Lease Ratio / Limits

Interesting question here regarding Lease limits in my Condo.

We have 14 units. Our current CC&Rs impose a Lease limit of 2 Units. We currently have 2 Units that are leased to tenants.

When the building was built in 2000, the CC&Rs did NOT have a lease limit. Our Declaration was amended in 2006 to include the current limit.

Unit 1 is an original Owner that purchased prior to the amendment / limits. He never occupied the unit as an Owner and from day 1 it was income property.

Unit 2 was purchased after the amendment, the unit was originally occupied by the Owner but later leased by her family due to Owner's illness.

Question: is Unit 1 exempt from the Lease Ratio under the Grandfather clause? There is no mention in the amended CC&Rs that state units being exempt. Only that once a leased Unit becomes vacant the next Owner on the "Waiting List" has 60 days to submit a lease to the Board. So I assume the original Owner of unit 1 would then have to sumbit an application to re-lease if not protected by Grandfather clause.

We have several owners upset that they cannot lease their unit. The feel it is unfair that one unit can forever be rental property, but they have to be placed on a waiting list.

What say you sharp minds of the HOA Talk community?

Thanx!

An HOA President

Two is 2 is to is two.

How many are upset?

Enough to amend again?

RwT*

Frank,

I suspect that the limit you speak of was due to the HUD Guidelines for Fannie and Freddy loans.
In 2006, rentals could only be 20% in order for a condo to be approved for FHA backed loans. Since many, many, many loans are sold to Fannie and Freddy, most lenders require that these guidelines be met.

Since 20% of 14 units would equal 2.8 units, and having 3 units rented would exceed 20%, rentals were limited to 2.

In 2009, see MORTGAGEE LETTER 2009-46 B (page 5), that ratio was lifted to 50%.

My suggestion would be to take a copy of these requirements to the Board and use it as a basis to increase the rental limit.

Hope this helps,

Tim

Frank,

One thing I learned when I was researching my issue with my Association is that grandfathering is not automatic.

It's called a grandfather clause for a reason. A clause is a part of a legal document. Hence, if it's not written into the actual document, there is no grandfathering.

I know that everyone believes that grandfathering is automatically applied. This is because it's been part of our history since the 1900. Grandfathering started as a way to counter the 15th amendment to the Constitution. From that scary start, the term has been used for any law or contract stipulation that exempts a business from new regulations or laws. However, as I said, it is not automatic, it has to be written into that law or document.

As an example: Most building codes grandfather existing structures even though the codes change. Those clauses basically allows existing structures to remain the same unless they are changed. Once changed, they must comply with the codes currently in effect.

However, the American for Disabilities Act did not have a grandfather clause. This is why public buildings that existed prior to the act being adopted must have things like wheel chair ramps and wider doorways.

Wow, really helpful replies. Thanks everyone! I am taking notes right now and will be meeting with the Board next week to discuss options.

Sounds like the Owner of Unit 1 will have to follow the procedures of everyone else if his tenants should vacate. That being, submit a new application to lease which means he may have to get at the back of the waiting list.

Whether the tenant vacates or not the owner feet is held to the ground. It is NOT the tenant. The Hoa has no agreements with the tenant. It is the owner who is a member. The HOA needs to follow the state laws on limiting rentals. The HOA can not evict tenants. There are tenant laws that everyone has to obey even the owner. An eviction can take up to a year in some cases.

You also need a fining schedule in place for violating the restriction. Plus make it a requirement for the owners to add into their rental agreements the tenant has to follow the HOA rules or face eviction. That caveat protects everyone. It is not in most otc written agreements...

Are you referring to Alabama or California [law] Melissa?

In Florida, the HOA can in fact evict tenants in some circumstances.

While the stipulations may differ from the OPs scenario, it is possible.

I also imagine it can happen elsewhere too.

RwT*

Thank you so much for all the feedback.

If we were to decide to propose an increase to the Lease Ratio, is that something that the Board alone votes on, or would it have to goto a full Owner's vote?

It depends on the document and the procedure to amend.

Typically, as RT pointed out, The CC&Rs need to be amended by the membership.

Each document should specify how that document can be amended. If it is silent, then you need to check applicable laws. When checking the laws, don't forget to also look at the applicable corporate law (if your Association is incorporated - most are).

As has been pointed out to you on other threads, a great reference for CA Associations is
https://www.davis-stirling.com/

There is no reference to 'rental(s)'. Suppose the owner's son actually lives there? It would not be a rental, but, would still disqualify as 'owner occupied'!

"Oh what tangled webs we weave when first we practice to control!"