On January 26, 2024, RMWBH attorneys Greg Godkin and Ashley Koirtyohann secured a major win for the POA industry when the Supreme Court of Texas denied a Petition for Review in Chu v. Windermere Lakes Homeowners’ Association, Inc. At the heart of the case was the question of whether a POA’s members have the power to amend the POA’s declaration to impose new restrictions against existing owners. In this article, we break down the case and address the potential wide-reaching implications that could have arisen from a different result.
Background
This case began in October 2019, when a homeowner challenged her Association’s ability to enforce a Declaration amendment prohibiting short-term leasing. The homeowner had previously purchased two homes in Windermere Lakes for the express purpose of leasing the homes on a short-term basis. At the time of her purchases, the Declaration for Windermere Lakes did not impose a minimum lease duration. Eventually, the Association’s members lobbied for the adoption of a Declaration amendment to prohibit leases lasting less than 180 days. The amendment passed with the approval of nearly 80% of the Association’s members. Following the adoption of the amendment, the homeowner sued the Association. In her petition, the homeowner argued that although the amendment had been properly approved by the members, it should not be enforceable against her because the purchase of her properties predated its adoption.
The 333rd District Court disagreed with the homeowner, granting a judgment in favor of the Association. The homeowner then appealed the District Court’s decision to the Fourteenth Court of Appeals, which affirmed the District Court’s decision, holding the amendment was enforceable against the homeowner. Notably, the decision by the Fourteenth Court of Appeals aligned with several other appellate decisions previously issued by the First, Third and Ninth Courts of Appeals in factually similar cases (see “Companion Cases” below for more information). The homeowner then filed a Petition for Review in the Supreme Court of Texas, asking the Court to grant review of the appellate court’s decision. The Court requested briefing from both parties and, after consideration of the briefs filed, issued an order denying the Petition for Review. As a result, the opinion issued by the Fourteenth Court of Appeals stands.
The Arguments
The homeowner’s arguments were largely based on constitutional concepts more traditionally applied to the actions of cities and municipalities. For example, the homeowner argued judicial enforcement of new restrictions on her ability to lease would constitute a taking.
The Association’s primary arguments were straightforward: (1) the homeowner purchased the properties with notice of the Association’s right to amend its Declaration by a vote of its members; and (2) the right to amend is consistent with long-standing Texas law dating back to the 1930’s.
Readers who have been following the development of case law surrounding short-term leasing restrictions will be familiar with two previous cases: Tarr v. Timberwood Park Owners Association, Inc, in 2018, and JBrice Holdings, L.L.C. v. Wilcrest Walk Townhomes Association, Inc., in 2022. In both Tarr and JBrice, the Court opined that the proper method by which to restrict short-term leasing is the adoption of a declaration amendment. As such, the Association’s final argument was that it had simply followed the Court’s instructions.
Companion Cases
In addition to the case argued by RMWBH, several Courts of Appeals throughout the state of Texas recently issued opinions upholding a POA’s right to amend its restrictions to impose a minimum lease duration:
- Adlong v. Twin Shores Prop. Owners’ Ass’n, No. 09-21-00166-CV, 2022 WL 869801 (Tex. App. – Beaumont March 24, 2022, pet. denied).
- Angelwylde HOA, Inc. v. Fournier, No. 03-21-00269-CV, 2023 WL 2542339 (Tex. App. – Austin March 17, 2023, pet. denied).
- Cauthorn v. Pirates Prop. Owners’ Ass’n, No. 01-22-00401-CV, 2023 WL 5535665 (Tex. App. – Houston [1st Dist.] Aug, 29, 2023, pet. denied).
- Poole Point Subdiv. Homeowners’ Ass’n v. DeGon, 03-20-00618-CV, 2022 WL 869809 (Tex. App.—Austin March 24, 2022, pet. denied).
The homeowners in these cases also filed Petitions for Review which were subsequently denied by the Supreme Court of Texas.
What’s Next?
A decision by the Supreme Court of Texas in favor of the homeowner could have had drastic implications for the ability of a POA to amend its governing documents and ensure the uniformity of applicable restrictions. Essentially, adoption of the homeowner’s argument would have resulted in patchwork subdivisions where different owners would be subject to different restrictions based on the dates they purchased their homes.
Fortunately, the Supreme Court of Texas denied the homeowner’s Petition for Review. As a result, the opinion issued by the Fourteenth Court of Appeals stands. While opinions issued by the Fourteenth Court of Appeals are only binding on the districts that court serves, every Texas appellate court that has weighed in on this issue agrees that short-term leasing amendments are enforceable when properly adopted.
What does this mean for your POA? Ensuring an amendment is properly adopted is essential to withstanding a legal challenge. POAs wishing to amend their declaration to restrict short-term leasing should work closely with an attorney to ensure the proper process is followed.
