Voting rights

We have a townhouse development of 64 units with 31 of those units now being used as rentals. It's lowering our property values immensely. We have several people who own multiple rental units and we are trying to amend our covenants to require simple majority votes because we can't get the rental owners to respond. One of those amendments is to limit future sales of property to owner occupied only, no rentals.
Our covenants do not specify that an owner has 1 vote for every unit owned and our By-Laws state the Board can determine the eligibility and qualifications for membership, but nothing about votes. So, our board passed a resolution that an owner only has 1 vote no matter how many units they own....We want to know how other HOA's handle this situation. Realistically, one person could purchase 51% of the units and have all the voting power if they had 1 vote per unit.

None of our documents even mention voting rights, which is why the board took the action they did.

No, we took over 2 years ago. We've never had more than 15 -20 owners ever vote and only 12 at a meeting, plus we've never tried to amend anything before. The only thing we've done is vote on board members. Most of our landlords live elsewhere and don't bother to return proxy letters or attend meetings, which is why we're trying to lower the requirements, so the folks who live here and have to watch their property values drop even further, have a better representation. We're aware that our amendments will probably fail, but we will keep trying.

If your docs do not saying anything about voting rights, look at the state code for corporations. That should have some guidelines. The state code will trump the governing documents. This is assuming that your HOA is a corporation.

That's my guess (default is that each unit counts as one "share").

Could you imagine if Dell Corporation (or any other corp...I'm just looking at my Dell computer...) decided that no matter how many shares of stock someone owned, they only got one vote?

Really though...voting rights could be designated in any number of different locations within the documents, and in MY documents, they seem to build on each other. The Articles of Incorporation detail a little bit about voting rights, then the Bylaws, then the CC&Rs... All three of my docs mention voting rights and how members get to cast their votes.

Do your docs say anything about proxies? If so, maybe around that location will be details about voting rights...

If someone owns 51 percent of the properties, then he/she deserves 51 percent of the vote.

To restrict it to one vote regardless of number of units owned is. . .inappropriate.

It may even be illegal in your state.

MarciiaB -

You have the proverbial "tough row to hoe" on this .. .. .. Here's what I believe you need to do first - throroughly read and understand your governing documents (the covenants and by-laws) of the HOA.

Pay particular attention in looking for (others, I'm certain, will supplement items I may forget):

1). What is the quorum for member meetings.
2). What is the percentage of members that must affirm any proposed changes to the covenants?
3). What is the percentage of members that must affirm any proposed changes to the by-laws?
4). Is the Board of Directors permitted to create, change, and enforce supplemental rules & regulations beyond what is contained in either the covenants or by-laws?
5). What represents a quorum for a meeting of the Board of Directors?
6). Are any of the articles in the covenants or sections of the by-laws in conflict with Federal, State, or Local laws?

Once you've got this "lay of the land" as to where you stand, you can then consider imposing restrictions on additional units being rented. You'll almost certainly not be able to restrict currently rented homes from either a practical (number of votes necessary to amend documents) or possibly legal standpoint. You will likely have to "grandfather" in all currently rented homes until ownership changes.

Much more to discuss on this topic, but I certainly don't want to be writing War and Peace here

If the member of the owner of several units only gets one vote then do they only have to pay one assessment no matter how many units they own? Otherwise, I recommend changing your bylaws to one vote per unit to make them reasonable in case this matter ever went to court.

Marcia,

I agree with the majority here who say it should be one vote for each unit/low owned. Now that you've "found" the articles of inc and see that it states, "1 vote per unit", you should be aware that the BOD's rule is null and void. The BOD cannot adopt a rule that is contrary to the gov docs! Case closed!!

Mostly everyone's property values are dropping and it has nothing to do with the number of rentals in our communities. It has to do with the economy!

However, if you are in a condo complex, you should be concerned about the number of rentals. If it is too high a potential buyer may not be able to get funding to purchase (i.e., HUD or FHA funding). If your condo is on the HUD approved condo list, then 80% of the units must be owner-occupied. If you're not on the approved HUD condo list, then a lender may try to get a "spot loan" in which case at least 51% of the units must be owner-occupied. You may want to check out the info at the following website: www.easyfha.com/fhacondoproject.htm

The FHA rules only apply to condominiums. If yours is a planned community (single family homes) the rules do not apply.

I would have to see that in writing to believe it.

My daughter owned a rental home. When she decided to sell it, she did what all of us who want to sell a home do, she painted, made sure the carpet was clean, fixed any problems like leaky gutters, etc., and then put it on the market.

There is no way, when she sold it, that people, or the banks from which they were financing, had any clue its rental history.

She sold it for an amount comparable to all the other homes that sold in the area and made quite a decent profit.

Tracie -

My understanding (others correct me if I'm wrong) is that there are only fee-simple properties, condominiums, and cooperatives. A townhome community could arguably be any one of the three.

Your answer will be found in the nature of the actual property conveyed to each owner, not it's physical structure.
While there are some differences in the nature on common property (limited use common property, etc), I don't think that is relevant to the discussion.

Marcia,

I find it hard to believe there is no language in your docs regarding voting rights. Even if there isn't you might check to see what State stutes have to say on the matter. While I sympathize with you I believe you are treading on dangerous grounds and doubt the investors will sit still for it.