Use of Social Hall in a HOA Community

Sure. What good is a social hall without social events?

Nancy:

I agree with Tim, the original purpose of all common elements is for the use and enjoyment of the members of the community. I think anytime you deviate from that plan there should be a fee involved in the usage of the facility, especially if the usage results in folks making money.

I don't see a problem with it. Renting the Social Hall for events is part of the members rights to do. This isn't a situation where it's used for business ALL the time, or someone running a flea market. It's an special event. We used to have members have all different kind of "business" like tupperware, amway, and other home type sales held at our clubhouse all the time. The houses are to small to accomodate a decent crowd.

Sounds like a problem that the HOA isn't charging any kind of significant useage fees to anyone who rents the social hall. Our clubhouse rented for $20 a day and $100 damage deposit. The Pool was NOT exclusive use to anyone renting the clubhouse. If there was damage, the damage deposit was ours.

The HOA has no right to any of the profit generated by the use of their facility if rented/used by a member. If the HOA was using it for their own event, then the profit could be theirs. Otherwise, members can rent out and do what they want with a Social hall/Clubhouse as long as it isn't illegal....

Otherwise, members can rent out and do what they want with a Social hall/Clubhouse as long as it isn't illegal....[Melissa]

I do not think so, unless the members own the Social Hall or the Club house which is hardly the case in Homeowners associations.

1. Unfortunately, this is a miscommunication. Nancy had a different question. NOTE the tables are rented ONLY to non-members. Members do NOT pay anything.

2.How does anyone know the members even have an option to rent the hall and do whatever they want to do with it? Nancy did not say that.

3. Does your HOA allow you to rent a swimming pool for a day and do whatever you want with it as long it is not 'illegal'? Imagine the sign: ‘Sorry, pool is closed today, Mrs. Jones RENTED it for a private party.’

4. Do you - as a member of your HOA- have an option to rent any portion of your common are and rent out the tables out to non-members to sell crafts ?

I don't think there was any miscommunication in my understanding of Nancy's question. Nancy's question was "Should a resident of a HOA be allowed to use the social hall for a craft fair..."

I think Melissa and I are in agreement, as long as the social hall is being utilized by the members in accordance with the governing documents (even if this purpose involves non members) and is being used for legal purposes, then there is no wrongdoing. I can see where allowing the area to be used for a craft fair which includes vendors and non members could lead to other issues which create liability for the Association. However, unless the documents are changed the members are entitled to use the social hall as dictated by their governing documents.

It really doesn't matter what other Associations do or don't allow. In this instance it only matters what Nancy's Association's documents allow. I think Brad raised some very valid concerns that Nancy could bring to the attention of the Board.

Carolyn

Petunka is right.

Being a member does not mean you own a portion of the hall. That is not the definition of owning a 'common' area.

The Board should have clear and concise guideline for use of the hall, whether this is a 'rental' or 'member use' of the hall.

For sure there should be opening/closing fee, a deposit and cleaning fee, all signed with a 'contact' for use.

Our Members pay $50 to use our hall. That covers the above costs. We cannot rent to outsiders due to insurance/liability issues.

One person should be signing as the designee for the use of the hall.

I could be wrong but I think today most HOA single family residence subdivisions are Planned Unit Developments. There are PUDs which allow HOA property to be used for business purposes (i.e.,golf clubs,tennis clubs,marinas,etc.)and residences may run certain types of businesses from their homes if allowed by the governing documents and municipal ordinances.

If Nancy or other members of her association feel the social hall should not be used for craft fairs or any type of 'private' money making venture the only way to prohibit it would be through the governing documents.

Carolyn

Our governing documents forbid and vendors coming to the building. It also prohibits any business (either for profit or not) being conducted.

The problem is nancy did not cite her documents so we don't know if this is allowed. Big difference between doing and being allowed to do. I am not a document expert but my guess is most original documents do not give non-members any rights and do not give members right to use for their personal gain.

Mary Kay Directors all over this country are using their HOA Clubhouses for business. I don't think there's a standard or right and wrong here. It's just based on each communities documents.

Hosting a party at which goods may be sold (ie., "Tupperware" parties, jewelry parties, etc.) is not generally considered as "running a business" either by the IRS nor by most municipalities. By extension of your reasoning, such parties would be prohibited in every private home in any area that is zoned "residential" almost anywhere in the country. If such parties are to be prohibited in/on HOA common elements, it would have to be by HOA CCRs or rules and regulations; not by zoning regulations.

Nope. The IRS doesn't care where you conduct "business" but uses other factors to consider whether you are in business or not.

If you host a Tupperware party or a jewelry party, YOU are not in business; the person that conducts the party and takes the orders for the merchandise in various hosts' homes is. The difference? One is done on a regular basis whereas the other is incidental.

If you hold a tag sale or a garage sale you are not in business. Those are incidental sales. Generally you would not be expected to pay income tax on the money you got from selling those items because you did not make a "profit." Generally you sell the items for less than you originally paid for them. Also, because this is not a business, neither are you allowed to deduct any losses or expenses in running the sale.

If you make crafts in your home and sell them, you may or may not be in business. If you intend to make a profit each year and can demonstrate that you are operating in a professional manner to achieve that goal, you may be considered a business. Otherwise, it might be considered a hobby. The difference will be in how the IRS will allow you to deduct your expenses and whether or not you can carry any loss over to offset any income from other sources. Also,in many states, a person selling goods on a regular basis will be required to register to collect sales tax. A person who occasionally sells homemade "hobby" items at craft fairs may not be required to do so.

Lets say you make greeting cards and sell them:

As a business you may deduct all expenses in making and selling the cards; the cost of the materials used in making the cards, the cost of advertising, the cost of business cards and letterheads, and on and on. Your records and the money must be kept separate from your personal funds, and if you show a net loss for the year you may deduct that loss from any other income you have.

As a hobby you may deduct only those expenses that exceed a certain percentage of you adjusted gross income. Also, your deductions cannot exceed the money you earn from selling the cards. You may not deduct any loss from your hobby from your income from other sources.

Also, zoning regulations do not always prohibit ALL business activities from a home. For example, suppose you are a professional tax preparer. You run your business out of your home. However, you do not have clients to your home, you go to theirs. Your office is in your home. You do all the paperwork there, fill out your clients' tax forms there, etc. Such a business would generally be allowed.

Maybe you run an internet business. Are you going to tell me that's prohibited?

I've run several businesses from my home in areas that have been zoned "residential"; all legally. All I needed was a permit. I either had to demonstrate that I had no clients who went to my home, or that I could provide adequate off-street parking for the number of clients I expected to have at any one time (with a hand-drawn picture showing the plan.

In another HOA where I lived I ran an internet business from my home, all legal, and it met HOA requirements (and that was in Florida). Also, in that HOA, the HOA itself sponsored an annual craft fair where residents could rent space (they had to supply their own tables) and sell their craft items. The fair was open to the general public (and it was a gated community).

Again, I believe it all boils down to what each HOA community is willing to allow, as long as it conforms to the law.

Things do have a way of getting off track.

The discussion had evolved into whether or not a business could be conducted in a private residence in a PUD (which I believe was a point you had brought up). I was trying to explain what constituted a business vs. what did not; that all attempts to earn money were not necessarily regarded as operating a business (including by the IRS) which is how we ended up on the issue of taxes.

The fact remains that some business activities may be permitted in private residences that are in PUDs and in HOAs. I've operated several home business in my lifetime in homes that I have lived in over the years in areas that have been zoned for residential use, including in an HOA zoned as a PUD in Florida. All that was required by the HOA was that I had a permit issued by the city to operate the business in my home, which I had.

Sorry if I misunderstood your comments or took them out of context, and that my explanation wasn't clear. I was merely trying to point out that not ALL business activities are prohibited in areas zoned as residential, which is what I had understood from your comments.

Bruce,

YES, we are saying the same thing in different ways. The original post was about renting the COMMON property . I just asked if such a use is allowed as follows:

'In a sense the Social Hall is used for business and the members and non-members making some profit. Is that allowed? I am not sure. Do your covenants address the use of the Social hall? ‘

As you can see, my question was only related to the ‘USE OF COMMON PROPERTY’. Furthermore, if those crafters advertise and invite public to attend these shows the issue becomes a little more complicated. You may have zoning/insurance restrictions not allowing that. Now, whether the individual crafters pay taxes is their business.