Board Members acting in own self interest

Hello all,

Over the years I have been an advocate of rent control in our HOA to protect against a mirade of issues that arise from rentals and over-renting. All of our issues over the past 5 years have been generated by renters. I have heard both sides of the issue and can understand both sides. In 2004 our HOA was formed, in 2006 our HOA passed rental restrictions, and then in 2010 they were voted out of the CC&R's. We are a 8 unit complex with 4 rental units. 3 of the non-rental units sit on the Board. When the 3 of us came on the Board I asked the other Board Members about reinstating our CC&R rental restrictions to protect us from going over 50% rentals. Also informed them what would happen if we went to 5 rentals such as increased insurance, inability to refinance or sell our properties. I was informed by the other two Board Members that they were not interested because they plan to rent out their places in the next couple of years. In addition California passed a law SB 150 in regards to rental restrictions that severely restricts ability to put rental restrictions in place on existing owners after January 1st, 2012.

If we have 6 out of 8 units in rental status no one not even myself will be able to sell unless its an all cash buyer. Now I have been told by one of the other non-board onsite owner wants to rent his place No bank will finance a 87.5% rented complex. I myself can't rent because I can't recoup cost of what I pay and my unit is underwater so I can't sell.

I can't seem to get across to anyone on the Board the potential disaster waiting to happen here. They are acting in their own self interest with each saying I am going to rent my place in 1-3 years so why should I put a restriction against myself. I'm the only one willing to put a rental restriction on myself to protect future capability to sell property. A board of directors is supposed to act in the interest of the Association not in self-interest. I almost consider this a breach of fiduciary responsibility. They know the potential of what could happen but don't care and have told me in no uncertain terms that they are sick and tired of me discussing it.

I just want to put this one last time in front of my fellow HOA Board members and see if any one have any creative ideas or comments or am I just off my rocker for wanting rent control?

Thanks

This is one of those issues that would be great if it could be enacted. Unfornately, a HOA can NOT interfere with the contracts of a homeowner. (Unless the HOA is the owner). This means that all the good will and intention of writing up and enacting rental limitations is for naught. Yes, before some poster decides to jump onto me about posting as if this applies to everything and everybody, there are some states that do allow a HOA to enforce rental limitations. However, you must do the research to find out if YOUR state allows restrictions. It's mostly states with a larger amount of HOA's in them like Florida, California, Arizona, and a few others.

The problem isn't limiting renters. There are varied reasons why renters are in those homes. These economic times are forcing more and more homeowners to leave their properties. Instead of leaving them empty they may find a renter. Other issues apply why some may use their property as rental. It would be nearly impossible to tell 1 owner they can't rent out their property because 1 other owner hit the allowance quota. What type of punishment would that owner be subject to IF they did rent their place out anyways?

I am not against rent limitations. It's just in all practicality and all that is involved, disallowing rental property is nearly an impossible restriction to enforce. The better solution is to hold the OWNER's feet to the ground for the renter's violations. The owner's should have in their rental agreements that the renters must obey the CC&R's. This is good for the owner and the HOA. Renters do have certain rights but it's to the owners of the property. The HOA can only hold the owners to uphold their rights. Better enforcement against the owners is what is needed not rental limitations.

Thanks for replies

TimB4: We are a townhome and I think in California it doesn't matter if you are a TH or a Condo in regards to FHA. I know one of our short-sales was an FHA sale.

See to me it comes down to the time someone wants to sell or refinance. When you get above 50% then the banks will not loan to a buyer and/or raise the rate to a point that makes it not feasible. None of the owners seem to care or want to care about this scenario.

Also other factors: The cost of Insurance, getting owners to participate in HOA (if our HOA goes to 6 or 7 rentals how we going to have a Board since I doubt anyone who is renting their property is going to want to be on the Board and actually come to meetings (my experience)), problem renters (all problems in past 4-5 years we have had to fine on is due to renters).

As far as a petition 3 of the current 4 rentals would not sign, 1 says as long as I'm grandfathered, and then from the onsite 2 Board say no and the 3rd is following the two Board homeowners who are against it. Again, in about 3 years I may be the only onsite person. I'm then stuck with inability to sell my place. The other issue is these people don't realize that once the dominoe falls its very hard to come back. So these 3 who say they want to rent and carry us over the threshold may in the future want to sell and won't be able too. Right now they don't care because they bought so cheap (bought either as foreclosure or short-sale) compared to others on the property.

Look I don't like to tell anyone what they should or should not do but buying into an HOA is a whole different concept. People continously think they can act on their own without regard to the group and that is my problem. As a Board Member my decisions are based on the entire HOA and how it affects others it is unfortunate that in my opinion Homeowners in my HOA don't think this way. There should be a document people sign before going into an HOA that states they recognize that they become subject to multi-homeowner issues not just their own etc...

Anyways enough of my ranting. I will probably just have to try and strategically get out of my property and let these people fend for themselves.

Fannie Mae and Freddie Mac requirements trickle down beyond their own loan programs. From personal experience I know many mortgage companies and some banks won't finance purchases in some developments because they don't meet Fannie/Freddie requirements. I was told this is because in order to sell their mortgages, which they normally do, they must meet Fannie/Freddie requirements.

Only a guess, but I think the theory is that homeowners have a vested interest in maintaining the viability of the HOA, complying with CCRs, and maintaining home values, whereas renters who have no vested interest in the homes they are living in may not be so inclined. Thus, providing mortgages to purchase homes in communities with a large percentage of rentals is considered risky where home values might not keep up with the market. I assume there must be some historical, statistical evidence to support this theory.

Thanks for the reply Bruce. It just seems like in an HOA - hell, especially in an HOA, rentals should be a non-issue because of the bylaws. Renters and their landlords are bound by them same as anyone else are they not?

We have about 35% units leased but in 10 years we had only two problems. However, when investors own multiple units in a community they tend to vote against any improvements in order to keep their expenses as low as possible and that does not help to increase property values at all.

Renters aren't allowed to go to HOA's meetings. Thus they aren't allowed to participate in HOA business. They are NOT members of the HOA. Only homeowner's are members. So to say a renter isn't attending meetings or participating in other activities isn't their fault or responsibility.

There are renters out there that are good renters and want to participate. However, that is a case by case basis in what they can volunteer to do with the HOA. They can never be board members, officers, or members but can be part of the neighborhood watch....

'Renters aren't allowed to go to HOA's meetings. Thus they aren't allowed to participate in HOA business.'

Tenants can be allowed to attend HOA meetings or otherwise participate in HOA business providing the owner gives his tenant a limited power of attorney to do so.

This was posted on finance.yahoo.com today...

http://finance.yahoo.com/news/White-House-seeks-ideas-to-rb-804949606.html?x=0&sec=topStories&pos=7&asset=&ccode=

It mentioned that the Obama Administration is looking for ways to skrink the foreclosure glut...turning the foreclosed properties into rentals. Now aren't we all worrying about how to comply with government lending institutions in the percentage of rental in our HOA's. Wonder if you will still a revision of there guidelines anytime soon.