by when?

Assuming that Hugh insured his rent house, he is responsible for damage to the house and should get his insurance company to adjust the claim. Asfor repairs, Hugh’s obligations do not begin until he receives the insurance proceeds. Either Hugh or Winn Blohn may terminate the lease by giving written notice to the other any time before repairs are completed. With the roof gone, it is likely that the premises are at least partially, if not wholly, unusable. Winn is entitled to reduce the rent he pays to Hugh to in an amount proportionate to the extent the premises are unusable because of the tornado.

Suitable Premises

At common law (before the Texas Property Code), a landlord could demand rent even if the premises became unsuitable because of a sudden act of God, such as a tornado. Even without a roof, Winn would have to pay rent for the duration of the lease. Most states like Texas statutorily abolished rent payment obligations if a non-man-made force renders the premises unsuitable. However, the landlord is likewise, not accountable for natural disasters such as a flood, fire, or tornado. Nor is the landlord responsible for providing alternate shelter and housing. The landlord is only responsible to fix the property and make it habitable as soon as possible.

Personal Property Losses

Renters sometimes assume that the landlord’s property insurance protects them in the case of a theft or fire. However, most landlord and owner’s policies cover only the structure of the building and grounds — not the tenants’ possessions. Renters can purchase rental insurance that provides temporary housing and provisions in a natural disaster. Unless the catastrophe was something other than a natural disaster and caused by the landlord’s negligence, the landlord cannot be held accountable for the loss of an occupant’s personal items.

Tilting the Scales in Your Favor

If you are the tenant and the landlord won’t make repairs to protect your health, safety, or security, and you follow the procedures required by law, you may be entitled to:

  • end the lease;
  • have the problem repaired and deduct the cost of the repair from the rent; or
  • file suit to force the landlord to make the repairs.

To do so, you MUST:

  • send the landlord a dated letter by certified mail, return receipt requested, or by registered mail, outlining the needed repairs, or deliver the letter in person;
  • keep a copy of the letter; and
  • be sure your rent is current when the notice is received. If the landlord does not make diligent efforts to repair, you may be entitled to terminate the lease, repair the problem and deduct the cost from your rent, or get a court to order that the repairs be made. You should consult with an attorney before taking any of these actions. In Texas, a landlord cannot retaliate for complaining about necessary repairs for six months after the complaint is made.

Disaster Relief Resources

The Hood County Bar Association is offering Hood County tornado victims free information and consultation on legal issues related to the recent disaster on May 23 from 9:00 a.m. to 11:00 a.m. at the Hood County Annex (1 – 1410 W. Pearl St.) The State Bar of Texas provides a toll-free disaster legal hotline at (800) 504-7030 for those impacted by the tornadoes in North Texas, as does Legal Aid of NorthWest Texas at (855) 548-8457.