Renter vs owners

We are having an issue in a 147 condominium including 3 commercial customers. We are getting close to having 50% rental units. How can we protect ourself and property values by turning into a rental building? Can we legally request the new Co—Owner sign a statement they will not rent out the unit? Probably not. Our bylaws state minimum rental period 90 days which is unfortunate. Are any large condominium projects having a similar issue and waht are you doing about it? Thanks. Paula

That's correct as far as it goes. However, it's likely that ship has sailed since you're already close to 50% rental. Many HOAs require the approval of a super-majority of owners to amend the CC&Rs, so you're talking 67%-75%. Some communities require only 51% but my impression is that this isn't common. It will be difficult to get your current landlords to vote for anything that they perceive as limiting their rights.

Unfortunately this situation is like many others: by the time you decide you have a problem, it's too late to fix it. I hate to be a Debbie Downer, but in your position I'd bail (in fact I'd have bailed a long time ago).

I apologize. They are commercial Co-Owners not customers. The Building Manager has been keeping the percentage of Owner Occupied to Rentals. Her
Numbers are lower than mine. She says 66 out of 147 are rental units.

My concerns are: if a Co-Owner purchases as a second home and then rents out, isn’t that considered rental? How about the commercial properties? If they are occupied by owner but running a business, is that considered Owner Occupied?

The Building Manager owns one of the Commercial units which she uses for her office for her rental and sales office as well as Building Manager.

Thank everyone for their comments. I assume we would need to amend the bylaws at the next Annual Meeting.

The courts want to see condos/HOAs following their own covenants and bylaws. Time and again, the courts say the covenants and bylaws are "contractual terms." So far, you have not posted anything that says to me that the COA (condominium owners' association) covenants and bylaws require new owners or co-owners to commit to renting or not renting.

A Board-created rule is only legally enforceable if it has a basis in the covenants. So the Board cannot invent a rule like what you propose and expect the courts to enforce it.

Without following the proper, lawful procedures for amending the covenants, requiring such a commitment (not to rent) would not be something the courts would enforce.

First, what it sounds like your COA board wants is a new use restriction. Fine; many COAs are understandably trending in exactly the same direction. But use restrictions are typically not in the Bylaws but instead, in the CC&Rs (covenants, conditions and restrictions, a.k.a. Declaration). To be direct: Don't be thinking your COA can seek an amendment to the Bylaws that adds a use restriction when said use restriction would really be an amendment to the covenants.

The threshold for amending the covenants is often higher than the threshold for amending the bylaws. Why? For one thing, because there is a hierarchy of legal power in the documents that govern a COA/HOA. Covenants trump Bylaws.

The COA would not be able to seek damages or even fines in its effort to enforce an unlawful amendment to the covenants like the one you propose.

As for amending: To do this right, have the COA attorney oversee all. Follow the requirements for amending and voting on amendments as given in the covenants, the SC Condo Act and the SC nonprofit corp act. From experience, and if the governing docs (covenants et cetera) allow, I advise a year or so long campaign to amend the covenants, with a roughly three-month voting period. If allowed, use an online voting service to make it as easy as possible. The COA should send out several mailings to owners.

It is common for a long set of proposed amendments to fail to pass. Granted a COA/HOA does not want to have many amendments floating around, with each amendment passed in a different year. Still, the more narrow you can make the set of amendments, the greater the chances that you will get the super-majority to successfully amend the covenants (the contract).

Your COA attorney may say that some rental units have to be grandfathered. Language on grandfathering should be included in the proposed amendment.

Yikes; this is so.

Good post by CathyA3, potentially saving this COA's Board a lot of time and money.

Kerry has a good point about the commercial owners. The CC&Rs and bylaws should describe the percentage of ownership the commercial owners have, how many votes they have, and whether there are any limitations their votes (such as not voting on residential matters).

This community's board should have a chat with the association attorney before pursuing this because it may be moot.

One reason people buy into associations with no rental limits is because they either plan on renting their unit out or like the flexibility to do so if needed. It can be near impossible to get rental restrictions added especially if many units are presently rented.

Our Covenants do not allow an owner to rent their unit during their first year of ownership. Our minimum rental period is 6 months.

SC law from the Horizontal Property Act (Condominiums):

"SECTION 27-31-170. … Each co-owner shall comply strictly with the bylaws and with the administrative rules and regulations adopted pursuant thereto, as either of the same may be lawfully amended from time to time, and with the covenants, conditions and restrictions set forth in the master deed …"

When people here say covenants (or CC&Rs), that means your "master deed" (known as a declaration in other states). The bylaws are also part of your master deed.

"SECTION 27-31-150. ...The administration of the property constituted into horizontal property, whether incorporated or unincorporated, shall be governed by bylaws which shall be inserted in or appended to and recorded with the master deed..."

In condos, there is often an overlap between the master deed (declaration) and the bylaws, especially since the bylaws are part of the master deed. You can consult with a lawyer about which to amend for rental restrictions.

FYI
In SC The Horizontal Property Act applies to associations with multi levels such as a high rise. It does not apply to associations that are not multi level such as single homes, townhouses, duplexes, etc.

I might beg to differ but no need to. Do your Covenants/Bylaws specifically say so?

The act does say an association can dictate that they fall under it. Obviously your Declarant did that when drawing up your docs. Based on this, I will hazard a guess your are in the Myrtle Beach area as the act was drawn up do to stop some of the shenanigan's many of the developers in that area were pulling.

One of the driving forces behind creating such a document for all associations has been in the Horry County region as mainly single home buyers felt they were not given a full picture of what a declarant can do before turning the association over to the owners. They succeeded in getting the SC Homeowners Association Act 27-30-110 passed in 2018. My cursory read is that it is not earth shattering and still will not protect a buyer from a seller/developer with larceny in their heart. Also it does not cover the myriad of issues that can arise in an owners association. Link to an overview of it:

https://www.hendersonproperties.com/2018/08/new-hoa-laws-sc/#close

What type arrangement are you? Meaning single family homes, duplexes, townhouse, etc. You must be what are called zero lot line units meaning no land ownership. We are 40 duplexes (side by side) and 32 single one and two story homes for a total of 112 owners. Each home has a small (15 x 30) backyard that is fenced in with a 7ft shadow box, privacy fence. Fences installed by builder and must be repaired/replaced with identical material. No other fences allowed.

Fences, sheds, parking, and landscaping are the biggest PIA issues for associations.

John

I am on my 5th association in 3 states (IL, MA, SC). In my first association (two story apartment like) I paid no attention to anything as I never had any issues. In my second association (3-4 townhomes per building) I got on the BOD to stop something the BOD was trying to do. By my 3rd association (2-3 townhomes per building) I knew how things worked and as all was well, I did not get involved. In fourth association (single family homes) I was on the ARC and I got involved in a movement to get rid of several BOD Members via election but I declined running for the BOD.

Now in my 5th association (duplex and single family) the Declarant asked me to be on a 5 person advisory BOD. Come turnover time there was a move to stop me from being elected as I had upset a few people while on the advisory BOD. I admit I was upset over it but I politely backed away. At the next Annual Meeting my name was put up and several people supported the nomination. I declined to run saying there were people on the BOD I would not be able to work with. People knew who I meant. Well two of the three I could not work with decided not to run (they had been on for 2 years) people started asking me to run. I did run and I have been on the BOD now for 3 years as VP & Treasurer. I stay on so that some other fool does not get elected. My term is up as is the Pres term and he and I have been discussing running. He said he will and he wants me to. I have told him if a "good" person runs then I probably will not run again but if no one does run or a fool runs, I will run again.

Bottom line is it took me a few associations to learn how they should run and which ones to avoid. The problem is many do not know which ones to avoid. One major warning sign is an older association with older owners and having little to no reserves. Not only will there have to be a dues increase but getting such will divide the association and make for a hostile environment.

Old line. Fool me once, shame on me. Fool me twice, shame on me..

Thanks for all of the information.