HOA voting to ban MTR
Member since 2020 · 7 posts · 5 votes
HOA voting to ban MTR
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Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
2yQuote from @Kevin Ramos:
Quote from @Steve K.:
Not uncommon at all, nor is having HOA's that don't allow units to be rented period. A big factor in these restrictions is that FHA guidelines for condos specify that a certain percentage of the units must be "owner occupied" to qualify for FHA financing. However one thing you might bring up which works in your favor is that the FHA guidelines actually consider "vacation condos" (2nd homes that are rented when the owner isn't there) as "owner occupied", but not LTRs. 2 of my clients with furnished luxury MTRs that were getting $10k/month in rent recently had their HOAs restrict rental terms (one to a 12 month minimum, the other banned any new rentals but grandfathered in several existing ones which board members owned, but not my clients). However because Colorado passed a law a few years ago that greatly reduced the power of HOA's (for example they cannot foreclose due to unpaid dues or fines anymore, and the maximum fine for non health and safety violations is $500), they both decided to simply continue renting their units anyway, and just pay the $500 then thumb their noses at the HOA board. If I ever own in an HOA again, which I probably will not, I'll make sure to be on the board (or even President of the board), to stay ahead of issues like this. OP, maybe look into getting on the board? Not a fun volunteer job to have, but would give you more control over your property at least. I'd also look into what the maximum fines/ consequences are. Good luck!
Hah, board members grandfathering in their own units is unsettling.
For a bit of background, my property is a SFH, and the HOA encompasses a pretty large neighborhood in suburbs. I suspect a lot of the residents that participate in the HOA are older folks that would rather we had no renters at all. I may not have a good chance of getting voted in.
In the next few months I do need to find out how much of the actually neighborhood shares this mindset though.
The crazy thing is the reason behind HB22-1137. That bill was signed into law in CO in 2022 because of predatory and corrupt actions from a few HOA's. Leading up to HB22-1137, there were hundreds of cases here where homes were actually foreclosed on by HOAs and their attorneys over what started as fines of less than $200. One attorney filed over 580 foreclosure actions on behalf of HOAs. Some of these homeowners weren't even notified of the original fine until the attorneys had already racked up significant legal fees and added 21% interest. HOAs and their attorneys had all the power, and knew it, and used that power to bully homeowners into compliance while simultaneously gouging them horribly with exorbitant fines and fees, then foreclosed on the property if they refused to pay up. The law was entirely in favor of the HOAs and these corrupt attorneys.
Thankfully HB22-1137 created new requirements for notifying homeowners of violations before issuing fines, set a maximum interest rate of 8% on past due fees and fines, limited the ability of HOAs to foreclose, and set the maximum fine amount for non public health and safety violations to $500. Opponents of the bill say it tips the balance of power too much in favor of homeowners, and they may have a point as it takes a lot of the teeth away from HOA laws, with the max fine being only $500. But at least it prevents the predatory and abusive behavior that was caused by the basically unlimited power that HOAs had here before.
Not sure if other states have similar HOA laws or not, this is just in CO. I thought it would be interesting to share this story here in order to demonstrate just how problematic owning a property (especially an investment property) in the wrong HOA can be.
Watch out for those sketchy HOAs out there people! And know the laws in your state regarding how much power an HOA can have over your property.
28 Replies
- 2yZachary DealPro MemberLender · Member since 2023 · 464 posts · 425 votes
Unfortunately yes - HOAs have a lot of control over rental restrictions and can change them at any time so it's important to always have a backup plan and try to good relationship with board members if you're using your unit as a rental.
Wish you luck in trying to sway the vote! Maybe they will agree to a limit on the number of units that can operate?
- Attorney · Columbus, OH · Member since 2023 · 193 posts · 145 votes2y
Quote from @Kevin Ramos:
Hi everyone. First post here.
I've been house hacking on and off for the past 3 years and was ready to make the move to turn my first property into an MTR. Bought half the furniture and then boom, find out my HOA wants to ban rentals under 6 months. Voting ends in 2 months. They need 67% of homeowners to agree.
I have no idea what their thought process is. They say STRs are dangerous and increase crime, which doesn't really explain why you wouldn't want someone to rent for 5 months. They see MTR and STR as the same
Anyway, unless anyone has any wisdom they want to share, this is mostly a cautionary tale. Remember HOA's exist and can be quite the annoyance!
Sounds like you should vote against this.
- Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes2y
Can you prepare some research to fight this? Maybe statistics of crime rates in STR's and MTR's in your area? The best way to fight fear is with facts. Good luck!
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes2y
Quote from @Kevin Ramos:
Hi everyone. First post here.
I've been house hacking on and off for the past 3 years and was ready to make the move to turn my first property into an MTR. Bought half the furniture and then boom, find out my HOA wants to ban rentals under 6 months. Voting ends in 2 months. They need 67% of homeowners to agree.
I have no idea what their thought process is. They say STRs are dangerous and increase crime, which doesn't really explain why you wouldn't want someone to rent for 5 months. They see MTR and STR as the same
Anyway, unless anyone has any wisdom they want to share, this is mostly a cautionary tale. Remember HOA's exist and can be quite the annoyance!
Not uncommon. You have to remember most board members live in the community and want to create a community of homeowners not a community of renters.
While I am opposed in most instances to banning rentals, I also can see both viewpoints on this topic and its really up to those that manage the community and live in the community to decide what they want and do not want, and if a super majority of people are for something then thats how it goes.
7e investments53 Reviews - Member since 2020 · 7 posts · 5 votes2y
Quote from @Chris Seveney:
Quote from @Kevin Ramos:
Hi everyone. First post here.
I've been house hacking on and off for the past 3 years and was ready to make the move to turn my first property into an MTR. Bought half the furniture and then boom, find out my HOA wants to ban rentals under 6 months. Voting ends in 2 months. They need 67% of homeowners to agree.
I have no idea what their thought process is. They say STRs are dangerous and increase crime, which doesn't really explain why you wouldn't want someone to rent for 5 months. They see MTR and STR as the same
Anyway, unless anyone has any wisdom they want to share, this is mostly a cautionary tale. Remember HOA's exist and can be quite the annoyance!
Not uncommon. You have to remember most board members live in the community and want to create a community of homeowners not a community of renters.
While I am opposed in most instances to banning rentals, I also can see both viewpoints on this topic and its really up to those that manage the community and live in the community to decide what they want and do not want, and if a super majority of people are for something then thats how it goes.
Absolutely. Whatever the majority decides is how it'll go. And I also understand the viewpoint of wanting the community to be comprised of mostly homeowners or long term renters. I disagree, to an extent of course, being someone that does not like it when someone keeps tabs on me, nor do I enjoy keeping tabs on my neighbors, but there are some that do enjoy that and believe it creates a better community.
- Member since 2020 · 7 posts · 5 votes2y
Quote from @Nicole Heasley Beitenman:
Can you prepare some research to fight this? Maybe statistics of crime rates in STR's and MTR's in your area? The best way to fight fear is with facts. Good luck!
I agree! I'm working on presenting the differences between STR and MTR, but I am having trouble finding crime statistics on MTR in my area. Thanks!
- 2yColleen F.Pro MemberInvestor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
@Kevin Ramos the other thing you might want to play to is the type of people who do rent MTR in your area. Point out what the demographic is compared to STR. You are talking about people relocating to the area for work or in the area temporarily for work not vacationers. Your goal would be to talk about how these people are more like them and not a disruption to the community. Examples of health care workers etc if that is your demographic. I am assuming of course that you aren't in a snowbird area but even then you could point out that crime goes down with age.
- Bismarck, ND · Member since 2017 · 56 posts · 201 votes2y
That is pretty aggressive. I've never heard of a 6 month limit! Most I've seen is 90 days, and I thought that was aggressive...might be time to look at a new market for MTRs!
- 2yColleen F.Pro MemberInvestor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
@Kevin Ramos not that uncommon. I wish HOAs would realize that month to month leases allow termination of troublesome tenants more quickly than annual leases. Not sure if the duration in your bylaws can just be overridden, you need to read the HOA docs.
- Investor · Indianapolis, IN · Member since 2015 · 126 posts · 141 votes2y
In my experience a requirement of 67% voting in favor of a change is a tough hurdle to get over. The amount of apathy and inactivity by residents is super high. I’m assuming that it is 67% of eligible voters, not 67% of who decides to vote. But either way, it is usually hard to get the required votes. I have many properties in hoa’s and many of them have recently talked about wanting to limit rentals. (Usually complaining about the hedge funds who are unreachable to correct issues). None of them have been able to get close to the required votes.
- 2yDavid HolcombeBusiness MemberReal Estate Agent · Atlanta, GA · Member since 2016 · 35 posts · 25 votes
I'm not endorsing this idea but I've seen people get around this by signing a "6 month lease" with every tenant but then giving them the right to terminate at no cost after 30 or 60 days or whatever it is. If the HOA doesn't specifically restrict against termination rights in their leases, they can't stop you. Of course, they could always change the rules again to close that loophole. You could lobby for a 30 day minimum rather than 6 months. That would allow you to still operate as MTR but restrict STR. If I were in your shoes and hadn't bought furniture yet, I would avoid doing MTR.
David Holcombe - Holcombe Real Estate53 Reviews - Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes2y
Not uncommon at all, nor is having HOA's that don't allow units to be rented period. A big factor in these restrictions is that FHA guidelines for condos specify that a certain percentage of the units must be "owner occupied" to qualify for FHA financing. However one thing you might bring up which works in your favor is that the FHA guidelines actually consider "vacation condos" (2nd homes that are rented when the owner isn't there) as "owner occupied", but not LTRs. 2 of my clients with furnished luxury MTRs that were getting $10k/month in rent recently had their HOAs restrict rental terms (one to a 12 month minimum, the other banned any new rentals but grandfathered in several existing ones which board members owned, but not my clients). However because Colorado passed a law a few years ago that greatly reduced the power of HOA's (for example they cannot foreclose due to unpaid dues or fines anymore, and the maximum fine for non health and safety violations is $500), they both decided to simply continue renting their units anyway, and just pay the $500 then thumb their noses at the HOA board. If I ever own in an HOA again, which I probably will not, I'll make sure to be on the board (or even President of the board), to stay ahead of issues like this. OP, maybe look into getting on the board? Not a fun volunteer job to have, but would give you more control over your property at least. I'd also look into what the maximum fines/ consequences are. Good luck!
- Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes2y
wow to this chutzpah:
to a 12 month minimum, the other banned any new rentals but grandfathered in several existing ones which board members owned, but not my clients).
Would love to see that one in writing and in court :)
- Member since 2020 · 7 posts · 5 votes2y
Quote from @Colleen F.:
@Kevin Ramos the other thing you might want to play to is the type of people who do rent MTR in your area. Point out what the demographic is compared to STR. You are talking about people relocating to the area for work or in the area temporarily for work not vacationers. Your goal would be to talk about how these people are more like them and not a disruption to the community. Examples of health care workers etc if that is your demographic. I am assuming of course that you aren't in a snowbird area but even then you could point out that crime goes down with age.
Definitely good points. I used to be one of those people that lived off of 3 to 4 month leases in the area earlier in my career as an engineer, and everyone I know who did it was either a professional or just not ready to settle down. I scheduled some time to speak during a board meeting tomorrow
- Member since 2020 · 7 posts · 5 votes2y
Quote from @David Holcombe:
I'm not endorsing this idea but I've seen people get around this by signing a "6 month lease" with every tenant but then giving them the right to terminate at no cost after 30 or 60 days or whatever it is. If the HOA doesn't specifically restrict against termination rights in their leases, they can't stop you. Of course, they could always change the rules again to close that loophole. You could lobby for a 30 day minimum rather than 6 months. That would allow you to still operate as MTR but restrict STR. If I were in your shoes and hadn't bought furniture yet, I would avoid doing MTR.
Interesting. HOA documents don't seem to restrict that. Either way, this is my primary property at the moment and I got a very good rate on it a few years ago, so my plan is to keep it as a rental regardless, start off as an MTR, and worst case, if the vote passes, then I will pivot to LTR, which will at least generate equity.
- Member since 2020 · 7 posts · 5 votes2y
Quote from @Steve K.:
Not uncommon at all, nor is having HOA's that don't allow units to be rented period. A big factor in these restrictions is that FHA guidelines for condos specify that a certain percentage of the units must be "owner occupied" to qualify for FHA financing. However one thing you might bring up which works in your favor is that the FHA guidelines actually consider "vacation condos" (2nd homes that are rented when the owner isn't there) as "owner occupied", but not LTRs. 2 of my clients with furnished luxury MTRs that were getting $10k/month in rent recently had their HOAs restrict rental terms (one to a 12 month minimum, the other banned any new rentals but grandfathered in several existing ones which board members owned, but not my clients). However because Colorado passed a law a few years ago that greatly reduced the power of HOA's (for example they cannot foreclose due to unpaid dues or fines anymore, and the maximum fine for non health and safety violations is $500), they both decided to simply continue renting their units anyway, and just pay the $500 then thumb their noses at the HOA board. If I ever own in an HOA again, which I probably will not, I'll make sure to be on the board (or even President of the board), to stay ahead of issues like this. OP, maybe look into getting on the board? Not a fun volunteer job to have, but would give you more control over your property at least. I'd also look into what the maximum fines/ consequences are. Good luck!
Hah, board members grandfathering in their own units is unsettling.
For a bit of background, my property is a SFH, and the HOA encompasses a pretty large neighborhood in suburbs. I suspect a lot of the residents that participate in the HOA are older folks that would rather we had no renters at all. I may not have a good chance of getting voted in.
In the next few months I do need to find out how much of the actually neighborhood shares this mindset though.
- 2yDavid HolcombeBusiness MemberReal Estate Agent · Atlanta, GA · Member since 2016 · 35 posts · 25 votes
Quote from @Kevin Ramos:
Quote from @David Holcombe:
I'm not endorsing this idea but I've seen people get around this by signing a "6 month lease" with every tenant but then giving them the right to terminate at no cost after 30 or 60 days or whatever it is. If the HOA doesn't specifically restrict against termination rights in their leases, they can't stop you. Of course, they could always change the rules again to close that loophole. You could lobby for a 30 day minimum rather than 6 months. That would allow you to still operate as MTR but restrict STR. If I were in your shoes and hadn't bought furniture yet, I would avoid doing MTR.
Interesting. HOA documents don't seem to restrict that. Either way, this is my primary property at the moment and I got a very good rate on it a few years ago, so my plan is to keep it as a rental regardless, start off as an MTR, and worst case, if the vote passes, then I will pivot to LTR, which will at least generate equity.
@Kevin Ramos yeah, hold on to that great loan!
David Holcombe - Holcombe Real Estate53 Reviews - 2yBonnie LowPro MemberLender · Asheville, NC · Member since 2016 · 1k+ posts · 1k+ votes
@Colleen F. makes some good points IF you want to fight the HOA. You could lean into the argument that month to month leases are easier to terminate and that most of the people utilizing MTRs are traveling health care workers, contractors, people relocating ot the area and generally others who are benefitting your community. However, HOAs are notorious for having nosy "Karens" on their board who don't care about any of those things. The NIMBY concept applies to most HOAs and even if the majority did vote in favor, they can still make your life a living hell by policing and complaining about everything that goes on in your unit. We once owned property in an HOA that had a green waste drop off site. On the sign to the yard under acceptable types of yard waste, rose bush trimmings were listed as allowed. But a nosy HOA member would park herself in front of the place on the weekends when it was the busiest and try to run off anyone bringing anything other than grass and leaves! We avoid HOAs for this very reason, which is too bad, because in some areas most of the new developments are in HOAs.
- Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes2y
Quote from @Ryan B.:
In my experience a requirement of 67% voting in favor of a change is a tough hurdle to get over. The amount of apathy and inactivity by residents is super high. I’m assuming that it is 67% of eligible voters, not 67% of who decides to vote. But either way, it is usually hard to get the required votes. I have many properties in hoa’s and many of them have recently talked about wanting to limit rentals. (Usually complaining about the hedge funds who are unreachable to correct issues). None of them have been able to get close to the required votes.
Yes, this.
@Kevin Ramos How big is your HOA? If it's 6 homes, then yeah, you might be screwed. Getting four people isn't that far-fetched.
If it's 60 units, getting 40 people to even vote, much less vote in one direction is more difficult.
We've owned several condos in Denver and been on the board once (awful experience, BTW). To try to change one rule, I personally knocked on all doors multiple times before the vote, sent flyers and emails and we didn't even get the 2/3 to vote.
- Banker · Huntington Beach, CA · Member since 2018 · 99 posts · 100 votes2y
@Kevin Ramos In my experience, most HOA members don't vote in elections. To that end, you may have to campaign. Go door knocking with some facts that show the benefits of MTRs. Sounds like you need to have 40% vote against. Hope it works out for you. Good luck
- Contractor · Canton, GA · Member since 2015 · 107 posts · 81 votes2y
@Kevin Ramos
Id suggest to get someone to immediately lease it for 5 months with an option on 7. Its kind of hard to have someone evicted through an hoa without proper cause. They may allow existing mtr s to stay in place if grandfathered.
- 2yBonnie Griffin KaakePro MemberReal Estate Consultant · Denver, CO · Member since 2021 · 661 posts · 389 votes
Quote from @Kevin Ramos:
Quote from @Colleen F.:
@Kevin Ramos the other thing you might want to play to is the type of people who do rent MTR in your area. Point out what the demographic is compared to STR. You are talking about people relocating to the area for work or in the area temporarily for work not vacationers. Your goal would be to talk about how these people are more like them and not a disruption to the community. Examples of health care workers etc if that is your demographic. I am assuming of course that you aren't in a snowbird area but even then you could point out that crime goes down with age.
Definitely good points. I used to be one of those people that lived off of 3 to 4 month leases in the area earlier in my career as an engineer, and everyone I know who did it was either a professional or just not ready to settle down. I scheduled some time to speak during a board meeting tomorrow
Remind the board that even the IRS says the MTR are actually classified as long-term rentals. Less than 30 days is a short term rental. Due to a lack of housing across the country, many are adding ADUs for relatives and seniors. Our neighborhood does not allow short term rentals but one family has built a 2-bedroom apartment in their basement with an outside entrance for a family that takes care of his wife who has MS during the day when he works. The HOA needs to think this through or be sued for discriminating against the disabled or elderly. - Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes2y
Quote from @Jonathan R McLaughlin:
wow to this chutzpah:
to a 12 month minimum, the other banned any new rentals but grandfathered in several existing ones which board members owned, but not my clients).
Would love to see that one in writing and in court :)
I would was really hoping they would find a good attorney to sell the property to.
- Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes2y
Quote from @Kevin Ramos:
Quote from @Steve K.:
Not uncommon at all, nor is having HOA's that don't allow units to be rented period. A big factor in these restrictions is that FHA guidelines for condos specify that a certain percentage of the units must be "owner occupied" to qualify for FHA financing. However one thing you might bring up which works in your favor is that the FHA guidelines actually consider "vacation condos" (2nd homes that are rented when the owner isn't there) as "owner occupied", but not LTRs. 2 of my clients with furnished luxury MTRs that were getting $10k/month in rent recently had their HOAs restrict rental terms (one to a 12 month minimum, the other banned any new rentals but grandfathered in several existing ones which board members owned, but not my clients). However because Colorado passed a law a few years ago that greatly reduced the power of HOA's (for example they cannot foreclose due to unpaid dues or fines anymore, and the maximum fine for non health and safety violations is $500), they both decided to simply continue renting their units anyway, and just pay the $500 then thumb their noses at the HOA board. If I ever own in an HOA again, which I probably will not, I'll make sure to be on the board (or even President of the board), to stay ahead of issues like this. OP, maybe look into getting on the board? Not a fun volunteer job to have, but would give you more control over your property at least. I'd also look into what the maximum fines/ consequences are. Good luck!
Hah, board members grandfathering in their own units is unsettling.
For a bit of background, my property is a SFH, and the HOA encompasses a pretty large neighborhood in suburbs. I suspect a lot of the residents that participate in the HOA are older folks that would rather we had no renters at all. I may not have a good chance of getting voted in.
In the next few months I do need to find out how much of the actually neighborhood shares this mindset though.
The crazy thing is the reason behind HB22-1137. That bill was signed into law in CO in 2022 because of predatory and corrupt actions from a few HOA's. Leading up to HB22-1137, there were hundreds of cases here where homes were actually foreclosed on by HOAs and their attorneys over what started as fines of less than $200. One attorney filed over 580 foreclosure actions on behalf of HOAs. Some of these homeowners weren't even notified of the original fine until the attorneys had already racked up significant legal fees and added 21% interest. HOAs and their attorneys had all the power, and knew it, and used that power to bully homeowners into compliance while simultaneously gouging them horribly with exorbitant fines and fees, then foreclosed on the property if they refused to pay up. The law was entirely in favor of the HOAs and these corrupt attorneys.
Thankfully HB22-1137 created new requirements for notifying homeowners of violations before issuing fines, set a maximum interest rate of 8% on past due fees and fines, limited the ability of HOAs to foreclose, and set the maximum fine amount for non public health and safety violations to $500. Opponents of the bill say it tips the balance of power too much in favor of homeowners, and they may have a point as it takes a lot of the teeth away from HOA laws, with the max fine being only $500. But at least it prevents the predatory and abusive behavior that was caused by the basically unlimited power that HOAs had here before.
Not sure if other states have similar HOA laws or not, this is just in CO. I thought it would be interesting to share this story here in order to demonstrate just how problematic owning a property (especially an investment property) in the wrong HOA can be.
Watch out for those sketchy HOAs out there people! And know the laws in your state regarding how much power an HOA can have over your property.
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