What to look for in CCRs?

14 Replies

Hey all, I'm looking to invest in a townhome/condo as an STR investment.

I'm exploring a particular HOA and reading through their covenants, conditions and restrictions (CCRs). I see some paragraphs that talk about "Leasing of Units" and "Time Sharing". All I've been able to take away from the document is that the HOA wants to have copies of all executed leases, and time-sharing is not allowed. I've not found anything in the document that specifically talks about restrictions on short term rentals.

I tend to get lost in the weeds whenever I read through any legal document. Any tips on what else to look for? In my estimation it appears there are no STR restrictions because it is not specifically called out. I also plan to have my agent call the HOA and specifically inquire about STR restrictions.

What other sort of due diligence should I perform?

Isn't Time sharing similar to a STR? They are saying they only want the owner and not multiple different people coming and going.

I think if you started a STR they would fight you.

If your were to send them a new lease every few days or week I'm sure they will not be happy.

@Greg S.

What you should also worry about is if those HOA's will modify their terms and policies in regards to STR's in the future. They could be STR friendly now but they can change that at a moments notice.

You can always ask the HOA directly about their regulations on short term rentals.

Originally posted by @John Underwood :

Isn't Time sharing similar to a STR? They are saying they only want the owner and not multiple different people coming and going.

I think if you started a STR they would fight you.

If your were to send them a new lease every few days or week I'm sure they will not be happy.

This is the language for time-sharing in the CCR:

The term "time sharing" as used herein includes any agreement, plan, program, or arrangement under which the right to use, occupy or possess the Unit, or any portion thereof, rotates among various Persons on a periodically recurring basis for value exchanged, whether monetary or like-kind use privileges, according to a fixed or floating interval or period of time for thirty (30) consecutive calendar days or less.

I think the verbage "periodically recurring" is key here. To my understanding, in order to be deemed a time share it needs to be a recurring stake in the property (i.e. - the time share owner gets access to it every November). In my understanding, this is not the same thing as a true STR as the occupants don't pay for recurring rights. Someone correct me if I'm wrong though.

Regarding leases, they are only required for any rental agreement 30 days or greater. Not totally applicable to STR, but could come into play if its rented on a medium term basis.

I understand your thinking. I am thinking from the side that might bite you. I would focus on "30 days or less"

Ask them for a written statement that it is ok to rent to different people for a weekend or even a week to protect yourself before investing.

What do you think their answer will be?

If they say yes you are good to go if they say no then you have saved yourself from a risky investment.




Hey @Greg S., the statement "rotates among various Persons on a periodically recurring basis" could mean different things. You are looking at it from the point of view of sharing the condo among several parties who have ownership interest.

It could also mean any persons, no matter who on a periodically recurring basis, use the place in exchange for $$$. That is exactly what a STR is. People using the condo on a recurring basis. Even if it is different people.

I would pass on this and hard. I guarantee you will be up to your neck in HOA issues in no time.

@John Underwood @Michael Baum you both make good points. I'm somewhat familiar with Time Shares and interpreted the language to expressly forbid that structure. I can see how they might use that language to extend to STRs. At the very least this would require a phone call to the HOA to confirm. For reference, these are excerpts from the CCR:

4.17 Leasing of Units. No Unit Owner may lease less than his entire Residential Dwelling and Unit. All leases shall: (i) be in writing; (ii) provide that the terms of the lease shall be subject in all respects to the provisions of the Condominium Documents, and any failure by the Lessee and the other Residents of the Unit pursuant to the Lease to comply with the terms of the Condominium Documents shall be a default under the lease; and (iii) be of a duration of not less than ninety (90) days. At least ten (10) days prior to the commencement date of the lease of his Unit, a Unit Owner shall provide the Association with the following information: (i) the commencement date and termination date of the lease and the names of each Lessee or other Resident who will be occupying the Unit during the term of the lease; (ii) the address and telephone number of the Unit Owner while the Lease is in effect. Any Unit Owner who leases his Unit must provide the Lessee with copies of this Declaration and the Rules. The Unit Owner shall be liable for any violation of this Declaration or the Rules caused by the Lessee, any other Resident of the Unit under the Lease, and their Invitees and family pets and, upon demand of the Association, shall immediately take all necessary actions to correct any such violations. 

4.18 Time Sharing. A Unit may not be divided or conveyed on a time increment basis (commonly referred to as "time sharing") or measurable chronological periods other than pursuant to a written lease as permitted under Section 4.17 of this Declaration. The term "time sharing" as used herein includes any agreement, plan, program, or arrangement under which the right to use, occupy or possess the Unit, or any portion thereof, rotates among various Persons on a periodically recurring basis for value exchanged, whether monetary or like-kind use privileges, according to a fixed or floating interval or period of time for thirty (30) consecutive calendar days or less.

It's pretty clear from those two excerpts from the CCRs that the HOA isn't going to be okay with STRs. I mean, in 4.17 they specifically prohibit any lease with a duration less than 90 days, and then in 4.18 they pretty much prohibit any agreement (whatever you call it) where the unit is conveyed on a time increment basis for 30 days or less.

I wouldn't even bother calling because anything they verbally tell you isn't going to matter if they try to hold you to what is in the CCRs after you buy the property.   And then you'd be stuck because to me that language is pretty clear.

Originally posted by @Kyle J. :

It's pretty clear from those two excerpts from the CCRs that the HOA isn't going to be okay with STRs. I mean, in 4.17 they specifically prohibit any lease with a duration less than 90 days, and then in 4.18 they pretty much prohibit any agreement (whatever you call it) where the unit is conveyed on a time increment basis for 30 days or less.

I wouldn't even bother calling because anything they verbally tell you isn't going to matter if they try to hold you to what is in the CCRs after you buy the property.   And then you'd be stuck because to me that language is pretty clear.

Does Airbnb/VRBO require a lease to be signed between the host and guest?  

Regarding time sharing, doesn't conveyance imply that ownership is transferred?   

@Greg S. It could not Possibly be any more clear:

...All leases must be in writing

.....No leases shall be for less than 90 days

What part of that do you not understand?  

Originally posted by @Greg S.:

Does Airbnb/VRBO require a lease to be signed between the host and guest?  

Regarding time sharing, doesn't conveyance imply that ownership is transferred?   

I don't read conveyance as transferring ownership in the context in which they used it.  Transferring possession maybe.  They even state "or arrangement under which the right to use, occupy or possess the unit..." 

Like I said, to me it's very clear what their intent is and, in my opinion, they did a more than adequate job covering all the basis. Enough that I know I would not be buying a condo in this HOA if my intent was to use as a STR. The last thing I would want to do is get tied up in litigation with an HOA board. No good can come from that.

Just my two cents.  

 

Originally posted by @Wayne Brooks :

@Greg S. It could not Possibly be any more clear:

...All leases must be in writing

.....No leases shall be for less than 90 days

What part of that do you not understand?  

 I understand it just fine, but you didn't answer the follow up question...  Is a lease signed when one rents their home on Airbnb?  I really don't know the answer as I haven't done it before.  I'm assuming a contract is executed, but is it a classified as a lease?  If not then does this restriction apply?

I'm not trying to argue that this CCR allows STRs, I'm just trying to interpret the language. It seems to me like boiler plate legalese that restricts time sharing, and maybe it wasn't tailored necessarily to restrict STRs. I do agree that its not worth fighting, but I would like to know what to look for in a CCR that DOES allow it. Something tells me I'll never find an HOA CCR that comes out and says explicitly "YES WE ALLOW STR".

@Greg S. It doesn’t matter if Airbnb creates a “lease”...the ccr says You must have a written lease if you rent your property out and you can not rent for less than 90 days.

You are right, no ccr  will say “str’s are allowed” but the absence of a prohibition for rentals shorter than a week, month, one year, etc means they are not prohibited.

I will make it simpler. Don't ever in any way shape or form try to do a short-term rental in an HOA.