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Owner rented unit and bypassed rental cap & wait list

Started by GreggT1 • 19 replies • 6957 views

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GreggT1 (Washington)
Posts: 3
Posted:
I am an HOA board member. Our condominium has a well defined, well documented (in the Condo Declaration and Rules) rental cap which we have been adhering to. A long term unit owner just purchased a new home and moved out. They then rented their condominium, apparently unaware there was a rental cap or waiting list, which has 6 wait listed owners on it already. Essentially this owner jumped the list.

Now that they have been reminded of the rules, they are going to submit a request to the board to grant them an exception.

I'm having a hard time see through granting such an exception. There's not much the HOA can do at this point to reverse the situation, a lease is already in place with their renters. We can fine the owner in the same amount that they are receiving for rent but they probably won't pay and we would then send to collection. We could litigate. We could ask them to try and move their tenants out and suggest they move them to the next wait-listed owner. Unfortunately they are in the least costly unit (basement level) so any other unit in the building will not be a sideways move.
This situation is not yet common knowledge but what is to stop all individuals from doing the same thing?

Appreciate any thoughts.
GlenL (Ohio)
Posts: 5,491
Posted:
This situation is not yet common knowledge but what is to stop all individuals from doing the same thing?

Nothing. Especially if the HOA doesn't enforce it and if you let one slide and try to enforce on the others it could get sticky.
Studies show that 5 out of 4 people have problems with fractions
RichardP13 (California)
Posts: 1,767
Posted:
Quote:
Posted By GreggT1 on 07/31/2014 6:10 PM
I am an HOA board member. Our condominium has a well defined, well documented (in the Condo Declaration and Rules) rental cap which we have been adhering to. A long term unit owner just purchased a new home and moved out. They then rented their condominium, apparently unaware there was a rental cap or waiting list, which has 6 wait listed owners on it already. Essentially this owner jumped the list.

Now that they have been reminded of the rules, they are going to submit a request to the board to grant them an exception.

I'm having a hard time see through granting such an exception. There's not much the HOA can do at this point to reverse the situation, a lease is already in place with their renters. We can fine the owner in the same amount that they are receiving for rent but they probably won't pay and we would then send to collection. We could litigate. We could ask them to try and move their tenants out and suggest they move them to the next wait-listed owner. Unfortunately they are in the least costly unit (basement level) so any other unit in the building will not be a sideways move.
This situation is not yet common knowledge but what is to stop all individuals from doing the same thing?

Appreciate any thoughts.

I think you answered your question, quite nicely and more important, in the correct manner.
MelissaP1 (Alabama)
Posts: 13,836
Posted:
Rental restrictions really can't be enforced. You can have them but where is the punishment? Do you have a fining system in place? The HOA does NOT own the property so how can they restrict how one can rent it out or not? Only the bank can do that.

I am not against rental restrictions it's just NOT practical in the application. So you restrict it... Now what? Can you punish someone for doing it? Only if you put it in writing.... Then it can also open up a lawsuit because you prevent X from renting their Unit while they are in a hardship situation. Hardship situations have to then be defined as well. Welcome to the rental restriction nightmare... Plus add in renter's rights and you have yourself headache on top....
Former HOA President
TimB4 (Tennessee)
Posts: 21,047
Posted:
Gregg,

You now see the hardest issue of rental restrictions.
Does the Association enforce the issue through the courts to force the owner to break the lease?
Does the Association fine which may or may not be paid?

Since nobody thought about how to enforce when they made the rule, The current board now has to decide what to do. Make an example which will likely incur legal expenses or grant a waiver which will simply demonstrate to others that nothing is going to happen if they break the rules.

The decision is easy made when you ask a different question - what message do you want to send the membership?
LarryB13 (Arizona)
Posts: 4,099
Posted:
Quote:
Posted By GreggT1 on 07/31/2014 6:10 PM

Our condominium has a well defined, well documented (in the Condo Declaration and Rules) rental cap which we have been adhering to.

Gregg,

Could you post the details about the rental cap? Have you consulted an attorney for advice on how likely the rental cap would be to survive a challenge in court?
GreggT1 (Washington)
Posts: 3
Posted:
Our rental cap requirement as well as various requirements to notify the HOA when a rental agreement is in force and requirements for submitting background checks, etc are documented in out recorded Condo Declaration which every owner signs off on as having received and agrees to comply with at closing. Our fining system is a little weak in regard to this problem. they would get off with a notice the first month, a $25 fine the next month a $50 fine the next month and then finally additional monthly fines as determined by the board. That's documented in our House Rules (Rules and Regulations). That's about all we got. I've already asked our management company to issue a Notice of Violation to start the clock ticking. As far as I can tell at this point, the best we can do is issue some pretty severe fines at the 4th month and they'll have to deal with the ensuing credit situation.
SteveM9 (Massachusetts)
Posts: 3,699
Posted:
Quote:
Our condominium has a well defined, well documented (in the Condo Declaration and Rules) rental cap which we have been adhering to.


Rental caps are voluntary. There is really nothing that can be done to enforce them... legally.
SteveM9 (Massachusetts)
Posts: 3,699
Posted:
There is so many ways a home owner can go around it, like room mate, house sitter, etc, its not worth pursuing.
LarryB13 (Arizona)
Posts: 4,099
Posted:
Quote:
Posted By GreggT1 on 08/02/2014 7:58 AM
Our rental cap requirement as well as various requirements to notify the HOA when a rental agreement is in force and requirements for submitting background checks, etc are documented in out recorded Condo Declaration which every owner signs off on as having received and agrees to comply with at closing. Our fining system is a little weak in regard to this problem. they would get off with a notice the first month, a $25 fine the next month a $50 fine the next month and then finally additional monthly fines as determined by the board. That's documented in our House Rules (Rules and Regulations). That's about all we got. I've already asked our management company to issue a Notice of Violation to start the clock ticking. As far as I can tell at this point, the best we can do is issue some pretty severe fines at the 4th month and they'll have to deal with the ensuing credit situation.

Gregg,

Your association's position is not the best. Rental caps typically have no provision for giving all owners an equal shot at renting their units so owners are not treated equally.

Your big problem is with your fines and the lack of specifics after the first three months. You seem to be of the opinion that your board may do as it pleases at that point. Should the owner take you to court you will need to convince the judge that your lack of a well-defined process is reasonable and consistent with the law. Good luck.
GreggT1 (Washington)
Posts: 3
Posted:
Thanks you all for the information and varied perspectives. This will certainly be a learning experience.
JohnC46 (South Carolina)
Posts: 14,265
Posted:
Our Covenants say an owner cannot rent/lease their home until they have owned it for at least one year.

We know we have several in violation of this. The ones we know of are family situations. Parents bought, child lives there or child bought and parent lives there. We do not even count them as rentals.

TimB4 (Tennessee)
Posts: 21,047
Posted:
Gregg,

I'd be interested in how your Board handles the issue. Please keep us informed.
ValerieS2 (Michigan)
Posts: 244
Posted:
Quote:
Posted By SteveM9 on 08/03/2014 7:15 PM
There is so many ways a home owner can go around it, like room mate, house sitter, etc, its not worth pursuing.

Dead on Steve.
JohnB26 (South Carolina)
Posts: 1,001
Posted:
food for thought:

property taxes 'tabled' for this example;

a 1/10 of 1% owner residing in 'unit' would also be a member of the association

forget about the renter, concentrate on the restrictions eg. noise, parking, exterior maintenance, timely payment of assessments

else, imo, forcing the owner to 'LLC' and sell shares to occupants

or

become a 'contract seller'

both of which are UNSTOPPABLE as they are NOT rentals
JohnC46 (South Carolina)
Posts: 14,265
Posted:
Quote:
Posted By JohnC46 on 08/05/2014 3:07 AM
Our Covenants say an owner cannot rent/lease their home until they have owned it for at least one year.

We know we have several in violation of this. The ones we know of are family situations. Parents bought, child lives there or child bought and parent lives there. We do not even count them as rentals.


No edit so allow me to add to my above post.

As we have no issues with the "tenants" and we do not want to answer questions that might call financing into question (FHA, VA, whatever), and no one has challenged us, we have chosen to treat the (rental) violations with benign neglect.

JohnB26 (South Carolina)
Posts: 1,001
Posted:
In general and oversimplified:

assuming fee simple ownership

the HOA has NO control over the home's interior or occupants (excepting HOPA issues)

the HOA 'may' have control over a non member's use of amenities

if so

simply pass a rule requiring guests to be accompanied by a member when using an amenity

'Renters Be Gone' 101

oops ... you just forced the LLC with 0.5% ownership issue



if you TRULY want to discourage rentals use the IRS rules and local business licensing laws

mortgage interest no longer deductible from personal tax
property taxed at commercial rate
licensing may be required

THEN

you got 'em as a business use if covenants restrict same

this would involve way way way more work and effort than the typical BOD could even imagine as THEIR duck's would have to be all in a row
VeronicaT (Ohio)
Posts: 1
Posted:
Do you have more recent case's with respect to fighting the HOA Rules and Regulations? Need more asap.

Regards,

Veronica

[email protected]
DouglasM6 (Arizona)
Posts: 724
Posted:
Veronica- You may want to start your own thread with your concerns and questions. This one is kind of old.

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