By-Laws change and rental policy

Started by RobertW31 • 10 replies • 723 views

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RobertW31 (New York)
Posts: 41

Posted:

Hi all, Need some advice. I am the HOA president of 100 plus townhouse community. Two years ago the board issued a policy that required those wanting to rent a property must have lived in the unit for 2 years, must provide a $1000 security deposit which is held in escrow, and limited the number of rentals to 10 at any one time.

The intention of the policy was to prevent investors from buying property and to keep the number of rentals to a low level. The boards purpose was to protect the community since having many rentals will result in a deterioration of this community since landlords do not consistently maintain standards of upkeep and as a result can diminish property values for residents.

In reviewing this policy with an attorney, he indicated that it needs to be in the Declarations and By-Laws which is filed with the attorney general of the state.

The By-Laws require a 2/3 vote of all residents and it states it must be in a meeting.

I believe this would be a fools errand. In the first place we will never get the majority of the residents to attend a meeting. There are no options in the By-Laws that permit a mail in vote. We are truly stuck on this and I am afraid this will be the beginning of the end of this community as we know it. It is some 25 years old and in a very desirable location close to major transportation and very desirable for investors.

Our general HOA meetings get maybe 30 people to attend and we need 70 to vote in person in favor of the change.

We do Have separate rules and regulations but they must follow the Declaration and By-laws. The By-Laws only indicate that a copy of the lease must be provided.

JenniferG11 (Texas)
Posts: 667

Posted:

There is no provision to attend a meeting/vote by proxy?

GeorgeS21 (Florida)
Posts: 3,808

Posted:

Based on what you have provided, the Board adopted an empty policy that is probably unenforceable.

JenniferG11 (Texas)
Posts: 667

Posted:

Quote:

Posted By GeorgeS21 on 07/19/2018 6:01 AM
Based on what you have provided, the Board adopted an empty policy that is probably unenforceable.

Ayup. I think OP is seeking for it to be enforceable, though.

TimM11
Posts: 354

Posted:

If your bylaws state that homeowners can lease their units without restriction, and you enact a policy that has restrictions, then yes, it won't stand due to the conflict. What exactly do your bylaws say about it?

We had a similar initiative in our community that hasn't passed yet. We also need a 2/3 majority to vote for it, though we couldn't get that even with mail-in ballots and going door to door (which we are allowed to do). We didn't even get half. A 2/3 majority isn't impossible to get, but it's not easy, which is the whole idea. You also need to consider that not everyone may support it even if you get 100% participation in the vote -- people might want to use their unit as a source of rental income, or sell to an investor when they move.

SheliaH (Indiana)
Posts: 6,964

Posted:

It would appear you need the old fashioned approach - send letters, visit homeowners, etc., encouraging them to come to a meeting where the pros and cons of the policy are enforced and then schedule a vote at a later date. Give them copies of the policy for their review so they'll know what the Bylaws will say if the proposal is passed. This is a meeting where people should make the time to show up, but if you can get at least 70 people to sign off on this, you might not have to worry about the rest. If they want to weigh in on the issue and cast a vote, they need to make time to show up.

If the Bylaws state this has to be done in a meeting, what do they say about homeowners appointing proxies to show up and vote on their behalf? While I personally think homeowners need to weigh in personally on issues like this, stuff does happen. Talk to the association attorney to see what your options might be - you might need to do some work to ensure the person who shows up was, in fact, designated by the homeowner.

If you can't get a formal vote on this, your next option is to make sure other rules regarding behavior and paying assessments in full and on time are being enforced. Investors (not all of them, but quite a few) often look for communities with weak or indifferent boards who don't enforce the rules as strongly as they should and so they rent to people who don't give a damn and cause problems for everyone. As you note, that's why the board established this rule. You may not be able to stop renting, but if the rules are being enforced, investors might be more careful about who they rent to or not buy in the community at all because they don't want phone calls and other hassles about tenants behaving badly.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

JenniferG11 (Texas)
Posts: 667

Posted:

I doubt that 2/3 are going to agree to restrict their own property rights. I would not agree. It would mean that someday if I want to rent it out, but 10 are being rented, I could not do so. No way, Jose.

RobertW31 (New York)
Posts: 41

Posted:

Thanks for the input-Have reviewed it more with the attorney and could do an all day meeting to make it easier for people to vote and yes we can have proxy designations. We really have to do a campaign to make people understand why it is important and what it means to them and the future of this place. Of course there will be some people who want the option to rent or are already renting properties in here. If we get enough to vote it would be a real accomplishment, but it is important to the future of the place.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Make sure it is Legal to have rental restrictions. In many states, HOA's can NOT limit rentals. My lawyer said we could not because the HOA does NOT own the homes. Thus if you do not own the homes, then you can restrict use of the homes.

Now that doesn't mean you can't keep renting inline. You have to keep the owner's feet to the ground for renter's violations. My recommendation outside of rental restriction rule, is to make the owner MUST have renters MUST obey the HOA's rules. This typically isn't in off the shelf rental agreements. If the owners would have the caveat the renter has to follow the HOA rules, then that helps ALL parties involved.

There is the factor of "Tenant's rights" one has to acknowledge. Which prevents owners from evicting troublesome non-paying renters. If the rules of the HOA to be obeyed isn't in the lease agreement, then the owner can NOT evict the tenant for violation of the HOA rules. The HOA can only hold the owner responsible they can't evict/fine the tenant.

Yes, you will need to put this rule into the CC&R's to be enforceable. Which is hard to do I agree. We have to have a special meeting to pass such a vote. It's a 90% of the owners to pass. Plus you have to pay to file. This process can take years and cost several thousand dollars. The end result is the rental restrictions do NOT effect home values...It effects loan opportunities and higher refinance rates.

Former HOA President

RichardP13 (California)
Posts: 3,868

Posted:

Robert

The CCRs will have to be amended. There is always a higher threshold for a reason. There also may be a clause that a certain percentage of mortgage holders must approve of the amendment. The mortgage holder is the one who hold the actual note, not the one that payments go to.

GenoS (Florida)
Posts: 4,276

Posted:

I agree with Richard. Such restrictions should be in the Declaration (CC&Rs), not in the Bylaws. I think proxies are definitely the way to go. Roll up your sleeves because if you can't muster enough votes in favor of an amendment you should re-double your efforts and try again the following year. If you make a good enough case then eventually you should have at least a reasonable chance of being successful. Such restrictions will be impossible to put into place via amendment once investors or absentee landlords control enough votes to thwart them.

Courts nationwide tend to look dimly on restraints of alienation, so in order to implement restrictions in the covenants you'll need to make sure they're fair and, perhaps, you may have to grandfather in all current owners under the current leasing restrictions (or lack thereof), in which case the new restrictions will only apply to a property after it's sold to a new owner. That's how it is in Florida, anyway. I'm not sure about NY jurisprudence regarding the matter.

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