Statutory Civil Damages for Covenant Violations Requires Actual Damages

In a case of first impression, today the Houston Court of Appeals, 14th District, issued its opinion in KBG Investments, LLC v. Greenspoint Property Owners’ Association, Inc. The court held that in order to recover civil damages under Property Code Section 202.004(c), an association has to plead and prove actual damages. Although the court upheld injunctive relief on the association’s covenant enforcement claim in the lawsuit, it modified the trial court’s judgment awarding statutory civil damages because the association failed to prove any actual damages.

The trial court had awarded $10,400 under Section 202.004(c), which provides that a court may assess “civil damages for the violation of a restrictive covenant in an amount not to exceed $200 for each day of the violation.” In reaching its decision to modify the trial court award, the appellate court relied on Chapter 41 of the Texas Civil Practice and Remedies Code. Chapter 41 governs exemplary damages and requires a claimant to prove actual damages in more than a nominal amount in order to recover exemplary damages (See Section 41.004(a)). Relying on other appellate court decisions, the court concluded that civil damages under Section 202.004(c) are punitive in nature and, therefore, Chapter 41 applies. Associations should take note and be sure to include proof of actual damages with any claim under Section 202.004(c).

A copy of the opinion is available on the court website under Case No. 14-14-00484-CV: http://www.txcourts.gov/14thcoa.aspx.

 

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