residential vs commercial of rental properties

DebbieP2,

That’s a difficult one for sure. I don’t agree with any renting of property within an HOA community. If your HOA has allowed renting, then can you explain to me what would make this resident able to rent his or her house out? What are the rules to such?

What would they have to do before it would alright with the BOD?

HMMMMMMM Good luck!

Chuck W.

Much depends upon what the CC&Rs clearly say. If the property units are restricted to single-family residence, then use has to be consistent with that designation. If the CC&Rs permit rentals, then the specifics for the terms of rental apply. If rentals are authorized in the CC&Rs without conditions, then rentals of most every type except maybe commercial may be permitted.

If the single-family designation applies, then the rationale used in two circuit court cases in Michigan may be relevant. As I remember the courts ruled that indications of usage help to define single-family usage, such as containing personal belongings, Thus use by people who bring their personal belongings and taken the belonging with them when they leave is inconsistent with single family. A commercial operation is not consistent with single-family residence. But rental to other family members and friends is, as long as the other evidence of use by the owner as a single-family residence also exists.

In addition to the rules and regs mentioned in earleir responses, places that are rented out for short periods of time are generally considered in the hospitality business (hotel, B&B) and have licensing and tax issues to deal with. I'm sure the state would be happy to find out if they're missing out on some taxes.

Joe

Couple of thoughts:
First, making a profit is not the key indicator of running a business. You can run a business for decades, and never make a profit. The key is simple: What is the intent? If you intend to make it a business, a charity, or a hobby, that's what it is, as long as you play by all the rules around those definitions. You can have a hobby and make a fortune, and it's still a hobby. Or a business and lose millions, but it's still a business. WHat you cannot do is have a business, treat it like a hobby, claim it is non profit to avoid taxes, etc... It's only a guess, but i bet these people claim this is a business deduction on their taxes, but want to claim "not a business" when it comes to other areas. That is not legal.

second, if your codes say "single family residence", then one area you can control is "the family" that rents. It must be a single family, it can't be frat brothers, family reunions, etc.. there are probably state definitions for a single family (father, mother, grandparents, children, etc.) that you can use.

As for renting it out for a day, weekend, or week: I am not sure you can stop that. If i owned a house, and rented it to a person for a year, would that be okay? what about six month leases? What about month leases? If month is okay, how about weekly? daily? By the hour? I am not sure you can regulate this issue based on length of rental very readily.

Cathy welcome but I'm afraid your post makes no sense. Are you looking for some specific type of help or are you just looking to vent? If looking for help, are you in violation? What type of violation and have you read your CC&R's to see if you actually are in violation?

Debbie,

Where I live in AZ, if a property owner decides to rent their property they must obtain a business license and the property must be changed from owner occupied to rental for property tax purposes. This, of course can be construed to mean the property owner is engaging in a business. Most assn docs have a clause against members "running a business" from their property; not running a business at all. If their property is being rented the owner cannot be running a business FROM it so, legally speaking, they are not in violation of that clause of the CCRs.

IMO, the best course of action is for the board to adopt a rental policy outlining exactly what type rentals are allowed -- daily, weekly, monthly, yearly. This policy should be required to be signed by any member wishing to rent their property. If they do not comply they would be in violation and perhaps liable to paying a fine until the document is signed and adhered to.

Cathy,

I believe courts will use case law from different states when deciding a case.

So you are saying the only violation you have been noticed on was the "running a business" one?

And I'm still not clear on what sort of business you're supposed to be running?

Cathy, If you really want input, please post your complete situation. It seems to me that you're almost speaking in code. Your neighbor just got on the BOD, and she doesn't like your driveway? She doesn't like laughing children?

You've stated that you're venting, so maybe you're not looking for input?

Cathy, that statement, that you make several times, may make perfect sense to you, but I have no earthly idea what you mean by it!

over 40 vacation homes (short term rentals) sometimes long term rentals.

OK Cathy I think I understand; there are over 40 vacation rentals in your area, you being one, which you have been doing since 2003. While I understand you have hours of logged calls how do you prove what was said unless you recorded them? This is why you need to document in writing and their response in writing would be even better.

This woman is out to get you or she is out to enforce the CC&R's it could be seen either way. The way for you to fight it is to know the CC&R's and the law better than the BOD. Unless your CC&R's specifically prohibit or severely limit your ability to rent your home chances are the BOD can't stop you. Especially if you can show that it is not being evenly enforced or that it is solely targeted at you. (Keep in mind I'm not an attorney and you should probably contact one.)

You make reference to a new rule, was it properly enacted under your CC&R's and Colorado law? For instance my BOD can make rules but they must be approved by 51% of the homeowners to be valid. A Covenant or By-Law change requires 51% homeowner approval but if the mortgage holder doesn't sign off on it then it is not valid for that property.

Whatever you do - do not ignore the violation letter. I would write a polite business letter requesting a hearing on the matter as is your right. If it is not resolved in your favor I believe in Colorado you have a right to request outside mediation. I did find this ruling on home based businesses in an HOA which you might find helpful: http://www.hindmansanchez.com/files/in-home_business_trial.pdf

These two articles speak to rental bans.

http://www.imakenews.com/ortenhindman/e_article000663920.cfm?x=b8Q34LJ,b6FtHyn4,w

http://realtytimes.com/rtcpages/20020102_hoarentals.htm

I had 4 different Board Members tell me for years no problem. Now Queen Bee is on the Board and angry because my drive way is bothersome. Large house and of course there will be cars going up and down (20 ft away from her living room window). No wild parties, and defi good people. I wished they had made the erroneous call to the Sheriff the week before since there was a group of attornies visiting from Denver. When I contacted the "other" board memeber(who has a vacation rental) she stated that she was "friends" with the other and couldn't help. So again, conflict of interest, and selective governance is a no no.

"No business of any kind unless approved by the Committee." (and case law I've found this would not apply, rentals) and again over 40 + I found where a group of homeowners sued the city in won in Florida when they tried to change Zoning.

Thanks Mary, yes that is all it states and we have over 40 vacation short and long term in the area and from "some" case law rentals are not considered a business. Wish I could find one just in Colorado=)

good news update, hunted down a previous board member to this HOA that I'm having problems with and he wrote a letter concerning that "rentals" have never been an issue or considered a business, or rental bans in the area and that I've been renting since 03. (He asked who I pissed off?)Not, neighbor doesn't like house being a rental and she is now on the board. Defi selecetive enforcement issue.....