rules for renting

I live in a small 13 lot development. There are presently 4 homes occupied, 1 purchased for resale and not selling, sitting empty, and 1 purchased as a vacation home with the rest being undeveloped lots. The owner of the vacation home has now died and the widow has tried, unsuccessfully, for sometime to sell. Now she is willing to rent to help pay expenses. Our covenants, by-laws make no mention of renting. The only time renting was discussed was when the association was first set up 3 years ago. The minutes read "The rental of your home for a long period of time such as 6 months to a year would be okay if the association was notified of the change in status." There were only four familes present at that meeting. The current owners (2 of the original 4 are no longer owners) feel we should have rules in place for renters before allowing this one owner to move forward with renting. There is a renter awaiting approval. What are we legal to do at this point? Can rules be made about renting? Can someone be denied the rental of their property? What type of rules would be legal? Any points or comments welcome and appreciated. Feel free to ask for clarification if I haven't been specific enough. (I did not own originally.)

This is a repost from another thread to give you some ideas for rental restrictions but remember what ever you do the owner is ultimately responsible for the renter's actions:

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.

Wouldn't it be better to put this language in the by-laws and CCR's instead of the lease agreement? I am faced with this exact problem right now, i.e., illegal renter. The PO is in Mexico and the person renting out his house does not have POA or a lease. The renters are troublemakers and the neighbors have been constantly complaining about them. I have been researching to find a legislative bill similar to the one in Ohio that gives an HOA authority to initiate evictions. Right now our hands are tied and I have talked to the "landlord" and given him a deadline to get POA and a lease turned in. If he doesn't get this done, I'm not sure what our next step would be. Ask him to evict??

GlenL - I agree with you completely. But I am definitely in the minority on this and I was hoping someone would come forward and give some legal information for me to pass on to the Board so they will allow the rental to move forward now and then make rules for the future.

Jan we have that provision (initiate eviction) in our documents courtesy of 5311.19 ORC but I believe we are the only state that currently provides this power by statute. As to where to best place the rental rules in your documents you should consult your HOA attorney however it is often easier to make a rule than to change the Declarations or the By-Laws.

Since there are NO rules about rentals, I would suggest to the owner that he/she wait until guidlelines are written - and then do it ASAP.

To allow someone to rent out could be a problem in the future. It is very difficult to try to enforce something retroactive.

This is too important of an issue to let it go.

Jan - you treat it the same as you would treat problems with any other property in the neighborhood. Your contract is with the owner so you send your notices to the owner and it is up to him to get his renter to comply. If necessary, you go to court and get a judgement against the owner. In extreme cases the judge can order an eviction.

Diane,

I believe you've got it right! Now regarding GA law and the number of occupants vs the number of bedrooms: are you sure that isn't a law that ONLY applies to rental properties or public housing?

Um, the owner is in Mexico, as in a mexican national. We have no "address" to send notices to. The person overseeing his property is also mexican and knows very little english. We have talked to the overseer and we think he understands the situation. I'm just wondering what our next step would be if POA and a lease is not produced soon.

Jan - you still treat them as you would any other property owner. The fact that the owner or his agent is Mexican is irrelevant. You send your initial notice of the violation to the last known address of the owner or their agent. When that doesn't get you any results, you do a title search with the county and send a certified notice to the address that they have for the owner. It's up to the owner (or his agent) to get the notices translated if necessary.

You should have a documented process to follow for your violation enforcement. So long as you follow that process consistently for all owners and make your best effort to send the notices to the owner, then if does it end up in court you should be able to get a judgement against the owner and eviction of the problem tenant. It will probably be a long process, but it can be done.

BTW: What is "POA"? I don't recognize that acronym.

The following Indiana case, decided three months ago may be of some interest here:

"The underlying dispute (in Villas West II of Willowridge v. Edna McGlothin) arose when the homeowners’ association sued an owner (McGlothin) for renting her residence, in violation of a covenant barring rentals in the community. The association sued her (and her estate after she died), arguing that the rental ban was needed to protect property values within the community and was consistent with the association’s obligation to do so.

"McGlothin countersued, arguing that the covenant violated the Fair Housing Act because it had a “disparate impact” on Blacks – that is, it prohibited more Blacks than whites from living in the community, and thus had adiscriminatory effect, even if the policy’s intent was not itself discriminatory.

"The question at issue was not the right of associations to enact restrictive covenants designed to protect property values, but whether this restrictive covenant in this community had an adverse and discriminatory impact on a protected class.

"In this case, the community association had cited its interest in barring rentals to tenants with little interest in maintaining property values. McGlothin contended that the community’s rules requiring appropriate attention to maintenance addressed that concern, and the lower courts agreed that the rules “more than adequately assured a neat, clean and visually attractive environment and a high degree of property maintenance.” As a result, the appeals court concluded, “plaintiff’s justification for the no-rent provision lacks a factual basis and is mere subterfuge, rendering said provision unnecessary and useless.”

"The state Supreme Court reached a different conclusion, finding that the community’s rules did not, in fact, provide “an equally effective means of maintaining property values.” The lower courts erred, the Supreme Court said, by failing to consider adequately the distinction between ownership and occupancy."

Nevertheless,

when the appeals court rejected the rental ban, many association attorneys in other states began to advise association clients that their restrictive rental covenants might be subject to similar legal challenges.

"Exercising an abundance of caution, many attorneys will continue to note that possibility, pointing out that while a higher court has now upheld Indiana’s rental covenants and rejected the argument that they are discriminatory, courts in other jurisdictions could go the other way."

http://www.meeb.com/current_alert2.htm

The Indiana Supreme Court opinion can be found here:
http://www.in.gov/judiciary/opinions/pdf/05150801rts.pdf

Kirk,

Your last sentence is very profound. I have seen in my dealing with associations and have read right here on this site, what I call "Knee Jerk" reactions to situations that are not addressed in protective covenants and sometimes because of a once in a lifetime occurance.

A Board has the fudituary duty to enforce the documents and to protect the association members and the system itself. To change the CC&Rs is not something that should be considered lightly. It is expensive , sometimes devisive and takes time to think things out.

But most of all, any change has concequences, sometimes not positive to the membership. Renting is and always will be so controversial to the membership. The "all renters are bad" mentality is not realistic. I rented when I was younger and I'll bet most of us did so. Yes, we can argue that renters do this and renters do that. and that's the way life is.

Banning renters can also cause a hardship on owners of units where some catastrophic thing happens. Owners are then stuck with no way out of ownership especially in todays market. Many owners who have lost their homes have to have a place to go. Renting is an only option for them.

I am in favor of very strict renting rules and to prevent speculators from gobbling up all of these foreclosures , more rules need to be enacted by Boards. Times have changed and those associations that don't adapt to the way the country is changing will become lost in this new market of homeowning. So if you want to control renters, do so by guidelines that control how the association deals with them, not by banning them.

Ah. That make more sense. Usually in this forum, I've seen POA used for "Property Owner's Association", which just didn't make sense in the context of your posts.

Thanks for the clarification.

SG2,

I think we discussed this rental limitation on another thread. I researched the FHA website and found that they require a 51% owner occupancy. Note this is only for FHA financing.