Limiting Rentals within the HOA

Started by DaleC • 16 replies • 2332 views

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DaleC (California)
Posts: 3

Posted:

Has anyone had any experience establishing limits on the number of rentals in your HOA? We are a 55 plus Senior Commnity, and the present economy has attracted a lot of investors that are renting their units. We are basicly single family homes, but we do have a few condos. We are located in California.

TimB4 (Tennessee)
Posts: 21,062

Posted:

Dale,

I liked the requirement I had seen posted that required a home to be owned two years prior to renting. I would expect that this keeps the investors out.

Perhaps the person that stated that will post the wording again.

You may need to have your CC&Rs amended for it to sustain any legal challenge.

Tim

DaleC (California)
Posts: 3

Posted:

Tim, We are attempting to open discussions through Town Hall Meetings prior to an attempt to change our CC&Rs. One problem is that we have some owners that have as many as 20 units and they don"t want us to limit their income.
Dale

TimB4 (Tennessee)
Posts: 21,062

Posted:

Grandfather existing owners.

TimB4 (Tennessee)
Posts: 21,062

Posted:

here are some links to other threads within this forum discussing rental restrictions:

http://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/34373/view/topic/Default.aspx

http://www.hoatalk.com/Search/ForumSearch/tabid/87/forumid/1/postid/30309/view/topic/Default.aspx

http://www.hoatalk.com/Search/ForumSearch/tabid/87/forumid/1/postid/10529/view/topic/Default.aspx

http://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/7342/view/topic/Default.aspx

Hope these help

Tim

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Dale:

One of my arguments when rental restriction issues come up is the fact when you limit to only a certain number of units, then how is that rule evenly distributed to all owners.

Like Tim stated the most equitable rental restrictions I have seen to date are those that limit where new homeowners cannot rent a unit for the first one to two years. This is a rule that could be applied to every unit equally. It also helps reduce or prevent units just being purchased by investors who are only interested in rental units. It also would potentially be easier to enforce. I think it may have been Donna that previously posted CCR verbiage, so maybe she will be able to do so again here or maybe we will be able to find the prior post. I have looked a bit but have not yet found.

You will need to have many meetings and also possibly have some sort of grandfather clause to get the number of homeowner’s potentially needed to pass the amendment to your documents. As you have potentially already found there will be a number of individuals who will be against unless they are maybe grandfathered.

The following is a CA article regarding the renting issue which was on another post in the past and may help:
http://www.californiacondoguru.com/hoarticles/lease.html

Good luck!

TimB4 (Tennessee)
Posts: 21,062

Posted:

Janet & Dale,

That post was from Donna and is part of the first thread I posted a link to.

Tim

JanetB2 (Colorado)
Posts: 4,219

Posted:

Thank you Tim ... now I can stop searching, I missed that as the thread I was thinking about had a more recent date, but the thread you posted actually covers all the info.

You are darn good!!!

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

As the economy gets worse, your going to find rental policies more of a problem. If someone has to move and is forced to not rent, they will simply walk away and leave the HOA with an empty unit and no dues for 1-4 years until the bank deals with it.

Something to think about.....

DaleC (California)
Posts: 3

Posted:

Thanks to all for the advice. There is quite a lot to look at and think about. Thanks again, Dale

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Dale:

You are most welcome ... we are all here to help each other if possible. Hopefully in the near future you can possibly help someone else, including maybe myself.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I am of the opinion that a HOA can't limit rental property unless the HOA directly owns the property. It's up to the mortgage/loan companies to put those restrictions on the property/owner. Not saying I don't agree that their should indeed BE rules/laws against it, just that a HOA can't do it.

Think about it...How does your HOA punish a person in violation? How does it decide which owner is in violation? Is there a review of any of the rental agreements between owner/renter presented to the board? How does your HOA know which properties are being used as rental? It may take 6 months for change of ownership to show up at the Tax office or any other verifiable source of ownership.

The HOA can't use fines as a basis of liens/foreclosures. So any fines the HOA may put on an renter violator wouldnt' be punishable that way. If the owner pays their dues, then there is no lien/foreclosure process anyways. Even if the owner does have a lien filed on them from the HOA, they can still rent out their property.

I say instead of working sooo hard against allowing or limiting rental property, you make sure there are significant rules holding the owner's feet to the fire if their tenant violates the rules. Wouldn't it be best to make sure the owner gets the brunt and responsibility of their tenants actions? In the long run, it is ONLY the owner that can be held responsible anyways.

Former HOA President

JanetB2 (Colorado)
Posts: 4,219

Posted:

Melissa … While this info is not from the OP’s state here is case laws listed from CA, ND, FL, GA, NC, MA, and FL: http://www.davis-stirling.com/MainIndex/RentalCaseLaw/tabid/1835/Default.aspx

In essence … the HOA can sue the homeowner for violation of the Declaration of CCR’s.

What all of us need to keep in mind is what an HOA may be able to do within our personal states is not necessarily what can take place within any other poster’s state. You and I agree to the extent in which an individual purchases a property and in essence should have control over certain items for said property. If my family was transferred and could not sell our home at this time, then yes I would like to be able to rent the property in order to purchase another elsewhere. This is one of the reason’s I like the “must own for 1-2 years before can rent” as an option for those HOA’s wanting to limit rentals, but prevent flipping or investors for rental only. This also is a rule which is fair, can be utilized across the board for everyone, and is also more easily enforceable.

While I both understand and appreciate your passion … we all need to keep in mind that any advice offered should not be advice in which an OP, if followed, can end up in potential legal litigation OR not have certain options which potentially are available.

Again, I overall agree to some extent with you regarding rentals; however, I also try very hard to play the middle man when posting and not always let my personal opinions override the situation and state statutes.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

What good does a lawsuit do an HOA? It's expensive and allows the owner to sell their property and walk away. Plus where is the proof? You can bring up any and every case law you want on the issue, it still doesn't prove the fact that there is NO punishment associated with violating rental agreements IF they exist.

What your not understanding is a violation against state statutes and the like don't matter a hill of beans. It just allows the HOA to pursue court action. There still have to be PROOF. HOW does the HOA know there is a renter violation? If there isn't a signature block on the rental agreement with the HOA's name on it, then where else is it documented with the HOA?

If your HOA was to show up today in court against a violator, what documentation would the HOA have in it's arsenal to prove it's case besides just what is in the law books? My challenge to you...ask a practicing lawyer who gets paid to know statutes/case law the question. The answer may just suprise you...(By the way, my stance on the issue does come from a licensed attorney...It's NOT like I haven't gone down this road myself...)

Former HOA President

RogerB (Colorado)
Posts: 5,067

Posted:

Melissa, I disagree with your assumptions except if and when you go to court then documentation is needed to prove your case. However, if the HOA has adequate governing documents they can provide punishment for the owner and the leasee and usually correct the problem without going to court. The HOA can establish governing documents which allow for the owner to be fined and for the lease to be terminated. Following is an example:

SALES AND LEASING OF UNITS

Home Sales:
Upon the purchase of a Unit the new owner must live in the Unit for the first 12 months of ownership. Upon request by an Owner or their authorized representative, the Association will provide copies of the governing documents. Copies will be provided by email at no cost. If hard copies are requested the copying and mailing costs shall be paid in advance by the Owner. One for sale sign may be placed in one window.

Rentals/Leasing:
All rentals shall require an executed lease. The lease shall be for a minimum of 12 months and shall not allow month to month tenancy. No owner may lease their unit for transient or hotel purposes. No more than two unrelated tenants are allowed to reside in any one Unit. One for rent sign may be placed in one window.

The lease shall include the following statement:
“The lessee has received and herein agrees to abide by the Governing Documents of the _________ HOA. By signing this lease form the Owner and the Leasee both agree and understand that failure by the lessee to comply with all of the governing documents shall be cause and allow the HOA to terminate this lease."

The Owner shall provide to the Managing Agent, prior to occupancy, (a) an executed copy of the lease; (b) the names of all occupants, a phone number and an email address (if available) by which the lessee may be contacted when necessary; and (c) the license numbers of all of the lessee’s vehicles to be parked in the garage of their unit.

RobW (California)
Posts: 279

Posted:

Limiting the percentage of non-owner-occupied units is, in my opinion, the best way to approach this. In my community, everyone who moves in is issued a key card for the pool and recreation buildings, a remote control for the gates, and must provide a telephone number for the intercom system. We know who the renters are, because they have to apply for access. Some CIDs require valid parking stickers, as well, so that's another way to monitor this.

Here's a good article on the Davis-Stirling site about this subject.

Restricting the percentage of rented units is necessary for insurance purposes (typically 30-35%) and for FHA certification (no more than 50%). Grandfathering should be the last resort, IMHO. If the percentage of renters is not controlled, one day homeowners could find themselves owning an apartment in a run-down apartment complex, instead of a community of homeowners. It wouldn't be the first time this has happened.

Rob

MelissaP1 (Alabama)
Posts: 13,836

Posted:

As I keep saying...Add a touch of REALITY. I am more of a "Tire meets the road" person. We talk about great ideas and case laws here. However, the application of such is a different story. There would be NO case laws if there hasn't been a CASE. Great ideas go no where if no one there knows how to implement them or support them. NOT being negative here at all.

I am NOT at all against rental restrictions or limitations. They are a good thing and if a HOA has the ability to enforce it then God Speed to them. It's just that all this documentation people post on here to use or examples they have can't possibly apply to each and every HOA. Most HOA's would have to do an intense re-writing of their CC&R's, By-laws, Articles of incorporation, and ACC documentation to incorporate these suggestions. Those changes can require 51% - 90% membership VOTE to adopt/change. It's also expensive and time consuming. It took us almost 3 years and cost over 2K to do.

What I am suggesting instead or in the meantime, to do things with your by-laws to strengthen actions against the owners when renters violate the rules. This is how you get your property values maintained. You can change by-laws without legal actions and as simple as a vote.

The cold hard reality limiting rental property is difficult no matter what means your HOA decides. If your HOA doesn't monitor it or has a system of approval, then really what proof or right does the HOA have to interfere with an owner's individual rights?

Former HOA President

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