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Subject: Owner Occupied, No Leasing, Hardship
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Author Messages
MarkM26
(Illinois)

Posts:9


01/30/2012 7:06 PM  
My association has an owner occupied clause in a delcaration ammendment: "All units must be occupied by at least one title holder."
There is also a no leasing clause in the same ammendment: "The unit owners shall be prohibited from leasing or renting any unit to an individual or entity which is not a title holder of record for the unit."
There is no hardship clause.
I have owned and lived in my unit since I purchased it over 5 years ago.

I'm getting married and will be moving into a rental apartment with my wife next month. (She unfortunately cannot move into my condo for multiple reasons.) I cannot sell my unit because I'm so far upside down, but I have good credit and I don't want to walk away or short sale. Running the numbers, if I eat just noodles for a while I can afford rent on the new apartment plus my mortgages/tax/assessment on my condo, and leave it empty.

Question 1: even though I can probably just barely afford to do this, I feel that this is unjust. (Note I didn't say unfair- I knew the law when I bought my unit.) If I have a child in the near future, I likely will not be able to afford both rent+mortgage anymore. Is there some kind of hardship ruling or law that can trump any condo bylaw preventing me from leasing my unit? It seems this law could end up forcing me to choose between my wife and my credit, whereas if I could simply lease until I have the money saved up to sell my unit I would not have to forfeit either.

Question 2: if I leave my unit empty, am I violating the owner occupied clause? By this I mean, if no one lives there, then it is not occupied by the owner! (I'm only half joking- I realize this is ridiculous, but then how should I interpret the owner occupied clause?)

Question 3: A very good friend of mine just got laid off and has no income, and is struggling to make his rent. He lives with his wife and two children. I'm considering letting them stay in my unit for free after I move out. Would this be ok according to the no leasing clause?

Question 4: If I leave most of my furniture in my condo and let my friend stay there, and I visit and perhaps crash on the couch on a regular basis, does that constitute owner occupied? I plan to keep all the utilities and the mailing address in my name.

Thank you.
TimB4
(Virginia)

Posts:8995


01/31/2012 2:38 AM  
Posted By MarkM26 on 01/30/2012 7:06 PM
My association has an owner occupied clause in a delcaration ammendment: "All units must be occupied by at least one title holder."
There is also a no leasing clause in the same ammendment: "The unit owners shall be prohibited from leasing or renting any unit to an individual or entity which is not a title holder of record for the unit."
There is no hardship clause.




Mark,

With the clause being in the Declaration, it shows that the membership voted on the restriction and adopted it. From what I have researched, it appears that IL considers this a stronger argument to keep the restrictions.

Additionally, with the restrictions being in the CC&Rs, the Board does not have the authority to offer waivers.

Posted By MarkM26 on 01/30/2012 7:06 PM

Question 1: even though I can probably just barely afford to do this, I feel that this is unjust. (Note I didn't say unfair- I knew the law when I bought my unit.) If I have a child in the near future, I likely will not be able to afford both rent+mortgage anymore. Is there some kind of hardship ruling or law that can trump any condo bylaw preventing me from leasing my unit? It seems this law could end up forcing me to choose between my wife and my credit, whereas if I could simply lease until I have the money saved up to sell my unit I would not have to forfeit either.




In 2009, the IL house tried to introduce HB5189 which would have done what you are asking. However, that bill died in committee.

Per IL Condominium Property Act there still is no language providing for hardship cases.

According to an article about leasing restrictions by an IL attorney, they recommend hardship clauses but it's not required.



Posted By MarkM26 on 01/30/2012 7:06 PM

Question 2: if I leave my unit empty, am I violating the owner occupied clause? By this I mean, if no one lives there, then it is not occupied by the owner! (I'm only half joking- I realize this is ridiculous, but then how should I interpret the owner occupied clause?)




Owner occupied typically means that the individual/s named on the deed are living in the unit.

IL case law modified that slightly (in cases where an individual owns two or more units) by saying it could be that the owner lives in the building.

Just as when you go on vacation and no-one is living in the unit, the place is still considered to be owner occupied.



Posted By MarkM26 on 01/30/2012 7:06 PM

Question 3: A very good friend of mine just got laid off and has no income, and is struggling to make his rent. He lives with his wife and two children. I'm considering letting them stay in my unit for free after I move out. Would this be ok according to the no leasing clause?




Interesting question and one that I'm sure would be answered in a court of law if you chose to test that interpretation of the rental restrictions.

I say this because you know that if you do this at some point in time the Board will find out and will enforce their interpretation of the rental restrictions. If you choose to disagree with their interpretation the issue will most likely end up in court.


Posted By MarkM26 on 01/30/2012 7:06 PM

Question 4: If I leave most of my furniture in my condo and let my friend stay there, and I visit and perhaps crash on the couch on a regular basis, does that constitute owner occupied? I plan to keep all the utilities and the mailing address in my name.




See my reply to question 3.



You may want to gather support and see if a hardship clause can be created and adopted by the membership.






MelissaP1
(Alabama)

Posts:4778


01/31/2012 8:05 AM  
I am one of those who don't believe a HOA has the legal right to enforce a no rental policy. Unless the HOA actually owns the property (house) they can't limit what an owner does with it as far as renting. A loan/mortgage company instead can put a rental clause on the property. Keep in mind I am also NOT against HOA's having rental policies it's just not one of those things that is enforceable.

Here's the rub here...What happens if you do rent out the place? Do they have a fine system? Do they restrict your access to amenities? What is the result of the violation? My bet is that they put in the rules to restrict but didn't think forward enough for a punishment. There has to be a fining schedule which is understood by ALL the members. Most HOA's lack this and it takes a long time to establish one.

A good HOA who restricts rental or has such rules do require filiing of rental or criminal check paperwork. Where is that requirement in your HOA? How would they know your renting if your still paying the dues? The only power they would have against you is for you to be forced to make sure the renter's follow the rules. Which is something you should have in your lease agreement. (It's NOT in an off-the-shelf type agreement). That way you would have some teeth against your renter when the HOA holds your feet to the ground.

I am no advocating breaking the HOA rules. However, if the rules aren't up to snuff, then do what you have to do. Just take a look at the punishment side of the coin and decide if it's something you can live with...

Former HOA President
BradP
(Kansas)

Posts:2640


01/31/2012 8:17 AM  
Mark

I disagree with Melissa, the HOA does have the ability to do this in my opinion. Here is the problem, you bought your property knowing that was a provision. At the time you bought it is very difficult to predict the future, no one knows what it holds. But now you are in a position where you either take a hit on your unit or you short sale it.

you don't have to answer this question, but why can't your bride move in with you?
JohnC46
(South Carolina)

Posts:3987


01/31/2012 8:50 AM  
MEL

I believe the covenants are enforceable and you are advising him to break them. Tsssk. Tsssk

MarkM26
(Illinois)

Posts:9


01/31/2012 8:51 AM  
Thank you all for your responses.

Tim- I appreciate the links and your opinions.

Melissa, you bring up a good point- there is a penalty written in our Rules and Regs: "Only those Unit Owners of records as of the restriction ammendment may be permitted to lease. A fine of $1000 will be issued for non-compliance and tenants must vacate immediately."

I'm not sure if that rule is legal or not, but I remember the board was split on approving the rules and regs as a whole because of that particular rule. But regardless, that fine applies to leasing only. If I allow my friend to live in my unit for free, I don't think that applies to me. Though I'm not sure how I could prove that he isn't paying me, or perhaps the burden of proof would be on the association to prove that he is? As far as I know, there is no penalty for leaving my unit empty, or letting someone else stay there for free while I am not using it.

Brad - i don't think it's relevant but the reasons my wife can't move in to my condo are that she has dogs which aren't allowed, and also she has bad hips and may need surgury in the near future, and my building is not wheelchair accessible.

Thanks.
JohnC46
(South Carolina)

Posts:3987


01/31/2012 8:55 AM  
MARK

Now were I to go move in with my girl friend to assist her and while I was gone, I have a house sitter whom I pay small fee to....hmmmm.
BradP
(Kansas)

Posts:2640


01/31/2012 9:25 AM  
Mark:

Appreciate the response and the information. You are against a rock and a hard place. Yes, you could permit your friend to live their rent free but do you expect no one to notice you aren't still there? Unless you plan on showing up every day for several hours a day. You are in a tough place, I would advise speaking to the board about your dilemna and seeing what options are available. If you try to break rules or skirt around issues when they do find out they won't have any mercy on you.

I would approach your conversation with the board from this direction, my future wife has bad hips, she can't navigate stairs well, our building isn't ADA compliant so I don't have the option of her moving in here with me. Normally if I had gotten married that would have been the plan but unfortunately she can't live here so I am in a bad situation.

I think if you use that approach you might have some semblence of a chance...
MarkM26
(Illinois)

Posts:9


01/31/2012 9:26 AM  
Posted By JohnC46 on 01/31/2012 8:55 AM
MARK

Now were I to go move in with my girl friend to assist her and while I was gone, I have a house sitter whom I pay small fee to....hmmmm.




I like the way you think, John!

I think the only way the association could attack if I do this is if they can call house-sitting or staying for free "leasing". I'm struggling to find a good definition of leasing, but it appears that when there is a lease, "consideration" of some sort must be transacted in order for a lease to be valid. So in my case, with no lease, and no consideration being transacted, I'm building my confidence with this and/or the house-sitting idea.

BradP
(Kansas)

Posts:2640


01/31/2012 9:30 AM  
Posted By MarkM26 on 01/30/2012 7:06 PM
My association has an owner occupied clause in a delcaration ammendment: "All units must be occupied by at least one title holder."




Mark...you are forgetting the above clause, how do you propose to get around that? You can pull it off for a couple months but not forever. you are correct that living for free or "house-sitting" is not leasing but are you really going to put yourself in that situation? You have zero legal recourse against any damage they may do to the place and you are also liable for their actions because they are your "guest" and not a rent paying tenant who agreed to a legal document.

This would be a temporary plan, not a permanent solution. Be careful how far you drag, once you make the board angry you have zero shot of any sympathy.
MoM
(Massachusetts)

Posts:9


01/31/2012 9:43 AM  
I don't know just how good friends you are with your potential occupant, nor the law in which you live, but it is possible in some states to deed a very small percentage of ownership of a property to another. I'm thinking something like 1/2 of 1% interest in the unit. That way your friends are in fact owners and whatever financial arrangements you make are between you two.
MarkM26
(Illinois)

Posts:9


01/31/2012 9:48 AM  
Brad- I don't intend to try to hide the fact that my friend and his family would live there. We are required to list all occupants whenever it changes, so I would just add them as occupants with me.

Regarding talking to the board and pleading my case, unfortunately there's no chance. They are ruthless regarding any request for an exception for anything, particularly pets and renting requests.

This isn't relevant, but an interesting tidbit is that almost the entire board can lease their units since they are grandfathered in before the ammendment was passed.

I'm not sure what recourse can be taken against me if my unit is not "owner occupied". For example, if I leave my unit empty but pay my assessments, what can they do, force me to move back in?

I do agree with you regarding my responsibility over their actions and how long could this go on for- valid point.
BradP
(Kansas)

Posts:2640


01/31/2012 9:59 AM  
What happens to folks in your community who break covenants? Are they fined? Whatever happens to those folks would eventually happen to you when the board finds out.
MarkM26
(Illinois)

Posts:9


01/31/2012 9:59 AM  
Posted By MoM on 01/31/2012 9:43 AM
I don't know just how good friends you are with your potential occupant, nor the law in which you live, but it is possible in some states to deed a very small percentage of ownership of a property to another. I'm thinking something like 1/2 of 1% interest in the unit. That way your friends are in fact owners and whatever financial arrangements you make are between you two.




Interesting idea. This seems legally valid to me, but I feel like a very small percentage might smell bad to a judge. I wonder though about giving him 25 or even 49 or 50%. That might make sense if he's willing to do it. But to give him half, I would also have to pay him more money than I have (since I'm upside down), but perhaps letting him stay there for a year or two would balance that out.

Going down this road, I imagine if I were to add him to the deed, then that could cause the mortgage companies to call due the loans- which isn't desireable. But I guess that wouldn't be desireable for the banks either, since it would force me to short sale or foreclose an otherwise strong mortgage for them. Logically I can't see the banks doing this to me, but I have no practical knowledge of this. Does anyone have experience with adding someone to a deed (other than a spouse which I assume is allowed)?
MelissaP1
(Alabama)

Posts:4778


01/31/2012 10:11 AM  
Here's an idea...Why not draft a rent to own type situation? This means the person renting is to get a copy of title after the loan payoff. The rent you charge could be just for the HOA dues. If your doing this for free then you still have to pay the dues. It doesn't mean you have to sell the house ultimately but show a type of contract that should fill your need.

I don't see why you can't rent as you are the deeded owner correct? Am I missing something here that your ownership doesn't fit the definition?

Former HOA President
BradP
(Kansas)

Posts:2640


01/31/2012 10:27 AM  
Posted By MelissaP1 on 01/31/2012 10:11 AM
Here's an idea...Why not draft a rent to own type situation? This means the person renting is to get a copy of title after the loan payoff. The rent you charge could be just for the HOA dues. If your doing this for free then you still have to pay the dues. It doesn't mean you have to sell the house ultimately but show a type of contract that should fill your need.

I don't see why you can't rent as you are the deeded owner correct? Am I missing something here that your ownership doesn't fit the definition?




Rent to own is still renting...his documents prohibit leasing or renting of the unit.
LarryB13
(Arizona)

Posts:2353


01/31/2012 12:47 PM  
Mark,

Your problem is that you need to relieve yourself of the financial burden of owning the condo without incurring the wrath of the BOD and without defaulting on your mortgage.

Can you sell your condo under a purchase agreement instead of a mortgage? I do not know how feasible it is to do this when you have an existing mortgage, but essentially you would be selling your interest to a new buyer. The buyer would not receive a deed until the property is paid in full.

In your case, you could offer the property with little or no down payment and payments sufficient for you to pay your mortgage each month. The purchase agreement gets recorded, so the buyer is now on record as the title holder. Should the buyer default, your contract should allow you to reclaim possession without going to court.

A real estate attorney should be able to advise you as to whether this can be done and to draw up an agreement if it can be done.
JohnC46
(South Carolina)

Posts:3987


01/31/2012 2:31 PM  
I am going to change my general thinking/approach on this issue.

I think unlimited/loose rentals can kill an HOA. I believe in HOA Covenants so take this with tough love. You signed them, so buckup and live with them.

MarkM26
(Illinois)

Posts:9


01/31/2012 3:34 PM  
Posted By JohnC46 on 01/31/2012 2:31 PM
I am going to change my general thinking/approach on this issue.

I think unlimited/loose rentals can kill an HOA. I believe in HOA Covenants so take this with tough love. You signed them, so buckup and live with them.




John, I completely agree with you that unlimited rentals "can" hurt the HOA. But it's the people chosen to be renters that cause the problem, not the fact that renters are allowed. There are many renters that are better neighbors than some of the owners. I believe steps can be taken to increase the likelihood that renters are non-harmful to the HOA. In many ways, I think it's easier to find a good renter than a good owner, since there is a much larger pool of potential renters than potential owners.

Anyway, we've gotten off topic here. I'm still trying to determine the best course of action. As of now I have determined that the fine for leasing should not apply to me, since I will not be leasing. There is no defined penalty for what will happen to me if I leave my unit empty, or if I let someone else stay there for free instead.
KellyM3
(North Carolina)

Posts:1069


02/01/2012 6:21 PM  
The by-laws say that the unit must be occupied by a title holder, so "Free leasing" won't work if you get caught. By-laws also tie the board's hands in terms of waivers, that's for sure. The facts are that you've chosen a lifestyle change - congratulations, by the way - that injects a housing problem for you. Ultimately, you're causing your own hardship with prior knowledge of how your HOA by-laws will affect you. This is a tough situation.
JohnB26


Posts:0


02/02/2012 12:09 PM  
Posted By MoM on 01/31/2012 9:43 AM
I don't know just how good friends you are with your potential occupant, nor the law in which you live, but it is possible in some states to deed a very small percentage of ownership of a property to another. I'm thinking something like 1/2 of 1% interest in the unit. That way your friends are in fact owners and whatever financial arrangements you make are between you two.





DITTO
JohnC46
(South Carolina)

Posts:3987


02/02/2012 12:23 PM  
Posted By JohnB26 on 02/02/2012 12:09 PM
Posted By MoM on 01/31/2012 9:43 AM
I don't know just how good friends you are with your potential occupant, nor the law in which you live, but it is possible in some states to deed a very small percentage of ownership of a property to another. I'm thinking something like 1/2 of 1% interest in the unit. That way your friends are in fact owners and whatever financial arrangements you make are between you two.





DITTO





Johnb26 and MoM

Is this advise, while maybe to the letter of the law, not a method to circumvent the intent of what the OP signed for and admits he understood why such when he signed for/agreed to such?

People not understanding what they signed for is a real issue, but do you not think aiding those that knew what they signed for to beat what they not wrong?

Is not yes, but the rules do not apply to me the bottom line/heart of this issue?

Thanks
JohnC46
(South Carolina)

Posts:3987


02/02/2012 12:28 PM  
Posted By JohnC46 on 02/02/2012 12:23 PM
Posted By JohnB26 on 02/02/2012 12:09 PM
Posted By MoM on 01/31/2012 9:43 AM
I don't know just how good friends you are with your potential occupant, nor the law in which you live, but it is possible in some states to deed a very small percentage of ownership of a property to another. I'm thinking something like 1/2 of 1% interest in the unit. That way your friends are in fact owners and whatever financial arrangements you make are between you two.





DITTO





Johnb26 and MoM

Is this advise, while maybe to the letter of the law, not a method to circumvent the intent of what the OP signed for and admits he understood why such when he signed for/agreed to such?


Is not yes, but the rules do not apply to me the bottom line/heart of this issue?

Thanks




I hate no edit here...LOL

People not understanding what they signed for is a real issue, but do you not think aiding those who knew what they signed for to beat what they signed for is wrong?



ND
(Delaware)

Posts:31


02/02/2012 12:53 PM  
Perhaps a bit of professional, legal advice is in order before you make any final decisions. I'd look into the legal definition of "owner occupied". I don't believe it requires you to occupy all the time, perhaps just a majority of the time, and perhaps less than that. Good luck.
MelissaP1
(Alabama)

Posts:4778


02/02/2012 10:34 PM  
I read your statement again and I think there is a translation issue...It may be the intent is to prevent investor type owners from renting out units. This could be like LLC's, Real Estate firms, or flippers. Owner's who intent is NOT to occupy themselves.

I don't think they can prevent you from leasing out your home. They don't own it so how can they? Consult a lawyer if possible. It would best to get that opinion. I've had a lawyer tell me a HOA can't limit rentals as the HOA does NOT own the houses and thus can't restrict owner's contracts just the aesthetics/maintenace.

Former HOA President
BradP
(Kansas)

Posts:2640


02/03/2012 1:31 PM  
Posted By MelissaP1 on 02/02/2012 10:34 PM
I read your statement again and I think there is a translation issue...It may be the intent is to prevent investor type owners from renting out units. This could be like LLC's, Real Estate firms, or flippers. Owner's who intent is NOT to occupy themselves.

I don't think they can prevent you from leasing out your home. They don't own it so how can they? Consult a lawyer if possible. It would best to get that opinion. I've had a lawyer tell me a HOA can't limit rentals as the HOA does NOT own the houses and thus can't restrict owner's contracts just the aesthetics/maintenace.




they can restrict rentals if it is a recorded declaration...
RobertC14
(New Jersey)

Posts:67


02/03/2012 2:00 PM  
while not really part of the original question just a passing statement in the OP, i am very curious why his bride can not move in with him. someone else also asked the question.

I too have found myself stuck in what i can only say are just as equally strange situations and would very likely understand the situation.

this is really just a curiosity on my part.

you can feel free to contact me offline at forumsnotify gmail com as i would understand you not wanting to air anything on a public forum.

MelissaP1
(Alabama)

Posts:4778


02/03/2012 2:01 PM  
Yes, they can put this in their documentation all day long...but is it really enforceable? Probably not...Why? 1. A HOA is just a "club" of homeowners and not actual owners of the homes. (Except in cases of foreclosure situations). It is like a belonging to a car club. Let's say a "Mustang car" club. All members must own mustangs and pay dues to cover costs of running the club. Now a member wants to use their car as a "Taxi" service. Can the other members restrict this and cause a punishment for doing so? The "Taxi" member still owns a Mustang it is just used by multiple people. What if the car club never made a rule about this? What if the car club did make a rule about this use? Did the club make a rule punishing the owner for violating this rule or just put the restricting wording in there? They can't stop them from being a member because they meet the requirement of Mustang owner....

Keep in mind PLEASE that I am NOT against a HOA having rental restrictions at all. That is completely NOT the case and agree 110% of those who believe in restricting rentals in a HOA. My point is that RENTAL IS A HOA FALACY. A HOA doesn't own everyone's mortgages so it can't restrict mortgage rules. Meaning technically ONLY the mortgage company can restrict the use of the home versus a HOA...

We can continue to disagree on this matter, but truly a falacy is a falacy...Unless HOA's start insituting better rules such as providing a copy of a lease and having a punishment system in place for violators. Most HOA's don't have that kind of system in place and thus can be overrun by renters...I applaud those HOA's who are forward thinking and require proof of ownership, leases, and have fining schedules...Your a forward thinking group of owners and is what we should aspire to..

Former HOA President
MarkM26
(Illinois)

Posts:9


02/03/2012 7:53 PM  
RobertC14- I actually did answer why she couldn't live in my condo- see the post dated: 01/31/2012 4:50 PM. (Maybe that timestamp will be 5:50PM for you- I'm not sure.)

Melissa- I think your reasoning is sound, but the fact is the courts don't agree with you. Leasing restrictions have been found to be constitutional. Here's a great article on this topic:

http://www.ksnlaw.com/articles/no-lease-restrictions.html

The article was written in 2006, but still seems pretty relevant today. Here are some interesting excerpts:

"The constitutionality of these no-renter covenant modifications has been challenged repeatedly since the mid-'70s. With rare exceptions, the right of condominium owners to modify their governing documents has been consistently upheld."

"It thus became well settled that a condominium association could amend the declaration to eliminate leasing. Needless to say, this could be a harsh reality for many owners without some exceptions. Condominium boards of directors began to consider less harsh measures for specific situations, including financial hardship and leasing to blood relatives."

MoM suggested this, and apparently this will probably fly:
"Hypothetically, what happens when a unit owner conveys a nominal interest (e.g., one percent) to a tenant to get around the restrictions of an owner/ occupant-only policy? Without specific guidelines or further restrictions, or possibly an additional amendment to the declaration defining an owner's interest, the association will arguably have to accept a nominal owner as an "owner" for the purpose of occupancy."

"Moreover, can some owners be allowed to continue leasing while others are not, e.g., by grandfathering existing investor-owned units for rental while prohibiting new owners? Can tenants be grandfathered? What about requiring an owner to first occupy a unit for a specified period before allowing him/her to rent the unit? What about a quota allowing a specific percentage of unit owners to lease and, once that percentage is attained, putting owners on a waiting list? What about requiring an owner to occupy his unit for at least one year before being allowed to rent to discourage pure investors? These and other variations have yet to be tested."

Larry suggested a rent-to-own type of deal. That probably won't fly:
"The trial court held, and the appellate court affirmed in an unpublished opinion, that the sales contracts were voidable because they were actually leases (15)."
BradP
(Kansas)

Posts:2640


02/03/2012 9:43 PM  
Posted By MelissaP1 on 02/03/2012 2:01 PM
Yes, they can put this in their documentation all day long...but is it really enforceable? Probably not...Why? 1. A HOA is just a "club" of homeowners and not actual owners of the homes. (Except in cases of foreclosure situations). It is like a belonging to a car club. Let's say a "Mustang car" club. All members must own mustangs and pay dues to cover costs of running the club. Now a member wants to use their car as a "Taxi" service. Can the other members restrict this and cause a punishment for doing so? The "Taxi" member still owns a Mustang it is just used by multiple people. What if the car club never made a rule about this? What if the car club did make a rule about this use? Did the club make a rule punishing the owner for violating this rule or just put the restricting wording in there? They can't stop them from being a member because they meet the requirement of Mustang owner....

Keep in mind PLEASE that I am NOT against a HOA having rental restrictions at all. That is completely NOT the case and agree 110% of those who believe in restricting rentals in a HOA. My point is that RENTAL IS A HOA FALACY. A HOA doesn't own everyone's mortgages so it can't restrict mortgage rules. Meaning technically ONLY the mortgage company can restrict the use of the home versus a HOA...

We can continue to disagree on this matter, but truly a falacy is a falacy...Unless HOA's start insituting better rules such as providing a copy of a lease and having a punishment system in place for violators. Most HOA's don't have that kind of system in place and thus can be overrun by renters...I applaud those HOA's who are forward thinking and require proof of ownership, leases, and have fining schedules...Your a forward thinking group of owners and is what we should aspire to..




Doesn't really matter how you view an HOA, it is not a club. The HOA has really nothing to do with it. The deed restrictions that run with your property are legally enforceable, the HOA is just the oversight responsible for enforcement of these rules. You buy a property, you have deed restrictions on a property which are a legally enforceable document, you sign the dotted line, done deal. Good luck in court.
FredB4
(Ohio)

Posts:356


02/05/2012 3:06 PM  
If it is in your Declaration then that is a legal document that you agreed to and would be upheld in a court of law if the HOA chose to pursue it unless there was some other wording in the Declaration that would override that clause under certain circumstances.Best to check with a lawyer on that one.
MarkM26
(Illinois)

Posts:9


06/19/2012 9:59 AM  
Bringing a semi-old thread back to life. I just want to update you all on what I ended up doing:

I "sold" half ownership of my unit to my friend, and by recording a Quit Claim Deed he is now an owner on title along with me. Both my first and second mortgages were fine with me doing this. I contacted my association and told them as well, and gave them all of the information about who was living in the unit, both owners contact info, etc. No problems at all.

I'd like to point out that the idea of adding my friend to the title was previously suggested, but the main difference here is that we did half ownership instead of a nominal percentage. Half ownership worked out better in our case as a result of the agreement we came to, but I do believe the way the law is written would have allowed him to live there even with a nominal percentage. However, I believe a nominal percentage probably leaves the door open for a challenge, as it seems pretty clear what the intent is in that case. Fortunately for us our intent morphed to him actually wanting my condo, so we didn't have to test the theory of just a small percentage.
ChrisM19
(Colorado)

Posts:2


10/08/2012 3:50 PM  
MarkM26: I am in a similar situation. I moved out of my condo and am renting it under a temporary hardship exemption to our no-rental rule. I am considering transferring a nominal interest in my condo to the current renter who sincerely wants to buy it but he can't get get financing just yet. Would you mind explaining a bit on how you arranged terms for the 50% ownership transfer? Why did you decide 50% was better than, say, 5%? Much thanks.
PaulT6
(California)

Posts:409


10/08/2012 4:05 PM  
Mark,

I think your Board would say: "if it looks like a renter, talks like a renter, it is a renter, here is your FIRST $1,000 fine. Their position probably being if you let one person violate the rules, where does it end. I can very much appreciate the rule, we have about 350 violations per year. With rare exceptions they all involve rental properties. Sorry to hear about your situation but you bought in voluntarily, buyer be ware.

Paul T
PaulT6
(California)

Posts:409


10/08/2012 4:08 PM  
Whoops!!, missed the original thread date, sorry.

Paul T
ChrisM19
(Colorado)

Posts:2


10/09/2012 9:28 AM  
Paul T, just FYI, the fairness of the issue isn't always that black and white, thus you might give Mark some slack for looking for a reasonable compromise or work around. In my case, the restriction was passed long after I became an owner there. The first time, the amendment failed. To get it to pass the second time they took advantage of a new law (that permitted 51% approval rather than 67%) and also provided for the Board to grant temp exemptions...and they verbally promised to be generous with hardship exemptions. But as it has turned out even during the housing crash they weren't that keen on granting exemptions after all...they say it weakens the restriction. They have granted them to me so far, but they didn't view the down market as sufficient reason by itself. So it gets a bit gray on what is "fair" and reasonable.
PaulT6
(California)

Posts:409


10/09/2012 9:44 AM  
Posted By ChrisM19 on 10/09/2012 9:28 AM
Paul T, just FYI, the fairness of the issue isn't always that black and white, thus you might give Mark some slack for looking for a reasonable compromise or work around. In my case, the restriction was passed long after I became an owner there. The first time, the amendment failed. To get it to pass the second time they took advantage of a new law (that permitted 51% approval rather than 67%) and also provided for the Board to grant temp exemptions...and they verbally promised to be generous with hardship exemptions. But as it has turned out even during the housing crash they weren't that keen on granting exemptions after all...they say it weakens the restriction. They have granted them to me so far, but they didn't view the down market as sufficient reason by itself. So it gets a bit gray on what is "fair" and reasonable.




Understood, and feel badly for people that have had things go wrong. However, in my experience of being Chairman of our 6,400 property Assn Covenants Committee for 16 years,
granting exceptions or looking the other way is almost always a BAD thing for the overall membership. It is hard to put the toothpaste back into the tube.

Paul T
MarkM26
(Illinois)

Posts:9


10/11/2012 8:31 AM  
ChrisM, to answer your questions: "Would you mind explaining a bit on how you arranged terms for the 50% ownership transfer? Why did you decide 50% was better than, say, 5%?

The transfer is accomplished by using a Quit Claim Deed. The reason we did 50% instead of a nominal percentage was two-fold. One, it turns out my friend ended up actually wanting to buy my unit long term, so we plan to someday have him acquire the other 50% from me. Two, although I don't think nominal percentages have been fully court tested yet, as PaulT pointed out, if it looks like a renter...etc. It is true that the way our docs are written, any nominal percentage technically passes the "owner on title" test, but the reality of what a judge would decide might be different. Maybe you'll make it through on the technicality, maybe not.

Something else to consider, is that in my case I'm upside down on my mortgage. My friend didn't "buy" 50% from me, in fact I should have paid him to take 50%, but we worked that out between us (I now owe him a considerable amount of money which we work out in who pays more of the mortgage vs living in the unit, etc). If we sold the unit today for a loss, we would each be on the hook for half of the difference. On the flip side, if you have considerable equity in your unit this works against you if you give away a percentage.

PaulT- I have to disagree with you on this point: "However, in my experience of being Chairman of our 6,400 property Assn Covenants Committee for 16 years, granting exceptions or looking the other way is almost always a BAD thing for the overall membership."

I think your statement was probably true for the first 13 years of your 16 years of experience, but the last 3 years has drastically changed things. In situations where many of the units in a condo complex are upside down on the their mortage, allowing more renters is better than the alternative which is what has happened to us: many people just walked away and their units were foreclosed (some were short saled too, but the foreclosures is what killed us- $200K units getting picked up for $60K). Our complex is in a relatively affluent community, and due to demand, the price of rent here would remain high enough to weed out the type of renters you want to avoid. Unfortunately, those type of renters are just buying our units instead because it's cheaper than renting. Now we are starting to see bad owners instead of bad renters.

I agree that leasing restrictions used to make sense, and maybe 5-10 years from now they will make sense again. However, I personally believe that in the current market, the things you are trying to prevent by imposing rental restrictions in the first place are more likely to occur in a housing market where many units are upside down, effectively backfiring. Also, many smart buyers in today's market won't buy into associations with leasing restrictions and this drives down prices further.

All that being said, Paul T - if there aren't a lot of upside down units in your association, then my statements probably don't apply to your association. In fact, let's revise your statment to this:

"Granting exceptions or looking the other way is almost always a BAD thing for the overall membership unless many units are upside down on their mortgages."
JohnC46
(South Carolina)

Posts:3987


10/11/2012 8:50 AM  
Mark asks a valid question.

Would you rather have renters and the associations dues getting paid or a unit not paying dues?

Also the lower the rent, the more likely to draw "problem" people.

Cheap is as cheap does.....


PaulT6
(California)

Posts:409


10/11/2012 10:02 AM  
Mark & John,

Agree, it is a tough nut to crack. Fortunately we are in pretty good shape, association wise, and I can only speak from my own experiences. About the only thing that has changed is that starting about four years ago, new construction came to a virtual halt. As I mentioned earlier, I feel badly for people that had things go wrong, but it can be a tricky balance to "just look the other way". I am sure each Assn has different and unique problems.

Paul T
FredB4
(Ohio)

Posts:356


10/11/2012 11:15 AM  
more than 50% rentals little chance to sell.
PaulT6
(California)

Posts:409


10/12/2012 6:01 PM  
Posted By FredB4 on 10/11/2012 11:15 AM
more than 50% rentals little chance to sell.




Agree, I am not sure if I would ever buy in another HOA that does not have rental related restrictions.

Paul T
LauraR5
(Tennessee)

Posts:207


10/26/2012 2:07 PM  
I am of the opposite thinking on this. We have had so many foreclosures in our development that it has decimated our property values. I would much rather someone rent their property out than get foreclosed on or do a short sale. Not to mention how much we've gotten burned on HOA dues with bank-owned properties.

The reality is that a lot of people across this country were sold homes when they shouldn't have been. Also, everyone is underwater on their mortgage right now. I have a friend who has had a house on the market for over a year for HALF of what she paid for it. But, because her association had a no-rental rule, there are so many foreclosures that she can't even sell her place at that highly reduced price. Not to mention that empty houses attract crime and squatters. The house I just bought was a foreclosure (because everyone else had to take their houses off the market) and at the end of the street, and when I moved in there were all kinds of shenanigans going on down there, simply because there was no one to alert the police to the activities. Who wants that in their community?

Excessive rentals can affect property values too, and maybe there should be some rules (although our HOA has rules governing rentals, just not any type of ban), but I have seen more harm than good by completely banning renters.

As for the OP, I probably would've done just what he did and transfered a portion of ownership to the potential buyer/renter.


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Forums > Homeowner Association > HOA Discussions > Owner Occupied, No Leasing, Hardship



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