Change In The Economic Climate And Corresponding Change In Rental Restrictions

Many community associations have enacted rental restrictions over the years in order to maintain property values and to prevent the association from becoming an investment complex. Although this restriction affected some associations much more than others, more recently, some associations have relaxed their rental restrictions in order to accommodate owners who have been affected by the economic downturn.

Since 2006, many property values in our area have plummeted dramatically, making it nearly impossible for owners to sell their property for what they initially paid for it. So what happens when an owner gets transferred out of state and can’t sell their house? Many owners are forced to pay mortgages on two properties or decide to abandon the vacant property.

Because of this, some association boards are allowing owners to apply for hardship accommodations for rental restrictions. In many cases, it is a choice of whether to let the owner rent the unit out temporarily or allow the property to go into foreclosure, which generally equates to delinquent maintenance fees. We recommend that your association’s Declaration include a hardship exception allowing an owner to submit a temporary application for hardship so that the unit may be rented. If your documents do not include such a provision, please contact us so that we can provide information about how to amend the documents properly.

Generally, the hardship exception is for a specified period only, for example, a maximum of 24 months, then the owner would have to reapply. Other boards only allow one hardship period per owner.

Other considerations when deciding whether or not to allow hardship applications are whether relatives only may qualify, ensuring that owners do not rent single rooms (must rent the whole unit), a minimum/maximum lease period, and ensuring that renters complete a rental application along with a criminal background check that must be approved by the board.

Some associations have been riddled with so many foreclosures that many investors have bought the bank-owned properties cheap with the intention of using them as rentals. Unfortunately, many of these investors never obtain copies of the governing documents and are never aware that leasing is not permited until the association informs them.

The common remedy to enforce no-leasing restrictions is to evict the tenants on the owners behalf, and at their cost, based on a violation of the governing documents. Unfortunately, there are two problems with this. The filing of an eviction requires a court action, which has upfront costs for the association, more so if the owner or the occupant contest the eviction.

The other issue with filing the eviction is that once the occupant is evicted, the owner will often just find another tenant to occupy the premises. At associations with many rental restriction violations, it is nearly impossible to evict all of the violators. The only option is to go one by one and file evictions against the renters. Some associations have even tried to vote to revoke their no-leasing amendments, however, they have been unable to get the necessary votes to do this because of absentee owners.

It is important that the Board be impartial and make even-handed decisions when allowing certain exceptions, and that its actions are allowable pursuant to the Declaration.

More on Community Associations