No business allowed and STR

Has anyone had success in preventing short term rentals using an existing but generic “No business allowed” restriction in their HOA? Especially single family residential homes situation. Or tried and failed.

I agree with Tim. There are not alot a HOA can do about enforcing rental restrictions long or short. Some local laws may fall into play. State laws vary.

You should talk to an HOA attorney in your area. Laws governing STRs are very state and local municipality specific, so you'll need to know what yours say.

I actually disagree with Tim on this, which I seldom do. There have been court cases that distinguish between STRs and regular rentals. One of them (in Kentucky?) found that the STR was indeed a business and that a person staying in a short-term "rental" is not living in the home in any sense of the term:

* The STR is not listed as their permanent address with their employer, their bank, the IRS, the USPS, etc.

* Their belongings are elsewhere and their mail goes elsewhere.

* They do not sign a lease and are not governing by the state's landlord-tenant laws.

I personally think that referring to STRs as "rentals" muddies the waters since it assumes something in dispute: that they are similar to all other rentals involving lease agreements. They are not: they are similar to stays in a hotel. Also hotels are zoned commercial and not residential. Unless you're one of the small minority of folks who do actually live in a hotel, your permanent address is elsewhere.

Fortunately for my community, our rental restriction forbids hotel-style and corporate housing, so no STRs for us. The restriction also requires a formal lease of at least 6 months in length, although renewals can be shorter.

You may have some leverage since owners of the STRs in your area may have to have a business license, and you may have leverage with the zoning issue. But your best bet is having similar language in your CC&Rs to the above (ie. no hotel style housing) and you'll need to enforce them. You'll also need to have this language in the CC&Rs before the landlords get a toe hold in your community and you don't have the necessary votes to amend your CC&Rs, if needed.

(FWIW, I think that all rentals of any length are businesses. People don't own rental property as a hobby, they want to make money. But rental properties such as apartment complexes are usually zoned residential, at least in my area, so I'm willing to let similar things slide in an HOA. A hotel is different for a whole host of reasons.)

We did and it worked. BUT, it required a change to the CCRs. We had a motivated group of residents and a lot of patience. Took about four years. We had a couple of homes being rented thru AirBnB or the like. When the CCR change went thru, they stopped operating. We changes the CCRs to enforce a minimum lease term of 6 months.

BP

I did some checking on what's going on in other states, and it reinforced my comment about the laws being very location-specific. Some state laws require that STRs be allowed in residential communities. Some of these laws, however, defer to a community's CC&Rs and do permit communities to restrict such usage. In the few cases I saw that referred to prohibiting business usage of residential property, the communities also had restrictions that prohibited short-term housing specifically.

What Is a Lien?

From CAI, a discussion of the Kentucky case:
Short-term Rental Case Impacting Community Associations

Quote from the article:

The nature of short-term rentals is not intuitively harmonious with the community association housing model, which focuses on bringing people together, strengthening neighborhood bonds, and promoting a sense of community and belonging. ...

CAI opposes governmental regulations that would intrude on a board of directors’ autonomy to serve the best interest of the association. Short-term rental regulation should not impair association contractual covenants and take decision-making authority away from community association homeowners. This degrades the very core of community association governance, which is based on private contractual obligations of the community’s homeowners.

A review of some other cases from a law firm:

HOAs and COAs increasingly confront owner challenges to regulation of short-term rental

An amusing quote:

But an enterprising owner developed an interesting work-around for the owner-occupied requirement. He placed his unit in an LLC, and then he sold small percentage shares of the LLC to would-be short-term renters that the LLC documents required the purchaser to sell back to the LLC at the end of their stay. It allowed the short-term renter to say: “I’m not a tenant. I’m a co-owner.”

Comment: the owner may be "enterprising", but IMHO he's stupid. It can be surprisingly difficult to remove people from property even when there is no legal agreement in place - the last thing you want to do is give them ownership rights and then hope they abide by the agreement they signed. The so-called renter isn't too smart either, since for that brief period of time he'll assume the risks shared by all other owners. But this is a topic for another day...

Good ideas here - unfortunately, that ship has said as far as my community is concerned (long story, but townhouse communities like mine are very vulnerable to this nonsense).

You probably won't be able to stop all of it, which is where fair and consistent rule enforcement (for everyone, not just the renters) comes into play. For example, if the short-term rentals are causing lots of trash and racket, you need to go after the owner/landlords. I'm sure there are rules prohibiting trash and noise after a certain amount of time, so focusing on the behavior might help (people don't want to turn around and have to spend time on fines, CCR appeal hearings, possible fights in court, and all that stuff.)

Something else to consider with STRs: the HOA's insurance. Having a steady procession of business customers coming onto the property can change a community's needs for insurance - so talk to your insurance agent to make sure the association has adequate coverage.

FWIW, our attorney was adamant about condos not allowing things like yard sales in their communities. His reasons:

* Legally a yard sale is no different from any other activity involving sales to customers, and this may be prohibited by the CC&Rs.

* He's seen communities where a customer was injured on the common elements and sued the association - and the association's insurer said "nope, that's a business activity, you're not insured for that." So the community had an uninsured loss, which the homeowners had to pay for themselves. It wasn't pretty.

* Inviting strangers onto the property often results in an increase in crime - you're basically inviting them to case the joint. He's seen upticks in crime after yard sales.

STRs introduce all of the same issues that yard sales do.

Also FWIW, our CC&Rs also have a restriction that prohibits anything that would result in a change in the association's insurance profile, so this is something else to consider. Most associations insure against damage to the property as well as liability for injuries, and both are potentially issues with STRs.

I would think a rental restriction Covenant Amendment )say 30 day, 6 months, etc.) would easily pass as it does not limit ones ability to rent their unit long term. Our Covenants say:

Section 6. Leasing Lots may not be leased during the first six months of ownership. After the first six months of ownership, lots may be leased for residential purposes only. All leases shall have a minimum term of at least six (6) months. All leases shall require, without limitation, that the tenant acknowledge receipt of a copy of the Declaration, Bylaws, use restrictions, and rules and regulations of the Association. The lease shall also obligate the tenant to comply with the foregoing.

With others, strict, quick enforcement of rules can go far with any residents.

Sadly, in Ca, we may not limit rental terms in our CC&Rs to 3 months, which is what we wanted, or 6 months, but only to 30 days. So,gain, you must know what your municipal and state laws are on this topic.

Thanks all. I try to remember to come back sometime and update our journey.