An association can block owners from renting – Sometimes. Some homeowners’ associatons and co-op and condo boards have the authority to restrict owners from renting their property. Depending on the rules and regulations, when the homeowners’ association, coop and condo boards forbid owners from renting their units, owners may have no choice but to sell, even in a difficult market.
Read the Condo, Coop and Homeowner Documents Carefully!
There is so much to consider when you buy a new home – including whether it is a condo, coop or in a home owners association and what that means to you. You need to verify whether the association can block owners from renting their properties.
How do you figure that out? When you buy a new home that is subject to condo, coop or homeowners’ association rules and regulations, you have the right to review those rules and regulations – and to void the contract if you are not comfortable with any restrictions contained in the documents. The length of time you have to review the documents begins when you receive the documents – and the length of time varies depending upon the jurisdiction where the property is located, whether it is the first time the property is being sold because it has just been built, and whether it is a condo, coop or home owners’ association.
Owners within condominiums and homeowner associations are bound by the legal documents and the rules and regulations of their association — as they currently exist and as they may be properly amended from time to time.
In a condominium, the legal documents are generally called (1) the declaration and (2) the bylaws. In a homeowner association, those documents are called covenants, conditions and restrictions (or CC&Rs).
A board of directors has the right to enact reasonable rules and regulations, so long as those policies do not directly conflict with the legal documents. In order to amend legal documents, it usually takes a supermajority vote of all of the owners. Sometimes this is a 66 2/3 vote and sometimes it is as high as 75 percent. Why? The reason is because the other owners bought into the association based on the existing documents — and only you and a supermajority of owners can make any changes.
Just remember, these rules are enforceable by the association – whether you like them or not.
An Association Can Block Owners From Renting
In the area involving restrictions on renters, the courts have held that a boards do have the right to restrict rentals, but the boards cannot make the change merely by a rule enacted by the board. It takes a bylaw amendment to do this.
If your association is following the rules regarding amending your legal documents, and if that vote is positive, you and the other owners are legally bound by those changes, so don’t snooze when your condo association is proposing new guidelines or restrictions. In addition, before you make a decision to buy into any community with a board of directors, whether it is a home owners association, a condo or a coop, take the time to read the documents that you receive. The timeframe for the review is not very long, so pay attention and read carefully in order to avoid any regrettable surprises that limit your use of your property.
Why An Association Can Block Owners From Renting
Restrictions on rentals appear in association rules and regulations for a variety of reasons. In the case of coops where the taxes typically are paid through the coop fee and there may be an underlying mortgage (also paid through the coop fee), the financial health of the entire coop is impacted by any mortgage default or failure to pay the coop fee. The burden of a mortgage default is shared by all residents of a coop, and there is a belief that absentee landlords are more likely to default or fail to pay the coop fees than resident owner. The coop may prohibit any rentals at all. In that case, the coop board can force owners who have to move out of town, get divorced or can’t afford their home any longer to sell the property even in a depressed market but in competition with many other properties for sale.The restriction on rentals can be very burdensome on an individual owner who is transferred out of the area or who has outgrown the property but didn’t want to sell just yet. It seems so unfair that a board can limit the owner’s ability to rent and force the owner to sell, but it is legal.
Not all associations have restrictions like this. For example, some condo associations such as Kenwood Forest I and II in Chevy Chase MD do not restrict rentals, and many current landlords were once owner occupants there. However, while these condo communities do not have rental restrictions, some condo associations do limit the number of rentals that can happen at any one time. This is because communities with high rental levels and/or high condo fee delinquincies may not qualify for certain loan programs, such as FHA mortgages.
This issue has been litigated in many states, but all the court cases have held that community associations have the right to limit — or even prohibit — the number of renters in those associations.
The expansion of Air BnBs has also resulted in condo and coop communities restricting short term rentals. There also are some state or local jurisdictions which prohibit short term rentals. In this case you are not only fighting your condo association – but you are also fighting City Hall!
An association can block owners from renting, in some circumstances. So, what does all of this mean to you? You need to be clear in your mind as you consider buying a property what your future plans are for that property. How long will you be in that property? Do you want to hold on to it and buy another property in the future as your principal residence? Is there a likelihood that you will be moving from the area? Are you in the military and likely to be transferred? All of these things can add up to tilting you toward a property without restrictions on renting it in the future. It is your responsibility to carefully read the condo, coop or HOA docs you receive to determine whether the associate can block owners from renting their property.
You may realize that you are better off purchasing a single family home that is not subject to any rental restrictions. In that case, you should check out other homes for sale here.