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Subject: Limit Ownership
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JoyceR2
(Virginia)

Posts:149


12/12/2018 8:09 AM  
Does anyone have any expertise on this subject?

Condominium Community:
Does a Board have the authority solely to limit ownership or would adoption of this language require a majority vote by the entire association?

In the absence of any language in governing documents:
Can the Board draft & adopt language to prohibit ownership of more than two units when the owners are related or the individuals have a financial interest in more than two units.

The concern is investment owners seeking to use the units for rental properties.

AugustinD


Posts:1583


12/12/2018 9:32 AM  
Is the Condominium Declarant controlled or owner controlled?

If owner controlled, and assuming the governing documents do not give the board any powers to limit ownership, then I think you are correct that a vote of the membership is needed to limit ownership. Whether it is a simple majority; 2/3rd's of owners; 3/4's of owners; or all owners needed for passage depends on what the governing documents say. Though even if the vote is sufficient to amend, I can see some viable court challenges.

Virginia's condominium act appears to provide some further protections to buyers of condo units, regarding renting the units:

§ 55-79.87:1. Rental of units.
A. Except as expressly authorized in this chapter or in the condominium instruments or as otherwise provided by law, no unit owners' association shall:

See rest at https://law.lis.virginia.gov/vacodepopularnames/condominium-act/
TimM11


Posts:253


12/12/2018 9:57 AM  
It's possible to limit rental activity without limiting ownership. Why do you feel you need to limit ownership to do this?
SheliaH
(Indiana)

Posts:2465


12/12/2018 10:02 AM  
AS Augustine said, something like this would likely have to be approved by the owners. We aren't attorneys, so you'll have to go to your association attorney for more information.

You say the concern is investment owners using the units as rental properties and you'll see conversations all over this website about the pros and cons of limiting rentals. In fact, I believe there's a recent conversation where a reader wondered about the best way to keep track of who was renting out the unit, which unit didn't have the owners living there, but relatives were there, which units were owner occupied - and how to know if anyone was lying about any of it. Basically it's a ongoing process that can take a considerable amount of time and money, so the question becomes whether the owners are wiling to spend it. This on top of the "you can't tell me what to do with MY property" crowd who'd dash off to court if you tried to limit their right to rent. That may or may not work, depending on your state - in mine, there's case law that supports a HOA's ability to limit rentals (which I won't get into - your attorney can research all that).

I live in a townhouse community with way too many rentals for my taste, although the crazier tenants and greedier owner-landlords seem to be gone (the owners weren't paying their assessments and foreclosure or the threat thereof took care of them). These days, I believe the key is rule enforcement - if this is a homeowner association, I think the responsibility of homeowners and tenants goes up a notch or two (or more) because this isn't an apartment complex. When homeowners understand that they are responsible for their tenants behavior and will be held responsible for any foolishness, that might reduce the number of investor owners because they don't want to be in a community where people can and will go after them if they only care about the rent check clearing and nothing else.

Your board may want to investigate the issue further, perhaps looking at other companies to see what they do regarding limiting rentals (e.g. requiring owner occupancy for two years before the home can be rented out). Keep the homeowners in the loop, asking them about their concerns regarding rentals and that can help influence what sort of CCR amendments you might need. Talking to a few realtors about rental homes and their impact on HOA communities (it will vary) along with the property values everyone obsesses about would also give you something to think about.
DouglasK1
(Florida)

Posts:1393


12/12/2018 11:23 AM  
I agree with others that such a restriction would probably require amendment of the covenants. I'll also add that any such restriction would probably be easily circumvented by creating multiple shell corporations/LLCs with different sets of officers. In most states actually determining ownership in a corporation would be challenging.

Escaped former treasurer and director of a self managed association.
JoyceR2
(Virginia)

Posts:149


12/12/2018 11:51 AM  
We attempted to pass a resolution for a 60-40 on rentals. My preference would be 70-30. As with many other HOA concerns folks do not respond.

Board members are still working on this & intend to go door to door for signature approval to try & get this passed.

Looking for alternative possibilities especially with a single investor(s) or several that could collectively take control of the association by majority.

I am aware of the pros & cons of limiting rentals but weigh on the side of protecting the best interest of all to the extent possible.

As one person stated this is not an apartment complex & have worked hard over the past 3 years to improve the community & see property value increasing which is another way to discourage investors to some degree.

Appreciate all the responses. Thank you so much for your insight, knowledge & wisdom.
RichardP13
(California)

Posts:3518


12/12/2018 12:29 PM  
Another thing you will need to consider. When amending the CCRs to limit rentals, you mostly will have to have the approval of the mortgage holders also. And their percentages are generally higher than homeowners.

Been there, Done that
JoyceR2
(Virginia)

Posts:149


12/12/2018 12:42 PM  
Wow> that was not info we had knowledge of. Thank you!
JoyceR2
(Virginia)

Posts:149


12/12/2018 12:47 PM  
Great points on enforcement/foreclosures... Did get a couple of folks concerned about a clause that they would have to live in the unit for 1 year before renting.

Some lenders restrict selling for a period but not sure if they restrict renting.

Thank you Shelia.
GeorgeS21
(Florida)

Posts:1208


12/12/2018 2:42 PM  
Hmmm ... would a resolution be sufficient? Wouldn't a CCR mandated percentage be required and then it would require an amendment to the CCRs?
JohnC46
(South Carolina)

Posts:8268


12/12/2018 4:09 PM  
Our Covenants restrict rentals during the first year of ownership. We believe this makes us unattractive for speculators. A similar Covenant Amendment just might be easier to pass then a tougher restriction.

We know we have had some violations but they are among families like parent buying, child lives there and in one case a child buying and their parent lives there. We keep a blind eye toward these especially when there have been no problems. In one problem case, the parent came down on their child having loud parties after we contacted the owner/parent.


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