Grandfather owners renting property?

I’m in a development under Declarant control. Due to the slow real estate market, many builders are renting their spec homes. Our documents do not restrict rentals. Owners do not object to rentals but want some restrictions. An example being a minimum 6-month lease to avoid the transient situation we have now with month-to-month. After researching other rental restriction posts on this site, I gave the Declarant some proposed wording. The Declarant agreed to pursue this since he is unhappy with some of the tenants in the community, though does nothing to make the owners maintain the property. The Declarant obtained a legal opinion that the documents can be amended to incorporate rental restrictions but also gave advice to “grandfather’ owners of lots purchased prior to the recording of an amendment to not have unexpected restrictions of the use of property. We do not want to prohibit rentals only have restrictions.

My question is in the grandfathering of existing owners. Does anyone have experience with this situation or a recommendation/wording that would honor all existing rental agreements but those going forward must adhere to the restrictions? In essence, an existing owner could rent their property to a new tenant but must adhere to all other guidelines such as the minimum term of a lease. The attorney is indicating his advice is the existing owners do not need to adhere to any of the restrictions with new tenants.

Joan,

I would be opposed to "grandfathering" that would allow some members to continue to rent "forever". I think the alternative is to allow those who are renting to continue renting for the duration of the current lease. After the lease has expired, then they will have to abide by the same rental restrictions as everyone else. If they purchased the property for rental income only, that's just too bad. Was the development advertised that way? I don't think so!

Mary,
That is exactly the problem with "Grandfathering". It is very misunderstood with the idea that whoever gets a grandfather classification, gets it forever. They do not. It means that IF there is a tenant in, they may continue to stay but when they leave, the unit then becomes liable back to the current HOA rules or covenants on record.

The reason is if some units are perpetually grandfathered in, this creates two classifications of owners, those who can rent and those who cannot rent and that is not specified in almost all CC&Rs. So, no, grandfathering must be used correctly.

IMHO, this whole "grandfathering thing" is about two things:

1). The idea of "fairness" in that h/o's who bought into a community when there were no rental restrictions reasonably expected to be able to rent their home if they so desired. Now, it's certainly true that they bought into a deed restricted community and should have recognized that changes to those deed restrictions (including rental restrictions) could occur in the future. In some sets of CCRs, there are clauses relating to "disadvantaged owners" which allow AND give credence to potential lawsuits by h/o's against the HOA when these types of changes are made.

2). More practically, this strategy is used to gain acceptance (or reduce resistance) of the proposed amendment from existing owners who may be renting their homes. Given that there are many different HOA situations, it is possible that the NO votes of this substet of owners could jeopardize passing the amendment.

As such the HOA Board should give careful consideration to:

A). Should "grandfathering" strategy be used?
B). If so, should the "grandfathering" be permanent or only for existing leases?

Each situation is different and YMMV

I think many have missed that they are not looking to ban rentals at all. Nor are they trying to restrict how many can be rented out. They are simply wanting to require a minimum lease for 6 months.

Now I suspect that the legal opinion was the idea of the Developer making a unilateral change to the rules. Even if he submits this to the whole, the vote is likely to go in his direction. In fact, for all we know he owns 2/3rd of the lots.

The thing is that many of those renting out the houses would probably not have a problem with a restriction making a minimum initial lease be 6 months. (Note that I would go for initial lease term only.)

I would look to try something that allows for 2/3rds of the non-developer lots to approve plus the developer rules the day.

The first thing is to be sure to read through all the covenants several times. Chances are that it will discuss Class A and Class B votes. (Normally the declarant is Class B and the rest who purchase lots are Class B.) And then look at the section concerning amendments and what rights there are.

At any rate, nothing prevents him from seeking and honoring the opinion of the people who live there now. So he could decide unilaterally to seek a vote of the owners. If those owners approve the changes at the required percentage that would be needed if he was not in control, then he could pass the amendment.

You might also want to look in your state laws regarding amending your covenants. In Texas we do have a law concerning this. And because of said law, anyone who owns property in the covenant area can initiate an amendment. Of course he could block it, but he doesn't seem inclined to do so. If I were initiating it, I would start by getting as many signatures as possible. Since his concern is not trumping your rights, this should overcome his objections.