Advice Needed: New Investor problem with HOA

Philadelphia, Pennsylvania
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Advice Needed: New Investor problem with HOA

Brittany Alling
Member since 2023 · 2 posts · 1 vote

Hi everyone!  
I need some advice! Recently I bought a townhouse- I am living in it for a year and then going to rent it out. This townhouse is in a HOA which I understand could get tricky. But when I looked at the HOA agreement nothing stated about not being able to rent the property out. The previous owner actually rented this property for 15 years!! I just got an email today stating that on September 1st ( my settlement date was September 22nd) there was a letter sent to the previous homeowner that stated the HOA wants everyone to vote on capping the rentals to only 22 properties- currently there are 19 properties already renting so there would only be 3 rentals left in the neighborhood. I don't know what to do because this was never disclosed to me when I received the HOA documents before settlement. I never would have considered this property if I knew this was the case.

Do I have a right to go back to the seller to understand why this was never disclosed? Also, does anyone have experience with HOA's and know if I can try to "reserve" one of the 3 spots left?


I appreciate all the advice I can get! 

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Greg M.
Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
2y

Whether or not the seller should have disclosed this is debatable. Buyers should be aware that HOAs can change the rules at any time. 

I would suggest contacting the Board and requesting they add a grandfather clause to the rule. Basically, anyone who currently owns is exempt from the cap. When the unit gets sold, it now falls under the cap rule. Smart HOAs will do this as it greatly lessens the likelihood that an owner would sue the HOA.

If they refuse, have an attorney send a letter threatening to sue the HOA, Board, & Management Company as their actins diminished the value of your investment. No HOA wants a fight and they may bend just to shut you up.

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  • Greg M.
    Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
    2y

    Whether or not the seller should have disclosed this is debatable. Buyers should be aware that HOAs can change the rules at any time. 

    I would suggest contacting the Board and requesting they add a grandfather clause to the rule. Basically, anyone who currently owns is exempt from the cap. When the unit gets sold, it now falls under the cap rule. Smart HOAs will do this as it greatly lessens the likelihood that an owner would sue the HOA.

    If they refuse, have an attorney send a letter threatening to sue the HOA, Board, & Management Company as their actins diminished the value of your investment. No HOA wants a fight and they may bend just to shut you up.

    2Reply
  • Benjamin AakerPro Member
    Rental Property Investor · Brandon, SD · Member since 2015 · 1k+ posts · 1k+ votes
    2y

    Sounds like the HOA hasn't changed the rules yet - they are just calling for a vote. As an owner now, you are entitled to a vote and to have your voice heard at a meeting. You should do this first. I'm not an attorney but I think you would have a hard time getting any satisfaction from the seller about a letter calling for a vote not being disclosed to you (unless you had something regarding that in the purchase and sale agreement, which is unlikely).

    Your particular condo has enjoyed the income of being a rental for a long time. The HOA will find it difficult to enforce a new rule that harms your unit financially, simply because other condo owners don't like rentals.

    Should this new rule pass, talk to the HOA about getting your unit to be allowed and get it in writing. This is likely to be your most successful option. You can talk to an attorney right now, but save a lawsuit for your last option.

    2Reply
  • Brad Ainslie
    Member since 2023 · 6 posts · 5 votes
    2y

    I would advise to look at the association governing documents.  How many owners must vote in favor?  If there are already 19 rentals you can bet they either won’t show up to vote or will vote no to make an amendment.   Depending on the size of community, it may be wishful thinking that they can even reach the threshold needed to make the change.  

    In the community where I live making a change would be very difficult as we do not get a quorum of members to show up to annual meetings.  

    Also, what is the reserves of the HOA look like? Do they have lots of cash on hand for a legal battle over changing the documents?


    I would get legal counsel on the documents and the amendment process.   

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    2y

    Well, one thing to consider is if the language of the new rule would your unit as one of the 19 rentals….does the “exemption” apply to the address Or to the specific owner name.

    1Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    2y

    I agree with the others-see what constitutes a majority to change the bylaws and hope that the other owners who rent their units vote against the change.  Make sure you show up to do the same.  I would also find out if existing owners can be grandfathered in.

    1Reply
  • Ronald RohdePro Member
    Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
    2y

    Were you given the HOA documents and deed restrictions prior to closing? Did you waive objections to terminate?

    Do you have a lender?

    1Reply
  • Richard Elvin
    Investor · Cleveland, TN · Member since 2016 · 279 posts · 187 votes
    2y

    I would consider reaching out to the other LL's and see if they are either going to the HOA meeting or if they would allow you to vote by proxy on this issue.

    1Reply
  • David M.
    Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
    2y

    @Brittany Alling

    To your question, I don't think you can really go back to the seller asking about disclosure...  Not sure how it works in PA, but I believe real estate purchases the onus is on the buyer to do their homework.  For example, otherwise why else would buyers need to do inspections?  How would the seller known you wanted to rent out the unit?  Was he supposed to turn over every correspondence from the association?  

    Also, as you have described it, this is a proposed cap that hasn't even passed, yet.  So, its as even a bylaw to be disclosed.

    As mentioned by others, don't get too excited about something that happened, yet.  Do some homework.  See if it happens, and it appears there is still "room" for you to be one of the landlords.

    Good luck.

    1Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y

    @Brittany Alling

    Going back to the seller will be very challenging, because nothing has changed. You Should make sure to talk to the board to get an understanding and then reach out to other people living to see if they can vote against it. This is very common in a lot of communities, where there are now setting cap rates on rentals, especially in a down market. Because investment condos when prices fall are one of ,the first types of assets to have high delinquency rates, which then causes HOA fees to not be collected, which causes overall distress on the HOA

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    1Reply
  • Brittany Alling
    OP
    Member since 2023 · 2 posts · 1 vote
    2y

    Thank you everyone for all of your advice! It has been super helpful. 
    I spoke with the HOA management and they mentioned it might be awhile for this rule to be even approved. They need a certain amount of votes and they barely received half. While I was on the phone with them I asked if there was an approval process for renters and thankfully there isn't! I just need to send over a lease and the name of the people leasing our property. There are different ways I can go about this if this rule does go through. Overall, it seems like it won't be too big of an issue to get one of the spots.

    Again, I appreciate all of the advice!! 

    0Reply
  • Gustavo Delgado
    Houston, TX · Member since 2015 · 261 posts · 170 votes
    2y

    Well the HOA is giving notice that they will take a vote. So for now its not set in stone. Read the bylaws to understand how many owners need to approve this so it can be added to the hoa rules.

    0Reply
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