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Condo | HOA Lawyers

Fees for Self-Renters Who Don’t Enter the Rental Pool are Legal

Facts

Association Board adopted a resolution that unit owners in the Association who self-rented but did not join the rental pool would need to pay 20% of their rental income to the Association because the self-renters “did not contribute financially for the extra expense of their leasing activity or for the beneficial services provided by the rental pool.”  The resolution also 1) disallowed future self-rentals; and 2) grandfathered in the current self-renters.

The Suit

Claims

The Association sued the self-renters seeking a declaration that its resolution disallowing future self-rentals and imposing a rental fee was enforceable.  The self-renters counterclaimed alleging: a) breach of contract; b) injunctive relief; c) that the resolution was arbitrary and unenforceable; and d) that the Association was improperly allocating certain fees on the self-renters.

Arguments

Self-Renters – Sought summary judgment arguing that the resolution is prohibited by the condo statute because 1) there is no connection between the 20% and any increased costs; 2) the resolution was decided on a whim; 3) the 20% is only against the self-renters and not all unit owners; 4) the resolution is contrary to the declaration; 5) all unit owners are to be charged their “pro-rata share of common expenses”; and 6) any changes to the declaration required proper written consent.

Association – Sought summary judgment on the grounds that the resolution was enforceable, not contrary to the declaration, and not arbitrary because it was “specifically considered by and overwhelmingly voted for by unit owners at an annual meeting where every owner was allowed to speak.”  The Association also argued that the self-renters were not singled out, but rather it was the rental pool owners who had for many years been overpaying to subsidize the self-renters.

Trial Court

Granted the summary judgment motion of the Association and ordered the self-renters to pay attorney’s fees.  The self-renters appealed.

Court of Appeals

Affirmed the trial court holding:

  1. The self-renters argument that the Association cannot deviate from the cost-sharing regime set forth in the declaration does not carry the day for them because the declaration specifically provides that the owners shall pay “their pro-rate share, in the percentages above fixed … and defined in this Declaration, and any other valid expense or charge assessed pursuant to authority given by [the Texas Uniform Condominium Act] or this Declaration or said By-Laws.”
  2. “We conclude that [the association] had the authority to levy fees against the self-renters renting outside the rental-pool, ‘assuming the prohibition and fees were reasonably necessary to achieve the purpose … of the [association].” Citing the same court’s prior opinion of Gulf Shores Council of Co-Owners, Inc. v. Raul Cantu No. 3 Family Ltd. P’ship, 985 W.W.2d 667 (Tex. App. – Corpus Christi-Edinburg 1999, pet. denied).
  3. An association has “considerable discretion to determine the necessary expenses for the operation of the condominium … and to assess the owners.”
  4. The assessment of the self-rental fee was not arbitrary because the Board “deliberated at length on the subject.”

LESSONS:

  1. Both parties thought their position was “fair,” but in these types of assessment cases it is not so much about fairness as it is the specific language of the statute, declaration, articles of incorporation, by-laws and rules;
  2. If you are passing a fee that does not follow the pro-rata formula set forth in the documents, make sure your board deliberates on the subject and members are given an opportunity to express their position; and
  3. The award of attorney fees against the self-renters likely made this a very expensive case for them to contest, but on the positive side they were lucky it was decided on summary judgment as opposed to after the costs and expenses of a trial.

Bargnesi v. Pelican Condominium Counsel Co-Owners Association (2021 WL 3556668, Texas)

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