Deed Restriction Disputes on Commercial Property in Texas

What commercial deed restrictions do

Business parks, shopping centers, office campuses and mixed-use projects are governed by recorded declarations, often titled CC&Rs (covenants, conditions and restrictions) or, in retail, a reciprocal easement agreement. They restrict permitted uses, grant one tenant an exclusive on a product line and bar competitors, set building height and setback rules, require architectural approval, allocate parking, control signage, prohibit outdoor storage or truck traffic, and impose assessments for common area upkeep. Because they are recorded, they bind every later owner and tenant whether or not that party read them.

Disputes arrive from both directions. An owner wants to stop a neighbor whose new use hurts its business or its tenants. Or an owner has been told its own planned use, sale or lease violates the restrictions and wants to know whether the restriction really reaches it and who can stop it.

Who may enforce a restriction

A restriction is enforceable by the people it was meant to benefit. In a planned commercial development that typically includes the declarant or developer while it still owns property or has retained enforcement rights, every other owner whose land is subject to the same scheme, and an owners' association if the declaration creates one and gives it enforcement power. A tenant may enforce a restriction that its lease or the declaration extends to it, which matters for exclusive-use rights in shopping centers. A stranger to the scheme, such as an owner across the street who is not bound by the declaration, generally cannot.

Chapter 202 of the Property Code addresses enforcement by associations. Under § 202.004(b) a property owners' association or other representative designated by an owner may initiate, defend or intervene in litigation concerning enforcement of a restrictive covenant or the protection, preservation or operation of the property covered by the dedicatory instrument. Under § 202.004(a) a discretionary decision by such an association about a covenant is presumed reasonable unless the court finds by a preponderance of the evidence that it was arbitrary, capricious or discriminatory. Chapter 202's definitions are written around residential subdivisions, so whether a commercial owners' association can rely on these association provisions depends on how the declaration is structured; the construction rule in § 202.003 applies to all restrictive covenants regardless of when they were created, under § 202.002.

How Texas courts read a restriction

Property Code § 202.003(a) states that a restrictive covenant shall be liberally construed to give effect to its purposes and intent. That changed the older approach, under which restrictions on land were read narrowly against the party seeking to enforce them. In practice courts start with the words of the declaration, read them as a whole, and enforce an unambiguous restriction exactly as written. Where the language is genuinely ambiguous, the court looks to the intent of the drafters as shown by the whole instrument and the circumstances of the development. Extrinsic evidence of what a developer meant does not override clear text.

The outcome of most commercial cases turns on definitions. Whether a medical clinic is a prohibited office use, whether a ghost kitchen is a restaurant for purposes of an exclusive, whether a crossfit gym is a health club, and whether vehicle staging is outdoor storage are all questions of what the declaration's words cover. Amendments, waivers granted to earlier owners and the developer's own conduct all become evidence.

Remedies

The primary remedy is an injunction: a court order that the violating use stop or that a structure built in violation be removed or altered. Texas courts have long granted injunctions to enforce valid restrictions without requiring the plaintiff to prove money damages, on the view that the owner bargained for the restriction and is entitled to its benefit. A temporary injunction early in the case is often the real contest, since a use that operates for two years while the case is pending is hard to stop later; the procedure is covered in emergency relief in Texas business cases.

Damages are available for proven loss, such as a tenant's rent reduction caused by a competitor operating in violation of its exclusive. Property Code § 202.004(c) separately allows a court to assess civil damages for violation of a restrictive covenant of up to $200 for each day of the violation; its availability outside the residential association setting depends on how the declaration fits chapter 202. A declaratory judgment that a planned use does or does not violate the restrictions is the usual vehicle for an owner who wants certainty before building or leasing.

Attorney's fees

Property Code § 5.006 provides that in an action based on breach of a restrictive covenant pertaining to real property, the court shall allow a prevailing party who asserted the action reasonable attorney's fees in addition to costs and the claim. The award is mandatory, but it runs one way: to the party that brought the enforcement claim and won. An owner who successfully defends against an enforcement suit does not recover fees under § 5.006, though the declaration itself may contain a broader prevailing-party clause that does. That asymmetry shapes settlement in these cases.

Defenses

• The restriction does not reach the use. The most common and most successful defense. If the declaration lists prohibited uses and the challenged use is not fairly within the list, the owner is free to proceed.
• Waiver or abandonment. A restriction that has been violated widely and openly without enforcement may be found abandoned. Courts look at the number, nature and severity of existing violations, whether prior enforcement occurred, and whether the violations are so pervasive that the restriction no longer serves its purpose. A few isolated violations do not do it.
• Changed conditions. Where the character of the area has changed so completely that the restriction no longer accomplishes its purpose and enforcement would be inequitable, a court may decline to enforce it. This is a demanding standard and is rarely met inside a functioning commercial development.
• Limitations and laches. A suit to enforce a covenant is a contract-type action, and the party who sat on a known violation for years may face a limitations defense under the four-year residual period in Civil Practice and Remedies Code § 16.051, or laches if the delay prejudiced the defendant.
• Lack of standing. The plaintiff is not within the scheme or the declaration does not give it enforcement rights.
• Approval or estoppel. The architectural committee, declarant or association approved the use, or the plaintiff itself encouraged it.

Example

Suppose a declaration covering a 40-acre light industrial park in Grand Prairie prohibits outdoor storage except for operable vehicles parked overnight. A new owner of one lot begins staging loaded trailers and shipping containers on its yard around the clock. The adjacent owner, whose tenant complains about dust and blocked sightlines, demands that the use stop, then sues for an injunction and fees. The defendant answers that trailers are vehicles, that three other lots have kept dumpsters and equipment outside for years, and that the park has changed since the 2004 declaration. The court reads the declaration as a whole, notes that it defines storage to include containers and trailers left for more than 24 hours, finds that the three other violations are minor and do not show abandonment, and grants a permanent injunction. Because the neighbor asserted and won the enforcement action, it recovers its attorney's fees under § 5.006.

What to check before you build, lease or sue

• Pull every recorded declaration, amendment, supplemental declaration and recorded waiver for the project, not just the one referenced in your deed.
• Read the definitions section first. Most disputes are decided there.
• Identify who holds enforcement rights today. Developers often assign them to an association or let them lapse when they sell the last lot.
• Document existing violations across the project with dated photographs, since they cut both ways: they support an abandonment defense and undercut an enforcement claim.
• Check your lease. A tenant's exclusive, and the landlord's promise to enforce it, may give the tenant a direct claim against the landlord as well as the neighbor.

A buyer who discovers a restriction after closing that the seller knew would block the intended use has a different problem, addressed in claims when a seller hides defects in a commercial deal, and a dispute that is really about the location of a shared drive or access easement belongs under boundary and easement disputes between property owners.

When to involve a litigator

Before a demand letter goes out or a response is sent, because the first letter frames the covenant question and because a party who later wins can recover fees for the work from that point. Tina Wysk represents owners, tenants and associations in restrictive covenant and land use disputes in Dallas-area courts through the firm's real estate litigation practice.