Rental cap question

Started by PeterI • 13 replies • 1773 views

💬 Join us to post & get advice from 50,000 HOA & Condo leaders.

⚡ Takes 30 seconds

Already a member? Log in

PeterI (Washington)
Posts: 1

Posted:

I own a condo unit, but I don't live in the same state anymore. I would like to rent it out, but we have a rental cap. I'm on waiting list and I'm first in line, but I have a feelng it still can take a while until I can rent. I really don't want to sell condo, but at the same time I really don't like spending all these money on mortgage and condo dues, so I am wondering if it usually allowed to let somebody live in a condo unit for free, but ask them to pay condo dues (and maybe for condo manager). Since I won't be getting any money, it's technically not renting, right? And I'm pretty sure I can find friend or friend of friend who'll agree to live in my condo paying just condo dues (it's obviously a great deal) and for me paying just mortgage and not worrying about condo dues is definitly much better that paying both.

Thank you

TimB4 (Tennessee)
Posts: 21,059

Posted:

Peter,

You would be receiving compensation for the person living there even if they paid the condo fees directly to the Association. Additionally, if you do not have a written rental agreement, friend or relative, if there are problems you may be harder to legally resolve them.

You might want to apply for a hardship waiver with your Association (which may or may not be approved).

NpS (Pennsylvania)
Posts: 4,216

Posted:

Interesting. And what do you think would be different if your resident also paid taxes and mortgage - with no money going to you personally?

Sikubali jukumu. Read all posts at your own risk.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

My question is what is the punishment for violating the cap and how would the HOA know you are? Is there some kind of requirement the HOA gets a copy of the lease? Otherwise it's a contract between you and your renter NOT the HOA.

If you do decide to rent. do NOT have the renter ever pay the condo fee. You should be the ONLY one doing that. It's a tax break for you and your responsibility. Any maintenance costs plus condo fees during it being rental is a tax break for you. Don't miss out on that. You can't write off your condo fees when you occupy/own it without renters.

Another thing, rental caps may not really be "legal" to enforce. Only state that I know of is California in regards to having any kind of rental cap enforcement laws. Otherwise, it's nice in to see in writing but is NOT enforceable. You may want to ask a lawyer.

The effect of rental is basically on loan values/contracts offered. Meaning that the HOA may not be able to offer FHA type loans. Plus they may face a higher loan or refinance rate if there are too many rental units. Which is surprisingly is around 50% give or take before it effects anything. It's NOT the whole "Rental property brings the place down" theory. It's in the REAL numbers of what rental property effects home value. So make sure your HOA rental cap isn't set ridiculously low such as what is really allowed.

Again find out the punishment and deal with it. Is it a fine? Is there a punishment? Do they need to know? If you do rent, make sure to put in your rental agreement that the renter has to obey the HOA's rules or be evicted. That will protect you in the long run as the HOA will hold you responsible for the renter's violations.

Good luck

Former HOA President

NinaR (Florida)
Posts: 26

Posted:

Caps on the number of renters is a legally binding agreement. To try and work around it is a dangerous game to play. You are setting yourself up to be sued by the HOA.
The legal definition of a tenant is someone who occupies a premise. How much money you take or do not take is immaterial.
@ Melissa, a cap on renters is done to protect property values and it is legally binding.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Not in every state. Plus the HOA is a third party to renting. Florida has some laws in regards to rentals that most states don't have. From my own experience, a rental cap is not necessarily enforceable just because it is written in your documents. Hence, why one should talk to a lawyer and find out the STATE laws on such restrictions.

Former HOA President

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By MelissaP1 on 02/01/2016 6:29 AM
the HOA is a third party to renting.

There is a legal distinction between a "third party" and an "interested third party." The HOA would be classified as an "interested third party."

Sikubali jukumu. Read all posts at your own risk.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Still does not mean they can restrict rentals. That is a fallacy of the HOA. Restricting rentals is one of those "good intentions but poor enforcement" areas in life. How really are you going to enforce a rental restriction? Through fines? Well, it may be worth paying the fine to an owner in a hardship situation or one with no overhead. Plus knowing fines aren't subject to liens/foreclosures in your state let them add up, who cares? The HOA can't garnish your wages and they sure can't evict your renter. (Unless your state allows it).

Don't get me wrong. I am all for restricting rentals in a HOA. However, in reality it's just really possible to do so no matter what we write in our CC&R's or by-laws. One good lawyer and your HOA is ripped a new one. Besides the fact that your suing yourself and your neighbors whenever you sue your HOA. Is suing over a HOA rental cap worth pursuing on your behalf as well?

It's a catch 22 situation no matter how you slice it in a HOA. If you don't restrict rentals, then your HOA faces higher interest rates, less loan options, and less appealing to potential buyers. If you do restrict rentals, then your owners suffer because they can't lease out their property when the need or desire occurs. Who likes it when someone tells them they can't rent out their home?

We will always battle over rental property allowances and caps to do so on here. Until someone finds a good solution as to actually ENFORCING rental restrictions and making proper STATE laws on it, then we will always have issues with it. Not to mention that Renters have rights too that would have to be considered whenever making any rules. Once a renter is in a home that violates the rental cap, they can't be evicted for some period of time from anybody.

If you want my solution to the issue here it is: Make it a requirement that ANY lease generated by an owner MUST have in it that the renter MUST obey the HOA's policies. If they do not, then it is a violation of the lease and they can be evicted. This protects ALL parties. The owner is protected because they have the power to evict or take recourse on the renter for fines. The HOA is satisfied because they can hold the owner to the ground on violations. The renter is still subject to the HOA rules through their landlord. This won't stop rental caps/restrictions being an issue. It will just help in making sure those who rent are subject to the SAME rules the HOA even if the HOA can't touch them directly.

Former HOA President

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By MelissaP1 on 02/01/2016 7:36 AM
Still does not mean they can restrict rentals. That is a fallacy of the HOA. Restricting rentals is one of those "good intentions but poor enforcement" areas in life. How really are you going to enforce a rental restriction? Through fines? Well, it may be worth paying the fine to an owner in a hardship situation or one with no overhead. Plus knowing fines aren't subject to liens/foreclosures in your state let them add up, who cares? The HOA can't garnish your wages and they sure can't evict your renter. (Unless your state allows it).

Don't get me wrong. I am all for restricting rentals in a HOA. However, in reality it's just really possible to do so no matter what we write in our CC&R's or by-laws. One good lawyer and your HOA is ripped a new one. Besides the fact that your suing yourself and your neighbors whenever you sue your HOA. Is suing over a HOA rental cap worth pursuing on your behalf as well?

It's a catch 22 situation no matter how you slice it in a HOA. If you don't restrict rentals, then your HOA faces higher interest rates, less loan options, and less appealing to potential buyers. If you do restrict rentals, then your owners suffer because they can't lease out their property when the need or desire occurs. Who likes it when someone tells them they can't rent out their home?

We will always battle over rental property allowances and caps to do so on here. Until someone finds a good solution as to actually ENFORCING rental restrictions and making proper STATE laws on it, then we will always have issues with it. Not to mention that Renters have rights too that would have to be considered whenever making any rules. Once a renter is in a home that violates the rental cap, they can't be evicted for some period of time from anybody.

If you want my solution to the issue here it is: Make it a requirement that ANY lease generated by an owner MUST have in it that the renter MUST obey the HOA's policies. If they do not, then it is a violation of the lease and they can be evicted. This protects ALL parties. The owner is protected because they have the power to evict or take recourse on the renter for fines. The HOA is satisfied because they can hold the owner to the ground on violations. The renter is still subject to the HOA rules through their landlord. This won't stop rental caps/restrictions being an issue. It will just help in making sure those who rent are subject to the SAME rules the HOA even if the HOA can't touch them directly.

Sounds very familiar. Do you recycle your posts word for word?

Sikubali jukumu. Read all posts at your own risk.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I do believe in recycling... and this is a dead horse subject...

Former HOA President

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By MelissaP1 on 02/01/2016 7:57 AM
I do believe in recycling... and this is a dead horse subject...

Nay.

Sikubali jukumu. Read all posts at your own risk.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By MelissaP1 on 02/01/2016 5:30 AM

Another thing, rental caps may not really be "legal" to enforce. Only state that I know of is California in regards to having any kind of rental cap enforcement laws. Otherwise, it's nice in to see in writing but is NOT enforceable. You may want to ask a lawyer.

Melissa,

We have been over this before.

If rental restrictions are contained within the CC&Rs (not any other governing document) then the restrictions will likely be upheld by the courts.

See:

RENTALS IN HOA’S THE NUTS AND BOLTS OF RESTRICTING RENTALS IN HOMEOWNER ASSOCIATIONS (HOAS) from an AZ legal firm.

HOA Rental Restrictions – Are They Valid? 2015 article from a Washington State law firm

Rental Restrictions in HOAs permitted according to the Virginia Attorney General from a VA law firm

The Actual VA AG opinion (10-078)

Now, keep in mind that the OP is within a condominium development. If the condo desires to be HUD certified, then FHA has it's own rental limit for the certification:

http://www.hawthornemgmt.com/hawthorne/picture/mortgagee_guide_2011-22.pdf

Way outside the topic, the best rental restriction I have seen has been provided on this site in the past from RogerB in CO:

SALES AND LEASING OF UNITS

Home Sales: Upon the purchase of a Unit the new owner must live in the Unit for the first 12 months of ownership.

Rentals/Leasing: All rentals shall require an executed lease. The lease shall be for a minimum of 12 months and may not be month to month tenancy. The leasee shall include the following statement: “The lessee has received and herein agrees to abide by the Governing Documents. It is understood that failure by the lessee to comply with all of the governing documents shall be cause to terminate the lease. The Owner shall provide to the Association, prior to occupancy, (a) an executed copy of the lease; (b) the names of all occupants, a phone number, and an email address (if available) by which the lessee may be contacted; and (c) the license numbers of all of the lessee’s vehicles. No Owner may lease their unit for transient or hotel purposes. No more than two unrelated tenants are allowed to reside in any one Unit.

GlenL (Ohio)
Posts: 5,491

Posted:

I was going to stay out of this one but I just can't. Melissa the contract between the HOA can and most often is more restrictive than local or state laws governing what you may do with YOUR property, yet they are regularly enforced with no problem. Why do you think that of all the Covenants (assuming they are properly enacted) that a Covenant establishing a rental restriction is unenforceable?

Oh and by the way the CA Realtor's lobby got rental restriction effectively banned unless they were enacted before the law went into effect. I'm not an attorney but I believe CA HOA's can still enact rental restrictions but the hoops they have to make it a practicable impossibility.

Studies show that 5 out of 4 people have problems with fractions

🎯 You've read this entire discussion

Join the conversation with 50,000 HOA & Condo Leaders:

✓ Ask follow-up questions
✓ Share your experience
✓ Get expert advice
✓ Access 350,000 discussions

Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in here