Adopting rental limitations

That is a loaded question and best to ask the professionals... Rental restrictions are not always enforceable or legal in many states. So it's best to get a lawyer's opinion and advice in your state. Plus you have to re-draft your documents to implement the rule too. Which takes a large number of owner votes (not just BOD). It's not a cheap process and takes time.

BTW: My opinion on rentals is that it's loaded with good intentions but the road is filled with thorns. The best option is that the HOA requires the owner to put into their lease agreements that they must obey the HOA rules and a copy given to them. It protects ALL parties involved if that is put into lease agreements.

Yes I am on the Board and heading a committee to study rental limits. We are looking at the Occupancy Restrictions.

Willard

I should never touch FL stuff but....that said....I believe it is possible to put rental restrictions in place via a Covenant change but those that do not vote for such are not bound by such. That is why gaining a majority (usually at least 2/3rds) to approve such a Covenant change is often impossible.

Willard,

Adopting and enforcing rental restictions can be tricky.
You can't simply impose restrictions, you also need to address and define hardships.
If you specify only x number can be rented, you need to develop a system to rotate.

The best restriction I have found was:

No property may be rented, in whole or in part, during the first x years of ownership (I've seen x equal anywhere from 2 to 5 years) and all rental contracts, leases, must be for a minimum of 12 months.

This keeps out investors who just want rental property yet allows those who may need to rent to rent after x years.

John,

I hadn't heard that (or at least don't recall that). However, even the article I posted above supports your statement. However, it only applies to condominiums and not to HOAs.

Tim

Ah---by "occupancy restrictions," I thought you meant # of people per unit or house.

Those that interest you are usually just called rental restrictions of which there can be many types. We, for instance, restrict short term rentals to a minimum of one month. To change that to, say, three months would require amending our CC&Rs, which needs 67% of Owners approving it.

One rental restrictions that interests you seems to be an new owner occupancy requirement, i.e., a new owner must occupy the residence for xx months or years.

What do your docs, your CC&Rs (aka: restrictions, declaration; covenants) say about rentals if anything?

WillardO, my HOA is also considering rental restrictions. There have been threads here discussing the issue on and off for quite some time. I posted THIS LINK just a few days ago in relation to the question.

Restrictions can take several forms: requiring ownership for a period of time (a year or two) before a home can be rented; restricting the number of rentals (while maintaining a waiting list); outright prohibition against rentals; restricting the length and frequency of leases.

We've had an uptick in the number of rentals here over the last few years that has caused a significant number of homownwers to become concerned. There is broad support for restrictions but, as our committee studying the issue has discovered, everyone has their own ideas on what form the restrictions should take. The whole question is on hold until February.

I'm curious, what difference does it make whether the properties are low to medium value?

To follow up on Geno's question, why does it matter to you & your community that investment companies want $300,000 or less. I don't even know what that means, actually.

Our Covenants say an owner cannot rent their unit during the first year of their ownership. We know of several violations but they are within the family as in parents buy, child lives there. In one case the child bought, parent lives there. As all pay their dues on time we have never pursued this. Also with family, who knows the arrangement.

Rental restrictions are really hard to enforce even if you have them written in. How does the HOA even know that is the situation? Do they require the homeowner to give them a copy of the lease? Considering the HOA is a 3rd party resource to the Lease, they can do very little in interfering with that agreement. The lease contract is between the owner/tenant. NOT the HOA.

There is such a thing called "Tenant's rights". Which means that landlords can't just evict their tenants on a whim/desire. The HOA can't evict or force a member to evict a tenant either. There has to be a violation of the terms of the lease. Which surprisingly doesn't mean them NOT paying rent! In some states, a tenant can go without paying a dime of rent up to a year! The landlord can not do a thing about it. It took me 5 months to evict my tenant and even put the house up for sale. It sometimes takes a Sherriff office to come visit. A typical eviction takes about 20 - 30 days IF goes smoothly. If not, then you have to add on about 2 weeks for a Sheriff eviction or they keep fighting your attempts to evict. It's NOT an overnight process to evict a tenant no matter how much it's wanted.

This is why I say if your going to have "rental restrictions" it is best to have it so that it is written into the lease agreement to FOLLLOW the HOA rules! Give the tenant a copy. This protects BOTH the landlord, HOA, and tenant. If the HOA sees a tenant break the rule, they have to go to the landlord. It's the responsibility of the landlord to face punishment or take action. Well if it's not in the lease the rule broken, then the landlord can't evict the tenant. The HOA will have to keep the landlord/member feet to the ground on the violations.

Don't forget that HOA's do NOT keep a "Home Value". It helps to keep up "Home ATTRACTION". There is a difference. Rental property does effect loan packages and refinance rates indirectly by FHA requirement be set at a certain amount. There is a HUD form that monitors this for banks and they don't like to sell to homes with higher rental property. However, the appearance of rental property isn't much as a concern to them. It's just a higher risk if there is a high amount of rental property in that HOA.

So make sure you know why you all want rental restrictions? Is it because the appearance of the homes or is it because it effects your loan package availability and refinance rates. Home values is a different animal based on REAL numbers such as what a home with similar size/bd/ba has sold for in last 6 months within a few mile radius. (Foreclosures are also factored in). It's not based on if the house "looks good".

Hard facts... You keep seeming to ignore them. There is a HUD form which is a HOA "appraisal". Have you ever seen one or filled it out? That is when the bank finds out about the % of rentals.

I rented my house out before. Have you? Evicting a tenant is hard. My tenant did not pay rent for months, moved a baby Emu into my backyard, and worked on motorcycles on my carpet. He basically destroyed my place and violated several HOA rules. I had to put a For Sale sign in the front yard and show the house to people to get him the message to move out upon the legal process.

Legally the tenant can stay in a home for almost a year without paying a dime of rent. They can break things and rules all they want during that time too as long as it's not in the contract. The landlord can't evict someone because they are being "fined by the HOA". They have to have it WRITTEN into the lease agreement violations are reasons for eviction.

What part of this do you not understand??? Reality?

Let's follow the bouncing ball shall we? So your HOA puts in a rental restriction. Let's say that the HOA only allows 10 rental properties at a time. Your number 11. So now what happens?

Well does your HOA have a fining schedule that says "Hey number 11, you get fined for being one too many rentals". So do you have to suffer the fines till your lease runs out? Your tenant is NOT violating the HOA restriction. You then have no reason to evict your tenant do you?

So how does one put in rental restrictions and enforce them without factoring in the tenants rights issues? Landlords hands are tied in many cases. HOA forcing rental restrictions when the contract between landlord/tenant doesn't have that caveat.

The best the HOA can do is maybe have a system to monitor the number of rentals and make sure the landlord has the HOA following in their lease agreement. Otherwise, there's not much a HOA can do since they don't own the property being rented.

RichardP... Thank you for confirming that HOAs can evict renters and even owners. I started a thread on that very topic... evicting nuisance owners.
The board of my HOA is also looking at changing bylaws to include rental restrictions. Which I very much support.
In the past 4 yrs we've had over 50% rentals. Corporations have been buying units just to rent them out.
Its been detrimental to property values.

PLEASE don't think that you can evict an owner just because you don't like them.

Hm, sounds like my community. We are a townhouse community of moderately priced homes with a high rental percentage. Most of that's due to the housing meltdown when mortgage companies started foreclosures and dragged out the process until they found someone to pay however much they wanted to recoup the loan. Usually those buyers were investor owners who then rented the home to anyone who could fog a mirror and thus we had more problems with people who didn't get along with their neighbors, let their pit bulls and other critters run amok, and nearly turned the parking lots into a junk car paradise. This on top of the wear and tear of the common area from people moving in and out all the time (I have a few other conversations on this board about trash problems for starters).

We tried to amend the CCRs to reduce the rental percentage a few years ago, but it didn't work, partially because some of the owners don't give a rip about anything and didn't bother to vote yea or nea. Since we already had a large percentage of off site owners, one can't really expect them to vote for something that might limit their ability to buy more units that went into foreclosure - and that's exactly what happened (even after our attorney prepare a grandfather clause that would enable those homeowners to continue renting until they sold or transferred their units).

If you already have a high percentage of off site owners, you will need some sort of grandfather clause to have any chance of a rental restriction passing. You can also educate everyone on the issues (too many off-site owners usually means fewer people will be willing to volunteer to serve on the board, current owner-occupants may have trouble getting refinancing on their units, etc.)

But mostly, what you need is a kick-ass rules enforcement policy. Owners have to understand that they are ultimately responsible for the behavior of the people who live in their home (whether they're tenants or not) and if friends, tenants, visitors or whoever misuse or damage the common areas or cause enough mayhem to make life uncomfortable for lots of neighbors, they will be held accountable.

Here's something else I've learned - some investor-owners like "moderately to low priced" HOA homes because it's often easier to get away with bad behavior and usually the assessments are moderately priced (which may mean they're seriously underfunded). If people want to rent and not pay attention to their tenants, the cost of running the community will go up - tell all homeowners there's a cost for behaving as if someone else will clean up your slop. Either they pay up or change their behavior. Hitting people in the pocketbook can also be effective, especially since some investor owners want to keep costs as cheap as possible while they sit back and cash rent checks.

(Yes, I know all this sounds like I have a bias against investor-owners. Actually, I served with two very good owners during my 10 years on my HOA board - my issue wasn't with them, but some of the other yahoos in the community! Lately, however, I think the percentage is inching down a bit because our assessments have gone up and the off-site owners would rather rent out a home in another community to make more money).

You can start with taking a look at the CCRs to see what you have right now and start working on more rules enforcement, while educating homeowners on the pros and cons of rental restrictions (not to mention doing research on effective ways to enforce those restrictions). It may take some time before the rental percentage goes down, but if the board makes it clear that all owners are responsible for taking care of the common areas and using them properly, that could keep out some of the slumlords (yeah, I said slumlord and I meant it!)

They were the "Owners" of the property, just that the HOA had first position on title. Might want to brush up on your real estate.

So how did the HOA evict a TENANT? Would like to know the details on that one Richard... They can foreclose on an OWNER. Unless they own that property and have their name on that lease agreement collecting rent, I'd like to know how a HOA a 3rd party can evict? (Legally).

I probably DO need to brush up on my real estate info. It's been a long time since I was in the business. If the HOA forecloses on an Owner, how is that (former) owner now in "2nd position?"

While not in our CC&Rs, Melissa, I have read that IF in the CC&Rs, HOAs can evict tenants in CA. I also think I read somewhere on this board that HOAs in FL also can evict tenants, but my memory on that one might be flawed.

Linda, I can't remember this one either since I never actually dealt with FHA guaranteed loans: Does that kind of loan permit investors to purchase or only owner-occupants? If only owner-occupants qualify, like VA loans, this new legislation should improve your owner occupant rate. I seem to recall that both types of loans are specifically for owner occupants to help lowr income people and veterans own homes.

The main reason we got our condo HOA recertified for FHA recently is so that some of our older Owners can get reverse mortgages.

Kerry - FHA is first time homebuyer. Not sure how much it means, as currently, one of the homeowners has an FHA loan on the property (she owns multiple properties, so I have no idea how she got an FHA loan) and a relative lives there. Go figure. Guess they know how to work the system.

Our board wrote its CC&Rs before 1/1/12 and put into effect rental restrictions and the ability to fine homeowners who rented their units without permission from the board. However the board did not specify details on the amount of fines, and other policies the board was adopting related to leasing or renting units. In 2014 more restrictions were adopted and clarifications on old restrictions were also added. One of the documents was called Governing Documents Enforcement Policy and Schedule of Fines. The other was called Rental Restriction Policy. I would like to ask if our board writes two documents after 1/1/12 that apply to rental restrictions whether these documents would be considered amendments and according to civil code 4740 would only apply to new homeowners who bought into to complex after these new documents (amendments) were filed?