HOA Trying to create leasing restrictions.

4 Replies

Hey BP,

So one of the HOA's that I own a rental in is trying to pass an amendment limiting rentals to 20% of the homes in the neighborhood and all tenants and leases have to be approved by the board of directors of the HOA.

From all the research I have done on BP it seems like if this passes I am SOL, and probably will have to sell. is this a correct understanding?

Also, the vote is next week and I plan on going and helping to vote it down, but I wanted to reach out and see if anyone had any ideas/resources to take to the meeting to help fight this? I feel like there was a BP podcast where they mentioned that rental owners paid their HOA's dues more than home owners and maintain their properties better than home owners. Is there any data or resource to back this up? Any ideas or strategies y'all have seen work in the past?

Thanks,

Nick Leamon

"I am SOL, and probably will have to sell. is this a correct understanding?"

Yes and No...it depends on whether your present tenant is grandfathered and whether the property has reached the 20% threshold. Most likely in the future you will need to sell if not immediately.

@Nick Leamon first of all make sure this "vote" has been and is being handled with strict adherence to the covenants. Was proper notice given? Does it require a quorum and how is that determined? So many HOAs are casual about this sort of thing... Prior to a vote there should be a discussion where you are both allowed to make a statement and ask questions. Ask them: how many rentals are there currently in the HOA? Can you cite some specific problems related to rentals in general? Or are there tenant issues not being handled by certain landlord / owners? Are these landlord / owners being properly notified and, if necessary, fined or otherwise penalized for their infractions? What is the current level of unpaid assessments and how many of those are rentals? You said the board and HOA (manager?) have to review leases? Other than determining the length of the lease what other things are they "reviewing"? What is the timeline for this to occur? They need to be careful that they aren't opening themselves up for Fair Housing violations... are they really capable of taking on this responsibility? I managed an upscale HOA for 6 years. We didn't have a limit on rentals, we did require that we have tenant names and phone numbers. We asked for a copy of the lease only to determine that it wasn't for less than 6 months. If I had a problem with a tenant I only dealt with the owner - not tenants, not property management companies - especially if there was a potential for a fine.

Is there a rental cap already in place and are they trying to decrease it? 

If there was no rental cap and if they are trying to make an amendment what % votes are needed to pass it ? Usually it is 67% but some communities might have it at 51% of the owners. This % is NOT the number of people who turn up for the meeting but % of the entire community (including proxies). Does your HOA usually have a big turnout for the meetings ?

Does the HOA have 100% accurate data on what homes are currently rented out ?

As part of your side of the story, try to show national data where rentals have increased over the past 20 years compared to ownership. If the rental cap did not exist until now then you have every right to ask to be grandfatherd or being exempt from this cap until you sell your home.

Talk to other landlords or like minded owners who can support you in voting this down. For a vote to be valid, the owner must have their account in good standing with no balance. Check for other nitty gritty details in the Covenants that may make a vote invalid.

Even if the Board passes it, it could take a year or two to fully comply with the 20% cap as the Board cannot remove the existing tenants until their current leases are over. You could try to extend the current lease with your tenant before the vote happens. 

Please update this thread on what happens next week. If they do pass the vote then you could try other options of renting it out indirectly.

Bottom line is you can jump through hoops to insure your HOA follows the proper procedure so they can legally enact the new regulations or you can move on when your tenants lease is up.

If the HOA wants to restrict rentals they will restrict rentals. You can fight and lose or adjust your investment plans. Restricting rentals may increase the value of your condo when you sell.

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