Our Clients Ask Us: Leasing Thresholds

Q: We have a threshold for leasing in our governing documents. When we reach a certain percentage, leasing is supposed to be cut off. If we deny someone the ability to lease his/her unit due to the fact that our leasing threshold has been met, are we discriminating?

A: NO. If your Declaration provides a leasing threshold, of, for example, 15%, then your Board can legally only allow 15% of the owners to lease their units out. Following your governing documents does not equate to discrimination. Make sure, however, that this is a provision of your recorded documents, and not an arbitrary rule voted on by the Board (implementing a leasing threshold requires a vote of the entire membership). To ensure fairness, send a form letter to every member whose application to lease is denied. Explain that the leasing threshold has been met, and they will be put on a waiting list. When the next owner applies for a new lease, that person will get pushed to the back of the waiting list. This ensures that all owner-investors have a fair opportunity to lease out their unit on a rotational basis. Documenting the reasons why the application to lease was denied is essential in fighting any potential discrimination claim. Keep detailed documentation of who applies to lease and when, that way there will be no question of the proper order of who was allowed to lease next. Documentation is the key to fighting against any sort of erroneous claims.

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