Renting Private Homes in HOA

Started by TimS9 • 14 replies • 2220 views

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TimS9 (Colorado)
Posts: 2

Posted:

Our HOA does not have any covenants specifically against renting. However the covenants do have a provision against operating a business. The BOD believes rental of a private home, long or short term, does not constitute a business because a business license is not required.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Tim:

Welcome to HOAtalk. To potentially answer your question, the board is correct in that an individual renting their private home to another individual or family is not considered operating a business. Home business information would also potentially be available through your local city or county ordinances on their websites.

WillR (Michigan)
Posts: 68

Posted:

I have been reviewing court cases in Michigan and I have to disagree. Michigan Court of Appeals had a case and it ruled that because the tenants of are renting from the property owner, the tenants are considered to be customers of the landlord( property owner) then legally the landlord is a business and in violation of running a business.. This case involved "summer rentals" where owners would rent out their property. I would suggest that you consult an attorney for advise. A business is a business no matter how much lipstick is smeared on the pig!

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Rental property isn't a business if owned by private individual. A business in respect to what a HOA is refering to is the type that would "Hang their shingle out". This means a Dentist can't open up a Dental office from his home. The IRS frowns somewhat about this business as well. They prefer an owner have a separate office space.

So in respect to what the HOA's documentation refers to isn't rental property but actual businesses with license.

Former HOA President

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Will:

That is interesting ... do you happen to have a link to that case or know the parties involved so I can research. I would be interested to know the argument used, as the landlord would potentially not have a home business license. Something we have to also consider is you are in Michigan and Tim is in Colorado, so there will be differences in the state statutes. I am just wondering what statute in Michigan is potentially referenced in the case you described.

As a general rule to be considered a home business when not in HOA documents, then the local ordinances apply. Also, in most instances the home business must apply and pay for a local business license and register as a “home based business” to operate.

TimS9 (Colorado)
Posts: 2

Posted:

I appreciate all the input and look forward to further replies. Our Association was formed in the 70's and as a BOD we feel that "business or commercial enterprise" refers to those as was stated "hanging a shingle out" so as to not have high traffic businesses or auto repair and the like, and not meant for rentals.

DonnaS (Tennessee)
Posts: 5,671

Posted:

Tim,

Many Citys have ordinances that limit the time of the lease when considering the rental as a business or just a owner/renter situation. Short term rentals is what they consider a business and as such, most are taxed as a business. Key West Fl comes to mind where this has gone to court several times. A business is any rental with leases shorter than 6 months in some cases, One of my rentals in Stuart Florida had any rental less that 3 months became a taxable business.

A permanent renter in a home would not be considered a business as such.

WillR (Michigan)
Posts: 68

Posted:

Not sure of the "http" link but go to Michigan Court of Appeals case inquiry and search Enchanted Forest Property owners association v Schilling March 2010. If your deed restriction state "use as a "private residence" then renting my be not allowed.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Our HOA documentation has the same exact wording as yours does. It's pretty typical legalese. Just like you stated before, it's in regards to autoshops and the like from opening up.

Rental property use and allowance is another issue really separate from this one. It's got it's own rules and laws in regards to that. No offense to those who want to turn this into a HOA rental limitation issue. However, the wording in this case is truly in regards to actual licensed professional business. However, the Avon lady or other such stay at home sales businesses (Pampered chef, Home interiors, Amway etc..) don't fall under this umbrella. They just can't put a sign up on their property advertising their business.

Former HOA President

JanetB2 (Colorado)
Posts: 4,219

Posted:

Thank you Will ...

Here is the legal case:
http://coa.courts.mi.gov/documents/opinions/final/coa/20100311_c287614_29_287614.opn.pdf

These are the areas in which the CCR was enforced regarding this issue.

The restrictions further provide that “No part of said premises shall be used for
commercial or manufacturing purposes.”

Residence is defined, for non-insurance purposes, as “the place where a person has his home, with no present intent of removing, and to which he intends to return after going elsewhere for a longer or shorter period of time.”

The HOA did allow rental, but they also had that the intent of the residence/rental was someone living there for extended period of time. By renting one week here and there to various entities and also using a third party company, the owner lost because that action in essence made it determined the property was being used for “commercial purpose”.

I just wanted to potentially clarify this for others who read the post.

BrianB (California)
Posts: 2,820

Posted:

One thing I would ask is what are the words of your CC&R. If they prohibit running a business in the home (within the HOA), then my question would be "Are the owners of the property running the business (rental) from their home IN the HOA, or are they running it from somewhere outside the HOA?". The home being rented is IN the HOA, but the business itself is physically run from.. somewhere else?

I would likely tell the HOA "I am running a rental business from 123 Main street, not from 847 W Oak, which is the property within your HOA and subject to the regulations."

SueD7 (Colorado)
Posts: 1

Posted:

Here's a copy of you by-law on the subject
Building Use and Type: All lots not
designated on the Plat as being for business or commercial use shall be
restricted to residential use either as vacation homes or year round dwellings.
Such structures shall be only one family dwellings and shall be for residential
use only.

DianaB4 (Oregon)
Posts: 13

Posted:

We tried to limit rentals in our community but the majority voted it down. The problem is that if you have too many rentals, v.s. amount of owners, your potential sale of a unit could be hamstrung by FHA rules about rentals/vs/owned in a given community.

In Oregon, it's not considered a business to rent your unit, but sure is a hassle for homeowner when she (me) has to deal with ignorant renters who never had the CCRs explained to them. Absentee owners are the worst.

DianaB4 (Oregon)
Posts: 13

Posted:

DianaB4 (Oregon)
Posts: 13

Posted:

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