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Capping Renters

Started by SharonB6 • 12 replies • 1688 views

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SharonB6 (Pennsylvania)
Posts: 70
Posted:
So I am a board member of a Townhouse Community of about 76 units. I am currently proposing an amendment change that would limit the amount of units allowed to be rented at one time.

I have done some research and found that a high % of renters can disqualify our neighborhood to be FHA and would prevent new homeowners from getting their needed loans. Also my insurance company said that when you hit around 35% a lot of insurance companies will not insure the HOA. Overall too, a high % of renters just makes the neighborhood less attractive to the informed home buyer. Plus I hate to say it, but renters just take less pride in the home and don't take care of it as much.

So at this point we do not have a problem with the amount of renters, but I want to pass this amendment before my term ends next year. I have a hardship clause in there so if anybody loses their job or is in the threat of a foreclosure they can rent it out. Plus we also said that after the 15% is hit, people can still rent their property but will have to pay a $100 monthly penalty. In addition anybody who is currently renting will be grandfathered in. We have 6 renters and 12 is our cap. We aren't even close to the limit and I don't think we will be anytime soon.

I sent out this proposal today so it can be discussed at our upcoming meeting. I have already received a few very angry e-mails back from the people who are currently renting.

I was hoping to hear from anybody who has already passed an amendment like this and how it has worked out for them. If you haven't what are your thoughts on this proposal?

DennisT (Ohio)
Posts: 109
Posted:
Two things:
1. You need to get the association lawyer involved before trying to pass this kind of amendment. This is not the kind of amendment you want to draft on your own without legal advice. You might save a few bucks not talking to the lawyer now but you'll pay 10 times more defending a legally inadequate amendment down the road. Renters amendments are a minefield of civil litigation waiting to happen among them being fair housing law violations, discrimination (by the owner who can't rent because he would be the 36%th percent) and restraint on alienation. I really doubt that a fixed percentage of rentals and/or an additional penalty would fly.

2. Good luck getting approval of any kind of anti-rental amendment in this climate. We continually tried to pass an anti-renting amendment and it failed every time. Our amendment included a one-time hardship rental clause where anybody could rent one time and none of it applied to the current owners of the units. In other words any current owners who were thinking about renting their units in the future would be limiting their competition! Still failed.

Don't get me wrong; restricting rentals is probably a good thing to do for your community. The problem is it's very difficult to accomplish in a manner that both the owners will accept and won't get the association sued later.
TimB4 (Tennessee)
Posts: 21,061
Posted:
Sharon,

Some planned unit developments are exempt from this issue.
SteveM9 (Massachusetts)
Posts: 3,699
Posted:
SharonB6,
Someone brings up the topic of limiting renters about once a week in this forum. Click the search button to the right and look up some of the posts. If you still have questions, post them here.
SharonB6 (Pennsylvania)
Posts: 70
Posted:
Ugh! I have been searching this topic all day. I now believe since we live in a planned community and that FHA argument doesn't apply to us. I was fed this information by a local Realtor and a director from an identical HOA. So now when we have this meeting, I have to explain why i am an idiot and didn't verify my statements.

I totally agree that our lawyer will be needed if we decide to go through with this. At this meeting I think it will just be a discussion to get a feel for how the Homeowners stand at this issue.

I personally feel keeping the rental units lower will be better for the community, but now I have to sell it differently.

Does anybody have any suggestions?
Has anybody successfully passed this?
What were the results? Any bad consequences?

TimB4 (Tennessee)
Posts: 21,061
Posted:
Sharon,

If it hasn't happened already, your Association will be getting PUD questionnaires from various banks and mortgage companies asking many questions, one of which is how many lots are rented. This is because FHA still requires this information even though a PUD community is typically exempt. I agree that a low rental rate is better then a high rental rate for any community. However, I believe that creating a rental cap will create more problems and headaches for the Association then it will solve.

I am currently serving on my Board of Directors and our town home development also has 19% rentals. This rental ratio has not prevented homes from being sold quickly (less then 30 days on market) or anyone from refinancing. Therefore, I mentioned to the Board the new guidelines, the fact that the Association was being asked the questions by bankers and the fact that we are currently exempt along with the indication that the high % of rentals has had little or no impact on property values or sales. Therefore, we chose not to address any rental policy.

Tim
SharonB6 (Pennsylvania)
Posts: 70
Posted:
yeah I am beginning to see what you are saying.. Yesterday A homeowner/landlord sent a very very angry e-mail threatening a lawyer and calling names. It amazes me because we are only proposing a change, not actually doing it. I love it how when anybody is angry with an HOA the first thing they go to is the lawyer card.

JeffP6 (Florida)
Posts: 91
Posted:
Is your concern really having renters or is your concern that the property wont be maintained because the homeowner is absent and the renter isnt responsible for it.

I understand this concern completely as it is an issue in our sub. Solution - we put the homeowner on notice and they get the violations - and we pursue all the way to a judgement if necessary.
SharonB6 (Pennsylvania)
Posts: 70
Posted:
A little of both actually. Right now we don't have any problem with rentals, however, I can see in the future how more and more rental units pop here. The houses that have been sold are WAY under what most of us paid for them. So i am nervous that people may buy them as investment properties. I don't want to live in a community that has a lot of renters. Not because people who rent are bad, but because I want people who are invested and care about the long term health of the community. Our developer went bankrupt and they were not even half complete with our development. We need people who are willing to fight to get what our community was promised. The homeowners who are landlords are not the ones fighting right now.

Two yes, we have had a few minor problems with renters not doing the upkeep in our neighborhood. For the most part the HOA takes care of things, like landscaping. However, stuff like shoveling the sidewalks, watering the grass, and a few other things are the homeowners responsibility. The renters tend not to do these things. Right now, our HOA is pretty strong and active and get on the renters for not following the rules, however, it's always a fight with the landlords to do anything. So in the future when the current board steps down, I am not confident that anybody in the future will have time to pursue these things. I am a stay at home mom so I am able to keep up with the demands of the position and do a lot of the extra leg work. My co-board members both have full time jobs that are demanding and they do what they can, but it is limited. So if we have 3 people with full time jobs on the board I don't know how they will be able to keep up with it all.

JeffP6 (Florida)
Posts: 91
Posted:
yep totally understand - all 3 of us have FT jobs. Luckily I work from home for mine so it allows me more flexibility. I totally understand. The STR in our community that have an active management company do a good job for the most part. Our issue is the LTR in the neighborhood as well. Like I said - we pursue the homeowner all the way to judgement - I actually have one hearing coming up soon.

Maintaining the yard is our biggest issue with these as well.

Good luck and let us all know - would love to be able to cap our LTR but have no idea how to even enforce that.
SharonB6 (Pennsylvania)
Posts: 70
Posted:
Wow. So we had our meeting tonight were I presented the idea. I fully expected to get yelled at. Nope everybody thought it was a good idea!?!?! HOLY CRAP! (that is except for the landlord homeowners who e-mailed me, they didn't show at the meeting). So now we are going to send out a survey asking whether the community wants to move forward. This way they can express their views without the pressure of an audience. If we have a good response back we will send the amendment to the lawyer and have him figure out the legalities of it all.

GlenL (Ohio)
Posts: 5,491
Posted:
Sharon, in addition to the rental cap if you decide to go for it, I would suggest a strong rental policy. Some of the things I have seen in different documents requires the lease to include things like:

Landlord is responsible to provide a copy of the CC&R's to the tenant.

Make the minimum rental term at least 6 months preferably a year.

Add something to the effect of if the homeowner becomes delinquent with their assessments then the Association can collect them and any past due amounts directly from the tenant and the owner must credit the money paid by the tenant as rent. In other words if your monthly assessment is $150.00 and the H/O is delinquent then the BOD collects the $150.00 from the tenant directly. When the tenant sends the owner his rent minus the $150.00 the owner must credit it as if the tenant paid him in full.

I would also include language that if you have amenities (pool, tennis court etc.) the owner either assigns the amenity to the tenant and cannot use it for the term of the rental or keeps it for their use and the tenant can't use it.

Give the Association the power to initiate eviction actions against problem tenants with the cost to be born by the homeowner.

And finally when you have the whole thing drafted have it looked over by an attorney to make sure it doesn't violate the landlord - tenant law in your state and adequately protects your Association as much as possible.

P.S I would also cap the number of units any one person or company can rent to prevent a speculator from buying enough to take control of the community.
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