If your HOA has a rental cap, what's the %

If you'd be so kind to participate in this informal poll, please reply with:

-Rental cap % (if applicable)
-State
-Whether or not your HOA grandfathered existing owners after implementing a rental cap
-Total number of units and types of units (condos, duplexes, townhomes, patio homes) in your community and type of community (high-rise, garden, mixed, other)

Thanks in advance!

Our covenants say that one cannot rent their home during their first year of ownership. We are comfortable that this would prevent speculators and so far seems to have worked.

Now we do have 3 homes we keep a blind eye to. In two cases the parents bought the home and their adult children moved in. In another case, a women bought the home and her father alone moved in. We do not consider those as rentals.

John c 46 Could I have your Hoa site I would like to see how it is written in the By laws or Covenants We are going to attempt to amend ours. Thanks

No rental cap. It would take a revision of our CC&Rs.

211 high rise res. condo units

37% tenants

I don't think this is a bylaw issue, Robert.

Bonnie

I believe what I might have said is you cannot make such a change via a resolution. It would have to be a Covenant change and could take all owners agreeing to such. I do not agree with what your lawyer said. A company could buy a unit but they just could not rent it for the stated time. Also some people do form a corporation/company to buy their unit under and they live there.

Our rental restriction was part of the Covenants from the get go.

I feel I need to point out something on this subject. HOA's can not really enforce rental limitations. Only state that I know of is California, and that is as recent as 2012 with a few stipulations. HOA rental restriction limits are a good idea and I am NOT personally against them. This is NOT a personal opinion on this situation. Unfortunately, this is a REALIST FACT one has to deal with.

With that said... ONLY Mortgage companies can place rental restrictions on the property. Depending on the loan package you go with, some will NOT allow you to rent your home for the first 2 years of ownership or even more. My own situation when I bought my second home is that I had to have a 1 year lease signed on my other home before they would loan me the money. Since it is the mortgage company's money they are loaning and ultimately own that property, they are the one's to dictate rental allowances or use. A HOA does NOT own the home nor has title to your home to impose any such restrictions. They just can enforce STANDARDS.

FHA loans are one of the most popular type loan programs out there. Many people desire them. However, FHA does have a PUD form that every HOA has to fill out whenever a person gets a FHA loan. It is basically a 25 questionnaire about the financial health of the HOA. It ask if it is a "fee Simple, number of owners versus renters, and collections". FHA does have a "rental cap" allowed in order for them to continue to offer FHA loans to that HOA community. I believe it is around 60% Maximum. If that PUD form indicates it is a high rental percentage, then FHA may no longer offer loans to your HOA community.

I should mention that Freddy Mac and Fannie Mae are moving toward the same direction of FHA restrictions. They are now on occasion requesting this similar information if not already. Other loan/banks are starting to get on board with the PUD form for HOA's. That is because with the high rate of foreclosures, it is much more riskier to loan high risk HOA's potential buyers money.

This does mean potential buyers will not qualify for FHA loans. Your HOA community will not be FHA qualified. However, it does NOT mean potential buyers can not get loans nor your home values being effected. It means that potential buyers will have to seek out different loan packages. Which is NOT a bad thing if you think about it. That usually means a higher qualified owner. They have to have a really good FICO score and long history of making bills to qualify for some of these loan types to mitigate the higher risks to the bank. The bank isn't going to loan their money to a higher risk property in a HOA without a better candidate who qualifies at a lower credit risk.

Essentially, HOA rental restrictions even enforced just means better loan rates for refinancing and a bigger pool of potential buyers. HOA's are NOT in the home VALUE market. They are in the making the homes MORE ATTRACTIVE to POTENTIAL BUYERS. The best way to do that is to have nice looking property and the ability to offer more loan options...

Rental restrictions that are not located within the CC&Rs would certainly be difficult, if not impossible, to enforce. This is because an argument can easily be made that such a restriction would be in conflict with the CC&Rs. The argument would be under the principle of expressio unius est exclusio alterius. That is to say the omission of a particular covenant or term from a contract reduced to writing shows an intent to exclude it (also see Sarnir R. Farran, et al. v. Olde Belhaven Towne Owners Association page 4, 2nd full paragraph).

Many Associations have attempted to limit rental restrictions by amendment to their Bylaws or by adopting a policy resolution. However, over time, Associations now understand the need to place rental restrictions within the deed restrictions. There are many, many cases (both within and outside of CA) of upholding rental restrictions when the restriction is in the CC&Rs. For example:

Town Houses at Bonnet Shores Condominium Association v Langlois 2012 RI case

Villas West II of Willow ridge Homeowners Association, Inc., v. McGlothin 2008 IN appeals court decision

Advisory
opinion by VA Attorney General 2011 (yes, it has no authority like a court case, but AG opinions are typically based in Statutes and, if available, court cases)

Rental Restrictions in Single Family Vacation Rentals, COAs and HOAs from a FL law firm that also lists various cases.

The Preserve at Forrest Crossing Townhome Association, Inc., v. DeVaughn 2013 TN appeals court ruling.

WHAT WE LEARNED AT CAI’s NATIONAL LAW CONFERENCE 2010 newsletter from a law firm. Pages 2 & 3 lists various cases on rental restrictions.

No problem.

I expected that if Melissa's experience and last research on rental restrictions was during the time frame when most Associations were placing the restrictions in their Bylaws or Rules/Regs then her comments were very correct for that time frame.

However, as we know, things change over time and everyone doesn't always have the time to do the research needed to keep up with the changes. Therefore, I thought it was best to simply provide the references I could locate so everyone who desires to may utilize those references for their own research.

I also meant to add .... it's a bit of a conundrum. Not sure if this applies everywhere? You can put a rental cap on units but if someone comes in, purchases a property and rents it out, the renters will most likely be protected by the Fair Housing Act. I have a feeling it's a no win situation.

Interesting article:

http://www.californiacondoguru.com/hoarticles/lease.html

My error - I put in 35% because that was what was discussed at the meeting. Current max is 50%. That's straight from the FNMA eligibility requirements ..... "at least 50% of the total units in the project must be conveyed to principal residence or second home purchasers."

Also, financial institute-owned REO units that are for sale (not rented) are considered owner-occupied when calculating the 50% owner-occupancy ratio requirement.