New rules for owners who rent their homes

Started by JackB5 • 18 replies • 3067 views

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JackB5 (California)
Posts: 2

Posted:

We recently introduced a new rule to our CC&Rs limiting
rentals to 7% of homes that can be rented at any one time
and in order to rent at all you had to own the home at least
two years, existing home owners are exempted.
One or two of our owners took exception to this. This rule
was voted on by our Association and it passed about10 months
ago.
He sent us notice that he was bringing in a HUD lawyer and
that the rule, is according to him was illegal.
where does the Association stand on this.

Jack b5

GlenL (Ohio)
Posts: 5,491

Posted:

Jack, you really need to check with the HOA attorney on this. If everything was done by the books you should be OK. Just because he threatened to go to HUD doesn't mean HUD will touch it.

Studies show that 5 out of 4 people have problems with fractions

SusanW1 (Michigan)
Posts: 5,202

Posted:

Where did you get the 7% figure? Why not 17 or 27%?

Does CA law allow this? Please post the authorization allowing HOA to have THIS percentage jurisdiction over a homeowner's personal property.

HUD may not touch it, but someone else might.

SusanW1 (Michigan)
Posts: 5,202

Posted:

See discussion on:
http://realtytimes.com/rtpages/20020102_hoarentals.htm

RobW (California)
Posts: 279

Posted:

In California, courts have ruled that it is legal for HOAs to restrict the percentage of rentals allowed in the community.

The successful arguments have been that, in general, renters do not have the same respect for the property as owners, nor the same respect for the Association rules and regulations, and statistically, absentee landlords as a group are more likely to default on Association fees. As a result, when the percentage of renters gets too high (somewhere between 30 - 35%), insurance companies raise their premiums, and mortgage companies begin to pull back from approving loans.

It is therefore argued that the interests of all of the homeowners have to be taken into consideration first in this case, and the individual homeowner's rights to rent as second secondary.

You can read more about this here.

Rob

BarbaraB10 (California)
Posts: 117

Posted:

To broaden the picture . . . . .

Too many rentals reduces the pool of volunteers for the HOA.

The premise of one owner or one couple "owner occupied" per lot implies one vote and one set of volunteers per lot.

In the rental situation, the premise changes to one or more owners who are also "absentee owners". The homes become non-owner occupied. There is no realistic expectation of absentee owner volunteers due to logistics. It becomes reasonable to believe that absentee owners would not/could not run for BOD positions.

RobW (California)
Posts: 279

Posted:

True, but as I just discovered (to my amazement) there is nothing in the California civic code that precludes renters from serving on the Board of Directors of an HOA. More on this here.

Maybe one reason that renters pose such a negative statistic for insurance and mortgage companies is that fact that HOA's tend to treat them as second-class citizens. Maybe if we tried reaching out to them as members of our communities (even though they are technically not members of our Associations), they would become more engaged. It's worth thinking about.

Rob

BarbaraB10 (California)
Posts: 117

Posted:

Our by-laws preclude non-owners from serving on the Board. The board positions require membership in the association which is limited to property owners in the HOA.

Our HOA is blessed with some very good (many long-term) renters who volunteer for club office positions and social functions. We'd be lost without their service.

RobW (California)
Posts: 279

Posted:

According to what I just read, a homeowner in a California CID can assign a specific power of attorney to anyone, and that person - renter or not - could then represent the owner in Board meetings, with the same privileges as the owner. That would, I assume, include the right to serve on the Board of Directors.

Rob

SusanW1 (Michigan)
Posts: 5,202

Posted:

Jack - back to the original issue: This "new" rule was passed 10 months ago.

That means everyone who owned before this passed is grandfathered in, right?

This applies to NEW owners only, and they can't rent out the unit for 2 years after purchasing.

just checking . . .

SusanW1 (Michigan)
Posts: 5,202

Posted:

MaureenM1 (PA)
Posts: 344

Posted:

I live in a 40 townhome development and we have a five homeowner board. Our builder recently sold all his homes that he rents (which we were hoping for him to one day sell) totalling 12 to one investor who will be continuing to rent. We are in the final stages of transition with the developer but the builder who was our President and held the majority of his votes gave up his seat and votes a year and 1/2 ago. The board feels that his timing was before transition so that he would no longer have any holdings in the development. Last year he sold three to a different investor who rents. His relative owns one that he rents so total rentals 16 out of 40 homes.

The residents who purchased as well as the board are not happy with all the rentals in such a small community. Our CCR's say that the builder can sell to whomever and he can sell to investors.

We have 24 homeowners that live in their homes. Again our CCR's say that the board cannot amend bylaws/CCR's without 67 percent of the association vote.

Are we stuck with not be able to limit renters since we do not have the majority to change bylaws/CCR's or is there anything we can do.

Any advice would be appreciated.

FredS7 (Arizona)
Posts: 927

Posted:

> He sent us notice that he was bringing in a HUD lawyer

I would be surprised if HUD cares if there are restrictions on the percentage of renters allowed in one particular association. I think you have very little to lose by waiting to see if this actually happens. Of course you should keep your lawyer in the loop.

Now if your rules resulted in discrimination against a protected class, that's another story...

LarryB13 (Arizona)
Posts: 4,099

Posted:

Jack:

You stated that "We recently introduced a new rule to our CC&Rs." Does this mean that the owners agreed to amend the CC&R's or does this mean that the board of directors and/or the owners adopted a new rule that did not amend the CC&R's?

If there was no amendment to the CC&R's, I would say that you are on shakey ground as this is a restriction on how the property may be used as opposed to rules regulating what people may do on the property.

How does your association determine which 7% can rent their homes? Is there some mechanism, such as an annual lottery, that gives everyone a fair shot at renting out his home? Or do the first 7% who rent their homes have a perpetual right to rent their homes and the remaining 93% are frozen out forever? If an investor owns a home that is rented out, does his right to rent transfer over to the next owner? How does your rental restriction work?

BruceF1 (Connecticut)
Posts: 2,535

Posted:

If I remember correctly, FHA, Fannie Mae, Freddie Mac and many mortgage lenders all have restrictions regarding the percentage of homes that can be rented in an HOA or condo community with respect to underwriting mortgages to the purchasers of homes in such communities.

I would think, therefore, that HOAs should be able to place restrictions on the number of homes that can be rented in order to enable prospective purchasers to obtain mortgages.

Thus, it does not seem likely that HUD will intervene because that would mean that FHA could not have such restrictions, and both are federal agencies. (Although, admittedly, one sometimes wonders if two different federal agencies belong to the same government.)

BrianB (California)
Posts: 2,820

Posted:

fyi, everyone, "Jack" started this post in February of 2011.

Maureen did a bit of thread necromancy, and revived it with a slightly different question, which no one noticed or is answering, as they are busy answering Jack's dead problem.

So, I wouldn't waste much time on the HUD thing and helping Jack.

MikeS1
Posts: 521

Posted:

Curious - Are these Condo's, Townhomes?, singles?

FredS7 (Arizona)
Posts: 927

Posted:

> fyi, everyone, "Jack" started this post in February of 2011.

I saw this too late.

Necropost, necropost, necropost!

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By FredS7 on 06/29/2012 1:29 PM
> fyi, everyone, "Jack" started this post in February of 2011.

I saw this too late.

Necropost, necropost, necropost!

Drat! I always forget to check that.

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