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Subject: Is there a way to prevent renters in an HOA?

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GaryT
(Illinois)

Posts:4

06/24/2008 6:17 PM
We have an association of 95 single family homes around a nine-hole golf course in IL. Recently, a couple of our homeowners who have moved from the area have begun renting their houses out because they are unable to sell in today's market. Other homeowners have asked if we can prevent the homes from being rented. Our bylaws and CC&Rs are silent on the matter. Any suggestions?

MaryA1
(Arizona)

Posts:1556

06/24/2008 6:32 PM
Posted By GaryT on 06/24/2008 6:17 PM We have an association of 95 single family homes around a nine-hole golf course in IL. Recently, a couple of our homeowners who have moved from the area have begun renting their houses out because they are unable to sell in today's market. Other homeowners have asked if we can prevent the homes from being rented. Our bylaws and CC&Rs are silent on the matter. Any suggestions? Gary, You can amend the CCRs to state "no rentals". Many assn's have done this but it can pose problems. One big problem being that lenders are unwilling to grant loans for homes in s/d's with a high rate of rentals. I'm sure this has been discussed here before as it is a recurring topic. But, the thing that strikes me about you posting this is the fact that h/o's in your HOA want to prevent this even knowing the rentals are due to the state of the housing market. Don't any of these h/o's realize that perhaps tomorrow they might be in the same boat? What the board should be doing is drafting a rental policy to ensure that renters receive a copy of the CCRs and any other rules and that property owners who are renting their property inform the assn of their current address and supply a copy of the rental contract.

KirkW1
(Texas)

Posts:679

06/24/2008 7:47 PM
I guess I will just say that I don't get it. I suppose that some people would rather have a couple of foreclosures in the neighborhood over rentals. I will say that I don't see how that makes a neighborhood better. I think you are much better focusing your energy on making sure the homes stay in compliance with the neighborhood standards. When banks write mortgages they are concerned with making sure that the house really is worth what the documents say. And mortgages are written all the time for houses in areas with a lot of rentals. If you choose to focus on maintaining your neighborhood and its value, you will naturally reduce the number of renters in it. And the houses that are rented will command a better price.

JimM7
(Florida)

Posts:54

06/25/2008 6:35 AM
Hi folks......... Interesting issue. The way we handle it , and it works, is to make the PROPERTY OWNER totaly responsible. We require an occupant certification because our docs have a minimum age requirement. All issues are refered to the property owner and everybody understands it. We are a community of 400+ homes.

DonnaS
(Tennessee)

Posts:2299

06/25/2008 6:54 AM
Gary, Put the shoe on the other foot--yours. You have to moove for a couple of years due to a job transfer or having to take care of someone but you really love your house and area. You want to come back OR you want to sell and cannot. What will you do to pay the bills? RENT IT OUT!!!

BradP
(Kansas)

Posts:1742

06/25/2008 7:13 AM
I agree with Kirk and Donna...I believe the job of an HOA is to protect its members and the association. Life brings on crazy circumstances, sometimes we have to move to another state and can't sell the home. Focus more on compliance, to me it is easy to deal with an absent landlord than a bank....

GeraldT4

Posts:908

06/25/2008 8:39 AM
GaryT - "homeowners have asked" which means you and the Board are in the position of educating them on the pros and cons. Not sure what your opinion is on the matter, you don't say. My belief is there are cons in restricting owners from renting in this or any market. Reason is that it will force some to sell perhaps at a loss. This hurts the overall value of the community because of the comps that are looked at in the appraisal process. But that too many rentals is not a good thing either. Agree with focusing more on providing renters the cc&r's. The owners of the homes, rented or not rented, are always the primary contact on the hook to make sure that all those residing in the home comply with the rules and regs. It is not appropriate that the association Board deal direct with the renter. Instead it's the owner that is ultimately responsible.

JohnK3
(Pennsylvania)

Posts:243

06/25/2008 9:09 AM
IMHO, if there is a specific problem(s) with a specific renter(s), deal with the problem(s) with the tenant or the owner. If not, I don't see a downside, except that some of your HOs might have a prejudice against renters. The HOs were probably renters at some time in their lives, and it wouldn't hurt to remind them that all renters are not bad people, esp. if they care for their temporary residences and your neighborhood shows well. As noted above, dealing with a bank is a much less favorable option.

DonnaS
(Tennessee)

Posts:2299

06/25/2008 9:41 AM
Seeing that I have dealt with anti renter associations and I have 2 rentals, I always want to know--who came up with the concept that all renters are BAD? There are bad ones and very good ones. There are really bad owners and really good ones. So explain to me why a ban should be on renters as a general policy. I have heard every and all excuses why they are bad but I never hear any valid good reasons.

MaryA1
(Arizona)

Posts:1556

06/25/2008 10:06 AM
I'm with you on this one, Donna. Many people think renters do not maintain the property but I've come across many, many property owners who keep their homes (in and out) in a shambles! I'd much rather judge the person not the title (renter vs owner)! But not only people do this -- banks, lenders, cr. card co's, ins co's, etc., etc.

BrianB
(California)

Posts:1591

06/25/2008 11:52 AM
Posted By DonnaS on 06/25/2008 9:41 AM Seeing that I have dealt with anti renter associations and I have 2 rentals, I always want to know--who came up with the concept that all renters are BAD? There are bad ones and very good ones. There are really bad owners and really good ones. So explain to me why a ban should be on renters as a general policy. I have heard every and all excuses why they are bad but I never hear any valid good reasons. the same people who came up with "people under 54/40/18/10 are always noisy" and "this breed of dog is a killer" and "those people ruin neighborhoods". basically, bigots who use stereotypes and subjective opinions to judge things, rather than facts, behaviors/actions, and objective data.

MicheleD
(Kentucky)

Posts:1444

06/25/2008 12:49 PM
Our board, at the repeated request of a group of homeowner "squeaky wheels" pursued the feasibility of altering our CC&Rs to prevent rental of the homes. (we are single-family, detached homes as well). We did a thorough investigation of the question and ran it by 3 different attorneys, each of whom are well-versed in HOAs and contract law and so forth. Each one strongly recommended against it, even though they said "technically" you could get the CC&Rs changed. Their reasoning was based on judges' tendency to uphold homeowners in cases that unfairly limit their "fair use" of their own property, even those judges that are "favorable" to HOAs and CC&R enforcement. They will make you prove that the HOA is "harmed" if it doesn't alter the CC&Rs in such an extreme, and what many consider, over-reaching affect AFTER the fact (meaning AFTER the residents/owners have already agreed to the CC&Rs that were in place at the time of purchase). They consider this a much stronger abridgment of an owner's fair use than say, amending to ban sheds or something. The proof they will request of you would be along the lines of trying to prove that enforcing the CURRENT CC&Rs against the owner, whether a resident owner or not, is not possible. What difference, the judge will ask, will it make if you are enforcing against a live-in homeowner who is violating the deed restrictions as opposed to enforcing against one who is not living there, but his renters are and they are violating the deed restrictions? In other words, in either case, the OWNER still has to ensure that the CC&Rs are upheld, whether he is the one violating them or his renter is. So if a homeowner were to take the HOA to court, he would have a better chance of showing that the CC&R amendment preventing him from renting his home causes him more harm than it does the HOA for not having it.

KirkW1
(Texas)

Posts:679

06/25/2008 1:26 PM
I would highly recommend that you point out to the owners asking that what they want to do would harm the people they used to call friends. And that the issue would probably cause a lot of strife and could easily cause more damage then any number of rentals. If they insist, then point out that it will take 75% of the people saying yes to such a change. Not 75% of those bothering to vote, but 75% of the total homes owned. Most CC&R changes require that of the total homes, not of a quorum setting the bar extremely high. As for renters not taking care of things as well as an owner, in my opinion, the problem is more often the landlord then the tenant. I can say with clarity that the house I used to rent would have been much better off if my landlord had let me improve the place at her cost. As just one example, some painting needed done and she would only agree to pay for primer. I thought it was just her, then discovered that many a landlord seem only interested in maximizing the immediate return. But you should focus on keeping the homes looking the best they can. If the homes are well maintained, then the values will remain. The value of a home is determined by how much similar homes in the area are selling for. A well kept home generally sells for more. And if you always focus on maintaining your neighborhood the rest will take care of itself. I am convinced that an empty home is a bigger drain on value then a rented home. In fact, I can't think of a single place where I have seen a house that looked better empty then occupied. Not saying it never happens, but...

GaryT
(Illinois)

Posts:4

06/25/2008 1:59 PM
Thank you all for your responses! I'm amazed at the number I've gotten to this post. You all bring up some very good points. Personally, I have tried to look at both sides of any issue and have done my best to not encourage random attempts to change the CC&Rs. We do make sure any renters are given the same welcome packet, which contains information about our restrictions, as any home owner. That is delivered in person. What they do with it after we leave is up to them. We've not had a specific problem as yet, but you are right, some of the owners have preconceived notions about renters. What set off the questions was actually a builder who had put up two spec homes at the front of the subdivision and has been unable to sell them as yet. Last week, For Rent signs went up along with the For Sale signs. Of course, for some of our owners, that meant the sky was falling. Your suggestions about educating the renters that they are still expected to comply is a good one, and we are doing our best to do that right now. I think we can do a better job of reinforcing those expectations on the lot owners, though. As long as we stay on top of things, I believe we can control the situation without having to amend our CC&Rs, which, as one of you stated, does take a vote of at least 75% of the lot owners. That would be hard to get, I believe. Again, thank you for all your input. This will help a lot!

EllenS1
(Florida)

Posts:321

06/25/2008 2:02 PM
KirkWI, I agree with you. Generalizations are never a good thing. Renters get a bad name because of a few. We have some owners here who let their property go to pot until they reeive a notice and then may or may not address the problem. I've rented only a few times in my life but when I did the property was usually cleaner and in better repair than when I moved in. We have some owners here in our HOA who bad mouth renters. I had a couple who rented and lived next door to me who were great and finally moved out and bought their own home because the owner refused to do anything about a roof leak.

KrystalA
(Iowa)

Posts:59

06/25/2008 2:23 PM
we are in the same position now too - we want to limit the number of rentals because the more rentals you have, the harder to get FHA loans - they just see to many rentals as a risk because the homeowners aren't on site. We have good and bad, but sadly the homeowners of these units tend to not pay association dues on time, they never give notice to the renters of our rules, and refuse to pay the fines assessed of the renters are in violation. I say look into a set limit that will not hurt the values, but also accommodate the housing market.

GlenL
(Ohio)

Posts:1221

06/25/2008 2:39 PM
Gary I believe a better way to go is to put in place protections to protect your Association from bad renters and landlords. I believe it was Donna that mentioned she had property in an Association that required an owner to occupy the home for two years before it could be rented to prevent speculators. This of course would not affect the houses currently for rent but could be phased in; I would however have a hardship provision where an owner could apply for a variance on this as emergencies do happen. While the homeowner is ultimately responsible for their tenant's actions, you can add some protections by requiring certain language in the lease or as an addendum to the lease. Some of the things I would suggest in no particular order are: 1. Make the minimum rental term at least 6 months preferably a year. 2. Add something to the effect of if the homeowner becomes delinquent with their assessments then the Association can collect them and any past due amounts directly from the tenant and the owner must credit the money paid by the tenant as rent. In other words if your monthly assessment is $150.00 and the H/O is delinquent then the BOD collects the $150.00 from the tenant directly. When the tenant sends the owner his rent minus the $150.00 the owner must credit it as if the tenant paid him in full. 3. I would also include language that if you have amenities (pool, tennis court etc.) the owner either assigns the amenity to the tenant and cannot use it for the term of the rental or keeps it for their self and the tenant can't use it. 4. Give the Association the power to initiate eviction actions against problem tenants with the cost to be born by the homeowner. And finally when you have the whole thing drafted have it looked over by an attorney to make sure it doesn't violate the landlord - tenant law in your state and adequately protects your Association as much as possible.

DJ1
(Ontario)

Posts:422

06/25/2008 7:00 PM
Mayn renters do become owners eventually. Who knows they might like the area so much they buy. Not everyone gets to do a trial run before buying. Could improve the market.

GlenL
(Ohio)

Posts:1221

06/25/2008 9:10 PM
Posted By DonnaS on 06/25/2008 9:41 AM Seeing that I have dealt with anti renter associations and I have 2 rentals, I always want to know--who came up with the concept that all renters are BAD? There are bad ones and very good ones. There are really bad owners and really good ones. So explain to me why a ban should be on renters as a general policy. I have heard every and all excuses why they are bad but I never hear any valid good reasons. Donna I believe most of these people are flashing back to when they were renters. Almost everybody had a friend whose apartment was party central. Now 98% of the people in those building were decent hard working people who treated the property well but they suffered at the hands of the 2%. And a lot of it is perception; people are inundated with negative images of rentals, whether it may be stories of slumlords or the news reporting the number of other problems prevalent in rental properties. Rarely do people who get busted selling or manufacturing drugs from the safety of their own home, it's almost always reported as a rental property.

DJ1
(Ontario)

Posts:422

06/26/2008 5:35 AM
So Glen, when the renters finally own homes do they no longer party? How Sad to get old.

JohnO6
(Georgia)

Posts:52

06/26/2008 5:48 AM
Also recognize that this isn't necessarily an "all or nothing" issue. Our community amended our CCRs to allow no more than 5% of the current homes to be rented at any given time. The reason for doing this is that the owners felt that a community where a large percentage of homes are rentals takes on a different character than one that is primarily occupied by owners. While this may sound like a logistical nightmare, with the guidance of our experienced HOA attorney we have been able to (a) get the 2/3 majority required to pass the amendment, and (b) manage the process effectively and efficiently thusfar.

DwightT
(Idaho)

Posts:342

06/26/2008 7:51 AM
Posted By GlenL on 06/25/2008 2:39 PM Gary I believe a better way to go is to put in place protections to protect your Association from bad renters and landlords. I believe it was Donna that mentioned she had property in an Association that required an owner to occupy the home for two years before it could be rented to prevent speculators. This of course would not affect the houses currently for rent but could be phased in; I would however have a hardship provision where an owner could apply for a variance on this as emergencies do happen. While I generally like the idea of requiring that the owner occupy the home for a certain amount of time before renting, I would also like to emphasize that there should be allowances for the Board to grant exceptions to this one. While our HOA does not currently have any such restriction, we have been considering ammending our docs to include one. However, we have one home that is making me rethink the issue. The home was purchased four years ago by a real-estate agent who did live in the home for a short time. However since the market was so good at the time, she found another home in a different neighborhood and moved into that one and rented out the one in our neighborhood. Mostly that wasn't a problem as the initial renter kept the place up and followed our rules. However, with the southward turn in the economy and the tanking real-estate market, the owner was unable to make the mortgage payments or the HOA dues and has pretty much dropped out of site, and the last renter basically trashed the place. The bank took the property back, but with the condition of the house (again along with the economy), they had a hard time selling it. Meanwhile we had an eye-sore property and an out-of-state bank/owner who wasn't taking care of it. Enter the house-flipper. The property was recently sold to a gentleman who has come in and repaired the landscaping and is generally refurbishing the property. He will probably eventually sell the place, but since the market still is not good for sales for now he will rent the place out. If our docs included the owner-occupied restriction (or if it had the restriction without the ability to grant an exception), he probably wouldn't have been interested in buying the property and we would still have an eye-sore that nobody else would want to buy. So again, be careful what you wish for. It may come back and bite you in the end.

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