I'm a dummy and need to know what I can do to fix it!

54 Replies

Ok. Here we go. I win the dummy award of the year but I need some help to see how I can mitigate my damage now that I'm in the bind I'm in.

1) Bought a townhome, fixed it up and put a renter in it. Small town. Small hoa (25 units). Duplex units. Just got a letter from the hoa attorney that they don't allow renters and I need to get mine out in a month "or else".

2) When I bought it, I literally just wasn't paying attention and never even asked for the CCR stuff. I've bought several before and never really heard of any hoa's in my areas restricting rentals so I just got lazy and lax and didn't do my due diligence.

But now I'm in the bind and I need to know what I can do to mitigate it?

Just got the letter and just contacted my attorney who won't be responding because its after 5pm.

So does anybody know what my risks/options are here? 
a) I don't think there's any way I could get the tenant out of the unit until the lease was up (11 mos from now) because of my stupidity.

b) The attorney sent the hoa page with the clause about owner occupants only but there's no reference to the penalty. Can they foreclose? If so, then if the foreclosure takes over a year but my tenant is out before then, would I be able to stop the foreclosure? Or sell the house before it was foreclosed on?

My thoughts/ideas so far - again without legal advice yet are:
1) See if I can tell the hoa I'm doing a lease option with the tenant and if that will work. I doubt they'd be ok with that and would probably fight it but threw that out there for the attorney to advise.

2) Tell the hoa what happened and explain that I can't get them out until the end of the lease and offer to pay a penalty (3 or 4k?) and see if that gets me through this? These are 140k to 150k units so 3k to 4k would be a nice number. 

3) If hoa refuses to budge at all and wants to stick it to me, I could have the tenants sign a quit claim deed to where I sign a quit claim to quit claim it from myself to myself and them. And then have both of us sign a quit claim to quit claim it back to just me.  That way, I could file the initial quit claim so the tenant is on the deed and therefore an owner occupant. And after the year was up, I could file the second quit claim deed and have them removed.

I'm sure there's some risk there. But I don't see that I'd have any choice. Something like that would be better than getting foreclosed on. And I just don't see any possible I could get the tenants out early. I could offer them 5k but they're older and I don't think they'll move. I think they'll be furious (as would I) and wouldn't do anything to help me out even if they made money doing it. I can't say I blame them either.  

But again, it is a one year lease, so would they be better off moving in 5 or 6 months and getting 5k or moving in 11 mos and getting nothing. 

Its entirely my fault for not being thorough on this deal. The worst part is I didn't even realize there was an HOA until the guy showed up at the house and gave my contractor his info. I called him and he said he wanted to know about the unpaid hoa fee. What really blows is that I told the guy I was a landlord and had several houses in beecher and that I already had a tenant at that place. The guy never said a word (he is the hoa president). Was really nice too.

I don't know if he just missed it or what. I don't think he was the type to try to create a situation. But had he said word one to me about no renters, I could have just flipped this thing. I even asked him to email me to restrictions but he said he had to mail them to me. I don't think I ever got them. If I did, I never saw em.

But I need some BP feedback here so I'll be able to sleep at least a little. What can the HOA due worst case. Are there any other suggestions I should consider here? Can I officially be nominated for the dummy of the year on this one? I hate to make light of it, but this one has me pretty unnerved. I've seen just about anything and there is some fear here that I don't normally feel.

Gosh you are in a pickle. First does the tenant want to buy it? if so maybe convert to a land contract? But do talk to your HOA directly ask for solutions at this point.

@Mike H. Attend the next Board Meeting or Meet with the Property Manager and find out how you can resolve this issue. 

I do like @Wendy Patton suggestion of tenant purchase... Maybe you can give them a good deal, just to avoid the legal pains from the HOA.

I also just thought of a few more things:   1)  Did you buy through title company?  Did you get a copy of the bylaws you signed off on?  2)  Did you work with a Realtor who should have also given you these copies and maybe should have known there were these restrictions?    

I would never suggest to blame anyone for this however there are responsibilities that both of these parties may have if you are unaware of this.   

I am not a lawyer and this is not legal advice.

You say you could have flipped.

I think you could still fall back to that fast as possible. You could meet with the tenant and possibly work out a deal where they leave in short(er) order. You would sit down with the tenant and try to work something out.

It seems like you know you can afford up to 3-4k to resolve this - find a way to have them move out with some money in their pocket.

Why pay the association? The association could take the money and your pissed off tenant still has to find a place in like 9 months and wrecks the place and stops paying you and the tenants family and friends get involved & does not move out in time and the market changes for worse and the association is fining you for stupid stuff etc. And big thing too is your money is tied up on this mistake and the deal of a lifetime happens rolls by for you and your not focused/funds tied up etc.

I am not a lawyer and this is not legal advice.

In theory - could you quit claim it to an LLC with tenants having a 1% ownership in the company with a $1 buy out to coincide with the end of thier lease?

Not sure this would work. It would give them legal ownership interest. 

I personally would not go the quit claim route. The intent is deception and not legally appropriate in my personal opinion.

I would meet with the board and inform them that I will be removing the tenant asap. I would buy  out the tenant, assist as much as possible in locating a new home for them as well as assist with their physical move.

The mistake would be entirely my responsibility and I would do what ever is necessary to comply with the HOA.

If the tenants refuse to move I would file a eviction and hope it will be motivation enough to get them to reconsider moving. A eviction may not be successful but it may appease the HOA knowing that I have filed. Obviously I would expect to be facing fines but I would do everything possible to appease the board without any form of deception.

What about meeting w/ the board and asking for a exemption that will expire on the same day as your lease? Reason being, you're elderly tenants will have difficulty relocating and you want to give them enough time to prepare. Toss in a compromise of giving the board a copy of a non renew notice now, probably a good idea to have a letter or in person discussion from tenants backing up your claim...

Is it possible to do a tenancy in common with an expiration date? I wouldnt offer the HOA anything to start. Ask them what the penalty is. If it is a montly fine it may be easier and cheaper just to pay it. If you pay the fine and promise to have the renters out at the end of the lease what are they really going to do? If they want to be sticklers about it go the the press. "HOA forces landlord to evect elderly couple"

@Mike H. PM me the neighborhood details.  I can look to see if there are any other rental situations in the neighborhood that could possible give you some leverage.

@Mike H. , I'm as surprised as you are that there is an HOA anywhere in Beecher.

Is there any chance to get on the board? I know you're a handy guy, could you barter with the board for the lease? Are there any others for sale? Do any other owners want to rent? 

Following to see what happens, please keep us posted.

@Wendy Patton

I did buy with title and realtor. There were no HOA docs in the closing docs at all. And yea, I don't mind throwing people under the bus when it calls for it, but ultimately this was my job to think of and catch and I just flubbed it. Although it does make me question what I'm paying the realtor for exactly. I'm tempted to get my realtor's license as its something I've been looking at on and off for a year or two. The only reason I haven't is because I believe in relationships. But at some point, what am I getting here if not to have someone help me avoid a mistake like this? If I'd have just had the hoa docs at the closing, I would have definitely checked through them and found this and would have just looked at this as a flip and not had a problem at all here.

@Patrick Squires

I'm ok even if I lose a little money on the house. Good thing is its fairly tenant proof. Hard surface floors throughout so some drywall repairs and a fresh paint with a few misc repairs. They're two older sisters (late 50's) and then their daughter and her kids. I don't think they'd do that but even if they did I can handle that. What I can't handle is the hoa foreclosing on me. Or charging me a 20k fine or something. Thats my real concern. If I can get them to agree to 3k or 4k and let me work out the year of the lease, its a win for me given the situation I put myself in. :-)

@Lauren B.

I was thinking something along the same lines. Do I really need to give them ownership though of the LLC? I'm thinking I can just quit claim to myself and one of them and then also have them sign/notarize a second quit claim deed quit claiming it back to just me personally and I would keep that.

Then when the lease ended, I could record the second one and they'd have no interest. As long as I didn't lose the second quit claim deed document or something I'm thinking that may work.

The other thing is that I thought maybe I could use that scenario as leverage to get the hoa to take the 3k penalty and let me just finish out the lease and then get them out. Ultimately, thats really all I want to try to do. If they don't agree to my offer, then I could tell them thats what I'm doing and I just don't think they could stop it. The tenant would be on the deed which would legally make them an owner occupant. They'd have an interest.

@Thomas S.

Thats the problem. I'm going to have no grounds for an eviction. None. I can't evict someone here in the US because I rented a unit I wasn't supposed to. The judge will rule in favor of the tenant. I can offer money to the tenant to get them out sooner and that is definitely going to be something I'll be proposing to the tenant. But I can't evict the tenant. I'd literally have no grounds unless they stopped paying rent. And I just don't think they'll do it in time.

@Matt K.

I like that idea. I think that added copy of notice would be good.

@Mindy Jensen

Handy as in creative? I'm definitely not handy as in construction so I'm guessing thats where you were going. :-) 

But yea, I think this is definitely going to call for some really unique negotiating. The first thing I really need to find out is what the penalties are. And if there's anything to the fact that I never signed or saw any of the HOA docs. And wasn't given the docs even after I asked the president for them. I asked him if they were online or he could email me. Said no. He'd mail them. Not sure if they ever came or not. But that would have been well after I owned it.

I really want to throw him under the bus for not simply telling me I couldn't rent it out given we were talking about me being a landlord and that I was renting that house out. But I don't want to do that right now because he is probably going to be the one that makes the call as to whether they accept my offer or not.

I really think because this is such a small town and because the guy seemed like a decent guy, my best route is to just be honest as to how this happened, tell them that I just was not aware this hoa restricted it, and ask them for mercy......

Thanks again for all the feedback. I didn't get much sleep last night. But luckily was able to crash this morning pretty good an am feeling better. Whats the worst that can happen? They foreclose on me and I won't be able to do any more rentals? I'll still have what I have at least so its not that bad.  But man, I do feel like a dummy that I'm even in this situation to begin with. Its like hitting yourself in the head with a hammer. I've got enough I'm dealing with but when I'm the one adding problems for myself, then maybe its time to take a break. :-)

I would meet with the HOA and your attorney to see what penalties are and what your options are moving forward. If you cant rent this out past the end of the year anyway, the goal should be to unload it as fast as possible to free up your money. I believe your best option would be to meet with the tenants and see if you can return their deposit, hire a moving company for them for their next place, and give them an additional $1500. This would still cost you less than 3-4k in fees and you could put the house on the market much sooner and move on from this deal.

Here is what I would do:

- Give Notice to vacate -  Send the Tenant to look for a new place AND pay their deposit in another property.

- List it to sell

- Explain the actual process to HOA AND ask for a few extra days

- Fail Forward - Let this be a lesson learned.

@Austin Chambers   That option is definitely one I'm going to try. I just know these tenants aren't going to go for that. They're going to ride out the year lease. But if I can get lucky, maybe they'd actually agree to something like that, I think the problem is much less an issue.

@Val Garrow   How do I give notice to vacate? On what grounds? The tenant has a lease for a year. As long as they pay and don't do anything outside of the norm, I don't see what grounds I would have to give them notice.  

@Mike H. , I'm going to tag @Linda Weygant here because she regularly deals with HOAs. 

Could notice to vacate be based on an illegal lease? Illegal sounds so bad, not-allowed lease? Does your lease state the tenant must comply with any HOA regulations? Could that be a way out of the lease?

There are all kinds of rules and filing requirements for associations in IL, I would not get too worked up about all this until your attorney has reviewed completely and advised.

@Mike H. Have you read the actual condo docs? While the hoa might believe there is a "no-renting" policy, its not always that clear-cut. I've frequently seen a one-time exception that if an owner has a hardship, they can rent it out for one year. Sometimes you have to have lived there for x amount of time, others don't mention anything about that. Just be sure to read the actual language if you haven't already.

Otherwise, its only 25 owners. I'd consider going door to door to meet with each, explain your situation, and ask for their support. If that doesn't work, see if 2-3 months rent and help moving will be enough to motivate your tenants to go.

If you give them interest in the property directly, what’s  to stop the federal government from attaching a tax lien to it? Any other kinds of personal liens? They could sell their interest before you file your deed. Too many things could go wrong with that scenario.

I am not entirely certain the OP is even talking about a condo association, as he said there were no HOA docs at closing? Even with a non condo HOA, would expect there to be a paid assessment letter at the closing at a minimum.

You had me going to google for the information in your state.  I hope you have a contract with your tenant. AND here is the law in your state.

*The grounds if you feel you need to explain yourself to them :  You own the property and want them out, secondly they have 60 days to vacate, you can help them get out and get a new place sooner and get you out of your troubles

-you can terminate it ANY TIME by your State Law, be very articulate in this situation, UNLESS you are taking the tenants side

-205.  Notice to terminate tenancy from year to year . Except as provided in Section 9

-206 of this Act, in all cases of tenancy from year to year, 60 days' notice, in writing, shall be sufficient to terminate the tenancy at the end of the year.  The notice may be given at any time within 4 months preceding the last 60 days of

the year


This is actually easy to solve.




@Val Garrow  How do I give notice to vacate? On what grounds? The tenant has a lease for a year. As long as they pay and don't do anything outside of the norm, I don't see what grounds I would have to give them notice.  

*putting on my HOA president hat*

Yeah, you're in a pickle and the outcome of this completely depends on who you've got on the board.  If you've got some regular people, things could go one way.  If you've got some self-important folks who are puffed up with their own power and ego, they'll likely go another.

Here's how I would approach this:

1.  Don't have your lawyer contact them.  Yet.

2.  Contact the property manager or board president.  Explain what happened.  Eat a lot of crow.  Call yourself an idiot if you want and use a lot of "aww shucks" and "yeah, I know, I know.... I should have done all of this stuff and I didn't."  Then apologize profusely.

3.  Explain the scenario with the lease.  Explain about your elderly tenants.  Talk about what great people they are.  Let them know that you won't renew the lease, but talk about the illegality of just putting these people out of the street.  Talk about lease breeches, etc and how you are caught between a rock and a hard place.

4.  Offer to sign some kind of commitment that you won't renew the lease.  Put it in writing.  Get it signed and notarized.  (Boards love this stuff).  The more you put in writing and make it look like you'll follow through, the better.

5.  Offer to finance or otherwise make possible some repair or improvement they want to do.  Offer to renovate the signage at the front of the property, if it's looking a bit tired or needs painting.  Or plant flowers at the entrance.  Or some trees.  (This probably wouldn't work with me, but it would for some people).   Look at the last 6-12 months of meeting minutes to see if they've tabled repairs or improvements due to lack of funds.  The meeting minutes are sometimes a good source of information to figure out the types of personalities you have on the board before you meet them.

You are then very likely to have to go to the next board meeting.  At that board meeting, you'll have to do the above all over again for the entire board.  The board will then render their decision.  They could agree that you're a buffoon and agree to what you propose.  BUT - they will demand that you then sell or otherwise do whatever is necessary to stop renting the house.  I see no way that they'll grant you any kind of permanent waiver.  This will be temporary only.

OR

They will scowl and frown and stick to their guns.  If this happens, then what happens next will be disclosed in your governing documents, but here is the likely scenario.

1.  You'll be issued fines.  The amount of the fine will either be in your covenants, your rules and regulations or, occasionally, the by-laws.  If you can't pull that out, then it may be in a Policy/Procedure document which you will have to make a special request for.

2.  You'll be issued very stern warning letters.  They'll get scarier as they go.  Eventually you'll get a cease and desist letter.

3.  After the cease and desist letter, you'll be served with court documents which will likely contain a Motion to Compel.  Once this happens, you can either comply with their demands and then request a dismissal of the case, or you can go to court.  Once you're in court, the judge will likely then give you a timeline by when you must comply.  If you don't comply, you'll be held in contempt of court.

At no time will the HOA be in a position to foreclose on the house or take your property (probably - doublecheck with your attorney, but here in Colorado, the HOA would not have that ability). The HOA can only foreclose if you're not paying dues or fines - we can't foreclose if the issue is non-monetary covenant violations. So make sure all dues and fines are always paid.

It's more than likely that all the letters, fines and court process will take about 11 months (ish) to complete, so it could be that working through it this way will just run out the clock.

Good luck.

@Linda Weygant   

Thanks for the feedback. Maybe I can have you call him for me first.... :-)

I was going to call him and explain but figured I better let my attorney weigh in first to make sure I'm not saying something to the president that "can be used against me in a court of law". :-)

I do feel better about the likelihood of them not being able to foreclose. Unfortunately, I don' t have a copy of the guidelines yet. He said he would mail them but if he did, I don't remember seeing them and can't find anything.  The only thing I have right now is a snippet of the guidelines from the hoa attorney.

So I'm going to call them now and get a full set...... My attorney said he was busy and wouldn't be able to look at this until tomorrow or monday....

@Mike H. unfortunately for the HOA, they likely don't have enough money to fight you in court. I would call their bluff. Personally, I might even just ignore them until an actual legal summons. I just don't see a small HOA being able to fight this. Are these 24 people going to want their dues going to a drawn out court case?

Nobody provided you the HOA rules, not the seller, not the realtor and not the closing company. In my city if there is an HOA, it is generally filed with the county, so you become aware when purchasing. Look back through closing paperwork and see if there is any mention of it. It should be attached to the property as a condition. If the HOA is not mentioned anywhere, then it may not have been properly setup. Maybe they formed as a club. The point is that if the seller didn't disclose it and the county records don't show it, how can you be bound to it?

As far as foreclosure, I am pretty sure they can only attach liens and foreclose if you owe them money. It also needs to be above certain amount of money in most states. The question is what penalties are outlined in their bylaws? If it says you can't do something, but with no penalties for doing it, what remedy do they expect to get in court? If you were drawn into court, explain to the judge that you have a lease with the tenant and ask the judge to nullify the lease. In other words, the judge has two choices. Allow you to fulfill the lease or allow you to evict the tenant. Let's say somehow the HOA could foreclose on the property, they would still need to evict the tenant, but your lease transfers to them. Still I don't see how they could foreclose on your property, but it is a good point to bring up to the HOA. Even if you sell the property, the lease survives the sale. They are stuck with this tenant for one year like it or not.

I purchased a property and was never notified of an HOA. It was a single family home and it was a $100 a year fee to maintain a private park. I found out later that some home owners had not paid dues for fifteen years or more. They just kept sending them letters and finally when it hit enough money, they filed a property lien. Keep in mind these HOA are volunteer positions and they are usually not well funded. Their bark is usually bigger than their bite. I just don't see them having much power here.

Originally posted by @Linda Weygant :

*putting on my HOA president hat*

Yeah, you're in a pickle and the outcome of this completely depends on who you've got on the board.  If you've got some regular people, things could go one way.  If you've got some self-important folks who are puffed up with their own power and ego, they'll likely go another.

Here's how I would approach this:

1.  Don't have your lawyer contact them.  Yet.

2.  Contact the property manager or board president.  Explain what happened.  Eat a lot of crow.  Call yourself an idiot if you want and use a lot of "aww shucks" and "yeah, I know, I know.... I should have done all of this stuff and I didn't."  Then apologize profusely.

3.  Explain the scenario with the lease.  Explain about your elderly tenants.  Talk about what great people they are.  Let them know that you won't renew the lease, but talk about the illegality of just putting these people out of the street.  Talk about lease breeches, etc and how you are caught between a rock and a hard place.

4.  Offer to sign some kind of commitment that you won't renew the lease.  Put it in writing.  Get it signed and notarized.  (Boards love this stuff).  The more you put in writing and make it look like you'll follow through, the better.

5.  Offer to finance or otherwise make possible some repair or improvement they want to do.  Offer to renovate the signage at the front of the property, if it's looking a bit tired or needs painting.  Or plant flowers at the entrance.  Or some trees.  (This probably wouldn't work with me, but it would for some people).   Look at the last 6-12 months of meeting minutes to see if they've tabled repairs or improvements due to lack of funds.  The meeting minutes are sometimes a good source of information to figure out the types of personalities you have on the board before you meet them.

You are then very likely to have to go to the next board meeting.  At that board meeting, you'll have to do the above all over again for the entire board.  The board will then render their decision.  They could agree that you're a buffoon and agree to what you propose.  BUT - they will demand that you then sell or otherwise do whatever is necessary to stop renting the house.  I see no way that they'll grant you any kind of permanent waiver.  This will be temporary only.

OR

They will scowl and frown and stick to their guns.  If this happens, then what happens next will be disclosed in your governing documents, but here is the likely scenario.

1.  You'll be issued fines.  The amount of the fine will either be in your covenants, your rules and regulations or, occasionally, the by-laws.  If you can't pull that out, then it may be in a Policy/Procedure document which you will have to make a special request for.

2.  You'll be issued very stern warning letters.  They'll get scarier as they go.  Eventually you'll get a cease and desist letter.

3.  After the cease and desist letter, you'll be served with court documents which will likely contain a Motion to Compel.  Once this happens, you can either comply with their demands and then request a dismissal of the case, or you can go to court.  Once you're in court, the judge will likely then give you a timeline by when you must comply.  If you don't comply, you'll be held in contempt of court.

At no time will the HOA be in a position to foreclose on the house or take your property (probably - doublecheck with your attorney, but here in Colorado, the HOA would not have that ability). The HOA can only foreclose if you're not paying dues or fines - we can't foreclose if the issue is non-monetary covenant violations. So make sure all dues and fines are always paid.

It's more than likely that all the letters, fines and court process will take about 11 months (ish) to complete, so it could be that working through it this way will just run out the clock.

Good luck.

Do you think the judge would issue a motion for him to comply, given a lease with the tenant? Basically, the judge would be directing him to illegally evict his tenant. I could see the judge granting permission for the lease to be fulfilled. By the time it goes to court, it would be within a couple months of the lease ending anyways.

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