Owner Occupied, No Leasing, Hardship

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.


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.


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.


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.


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.

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?

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.

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...

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.

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.

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)?

Rent to own is still renting...his documents prohibit leasing or renting of the unit.

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.

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 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

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.

they can restrict rentals if it is a recorded declaration...

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.

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.

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

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.

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."

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

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

Paul T