Get 1 year of free community web site hosting from Community123.com!
Thursday, November 26, 2020











HOATalk is a free service of Community123.com:

Easy to use website tools to help your board
Only members have access to all features.
Click here to join HOATalk for Free! Members click here to login and access all features.
Subject: HOA renting out amenities?
Prev Next
Please login to post a reply (click Member Login on the menu).
Author Messages
GeorgeS21
(Florida)

Posts:3411


11/05/2020 3:00 PM  
Hi All,

314 single family house HOA with paved walking path, large gazebo and park, playground park.

I am on the Board.

We have always supported use of the gazebo as a venue for member events, including small weddings of members/fsmilies.

New president wants to rent out the gazebo to establish a revenue stream for the HOA.

The usual concerns being voiced by the board:

- not for profit status
- different tax return?
- insurance
- management of the coordination
- damage to the amenity
- county requirements for gatherings based on size (ex: portapotties?)
- damage bond/deposit
- does this sort of thing require membership approval?

Thoughts?

JohnC46
(South Carolina)

Posts:10130


11/05/2020 3:13 PM  
Posted By GeorgeS21 on 11/05/2020 3:00 PM
Hi All,

314 single family house HOA with paved walking path, large gazebo and park, playground park.

I am on the Board.

We have always supported use of the gazebo as a venue for member events, including small weddings of members/fsmilies.

New president wants to rent out the gazebo to establish a revenue stream for the HOA.

The usual concerns being voiced by the board:

- not for profit status
- different tax return?
- insurance
- management of the coordination
- damage to the amenity
- county requirements for gatherings based on size (ex: portapotties?)
- damage bond/deposit
- does this sort of thing require membership approval?

Thoughts?





Add parking and traffic concerns to the above list.

Pres sounds like a yes we are far in debt but let us have a bake sale type simple thinker.
AugustinD


Posts:4421


11/05/2020 3:22 PM  
What do your HOA's governing documents say concerning "use of common elements"?

If this common element were rented out, then first, the board would likely be taking away a right of members to use the common element for the period for which the gazebo was rented. I do not see how the Board has this authority under the covenants and law.

I'd wager that, to do this lawfully, you all would have to amend the governing documents by vote of the membership.
AugustinD


Posts:4421


11/05/2020 3:24 PM  
Posted By JohnC46 on 11/05/2020 3:13 PM
Pres sounds like a yes we are far in debt but let us have a bake sale type simple thinker.
I agree. I would wager he/she is the type that does not know a HOA rule from a HOA covenant and is going around saying, "I do not know why other Boards did not think creatively of other ways to boost revenue besides raising the assessment... "
AugustinD


Posts:4421


11/05/2020 3:30 PM  
From FS 720.304:

"All common areas and recreational facilities serving any homeowners’ association shall be available to parcel owners in the homeowners’ association served thereby and their invited guests for the use intended for such common areas and recreational facilities. The entity or entities responsible for the operation of the common areas and recreational facilities may adopt reasonable rules and regulations pertaining to the use of such common areas and recreational facilities. No entity or entities shall unreasonably restrict any parcel owner’s right to peaceably assemble or right to invite public officers or candidates for public office to appear and speak in common areas and recreational facilities."
GeorgeS21
(Florida)

Posts:3411


11/05/2020 3:54 PM  
Should have noted - we have fully funded reserves and don’t need the additional funds.
MarkM19
(Texas)

Posts:684


11/05/2020 4:31 PM  
George,
So your HOA is fully funded which is amazing. Congrats to all they help make your Community so fortunate. So things are going so well the board member wants to sign up for potential problem and possibly lawsuits. Sounds crazy to me.
MelissaP1
(Alabama)

Posts:9714


11/05/2020 4:45 PM  
Is everyone skipping over the reason for doing this is to generate HOA revenue??? A HOA is funded by it's members only via dues. It is to collect as much as it spends. So it is NOT into collection money outside of that. That is considered a profit and subjected to taxation. Plus your ruining your assets by allowing outside non-members using it.

Former HOA President
MarkM19
(Texas)

Posts:684


11/05/2020 4:52 PM  
Melissa,
I think he mentioned the Tax issue in the OP. As I mentioned I think it is a bad idea and I continue to shake my head as I think about it more I wonder if he has someone in mind that he is creating a rule someone special. I can't think of any other reason why any HOA would consider this. What are the other board members saying about this idea? All it takes is a majority of like minds to kill this bad idea.
KerryL1
(California)

Posts:7660


11/05/2020 5:13 PM  
How will the Board vote on this idea, George?
GeorgeS21
(Florida)

Posts:3411


11/05/2020 8:30 PM  
Kerry,

I dunno ... new president, but my sense is most board members would be concerned - and, as noted, not likely to see an upside.
MelissaP1
(Alabama)

Posts:9714


11/06/2020 4:24 AM  
I just don't think the new President understands how a HOA works. Have seen this before. They heare "corporation/business" and mind goes to "Make money". They don't get that not for profit means. It's NOT a charitable corporation. It isn't to make a "profit".

You get money ONLY from it's membership. That is by Dues and Special assessments. Fines/late fees are NOT for making money. Those are punitive measures. Having a "bake sale" or renting out amenities is NOT on the approved way of generating money. A committee may be able to do a "bake sale" for it's needs if it isn't being funded by the HOA budget. Otherwise you ONLY collect by Dues/Special Assessments.

Plus when you rent out amenities you end up needing more maintenance or replacement expenses. There is more wear and tear increasing the long term maintenance expenses. Not a good idea.

Former HOA President
LetA
(Nevada)

Posts:1047


11/06/2020 6:04 PM  
HOA's are not a for profit entity. If your Board President did this, It would toss your HOA into some bad, bad jujus. Your D&O insurance premiums would go up, and you would have to have business insurance, add to that permits and business licenses. Thats just for starters. Your corporate council needs to set this guy straight.
BobbyL1
(California)

Posts:19


11/08/2020 4:28 PM  
Don't forget the income tax implications here!
GenoS
(Florida)

Posts:4158


11/09/2020 10:41 AM  
Normally an HOA is not required to be ADA compliant but if you're going to hold it out as something available to the public then ADA compliance might become mandatory.
AugustinD


Posts:4421


11/09/2020 11:19 AM  
Posted By GenoS on 11/09/2020 10:41 AM
Normally an HOA is not required to be ADA compliant but if you're going to hold it out as something available to the public then ADA compliance might become mandatory.
Aside for HOAs/Condos in general: I believe the Fair Housing Act's/HUD's requirements for accommodation of disabilities result in a distinction without a difference.
SheliaH
(Indiana)

Posts:3577


11/09/2020 12:41 PM  
AugustineD noted renting out the gazebo might prohibit the homeowners from using it, and since part of their assessments pay for the upkeep, I agree this wouldn't be a good idea.

If the new board member would like to research all the concerns being raised by his/her colleagues and bring a report and recommendation, tell him/her to have at it. Otherwise, no. As was also noted, this is a non-profit organization and I'd be most worried about the tax and liability implications. If a homeowner's friend is interested in renting the gazebo he or she can go through the homeowner - make it a requirement that the homeowner be present during the event. You can work with your association attorney on the other stuff (I'm thinking a waiver signed by both the homeowner and renter would be appropriate), and you can charge a separate fee for people who rent through the homeowners to cover damage deposits and what not.

You might also consider prohibiting rentals if the homeowner is delinquent in assessments - that's my community policy regarding access to the community amenities. It was very effective when we had the pool.
ND
(PA)

Posts:511


11/10/2020 4:35 AM  
I think I'm in the minority here . . . but if done properly (considering necessary tax, liability, legal issues, and other pros/cons/issues already mentioned); if done in the best interests of the membership; and if not prevented by your HOA documents and state HOA law, I think it's entirely possible to rent out your gazebo and generate some income.

Certain folks keep harping that an HOA is ONLY FUNDED BY ITS MEMBERS. I don't think that is accurate or needs to be the case. A quick example negating that statement is the interest gained on bank accts or other investments (CDs). This is income not from the members.

I think folks are confusing income with profit. Among other things, being a non-profit generally means that for the year, income is equal to expenses. If income exceeds expenses, then there is profit which is generally not permissible. If the income were to be generated through assessments only (paid by all members), then that is one way to do it. However, if there were other sources of income that then lessened the assessments owed by the members; then this is another way to do it.

A quick Google search brings up many ideas for how HOAs can generate income from things that are not only member-paid assessment. And nowadays, depending on each HOA's and each member's own situation, it may be entirely necessary to find other sources of income.

Again, there are certainly pros and cons to renting out your own HOA amenities and finding other sources of income, but I think it's allowable and if done properly can be a great way to reduce the financial burden on an HOA's membership.
MarshallT
(New York)

Posts:114


11/11/2020 6:11 AM  
Hi,

Sounds like you've identified most of the key issues. Now the big question is, does the community support this proposal?

I think speaking to a lawyer is a good first step. Figure out if the risks are worth the rewards. Then, members will need to vote on the issue.
GeorgeS21
(Florida)

Posts:3411


11/11/2020 8:20 AM  
Thanks to All!

Yes - I think the Board understands the issue - and, I have provided a lot of pro/con feedback to the board from reading on the topic, and from the advice provided herein, as well.

The community will first hear of this in a few weeks - and, to be clear, the amount of money generated by renting this amenity out would probably not total $1,000 on an annual basis - small peanuts. The community is broadly happy and not involved - we provide LOTS of information, status major projects often, have a boring board interested in maintaining property values, activist on inspections and standards - but otherwise not doing anything weird. Have 2-3 people attend the online Board meetings, 4-5 at in person meetings (pre-C19), 10 at annual meetings with lots of proxies for quorum.

Once the board meets and this is discussed - assuming the president even wants to put it on the agenda - I suspect it will die slowly, as many unnecessary things like this do :-)

Thank you All, again!
Please login to post a reply (click Member Login on the menu).
Forums > Homeowner Association > HOA Discussions > HOA renting out amenities?



Only members have access to all features.
Click here to join HOATalk for Free! Members click here to login and access all features.







General Legal Notice:  The content of forum messages are from the posting member and have not been reviewed nor endorsed by HOATalk.com.  Messages posted by HOATalk or other members are for informational purposes only, are not legal or professional advice and do not constitute an attorney-client relationship.  Readers should not act upon this information without seeking professional counsel.  HOATalk is not a licensed attorney, CPA, tax advisor, financial advisor or any other licensed professional.  HOATalk accepts ads from sponsors but does not verify sponsor qualifications nor endorse/guarantee any sponsor's product or service.
Legal Notice For Messages Posted by Sponsoring Attorneys: This message has been prepared by the sponsoring attorney for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute an attorney-client relationship. Readers of HOATalk.com should not act on this information without seeking professional counsel. Please do not send any sponsoring attorney confidential information unless you speak with the sponsoring attorney or an attorney from the sponsoring attorney’s firm and get authorization to send that information to them. If you wish to initiate possible representation, please contact an attorney in the firm of the sponsoring attorney. Sponsoring attorneys that post messages here are licensed to practice law in a specific state or states as indicated in their message signature or sponsor’s profile page. (NOTE: A ‘sponsoring attorney’ is an attorney that is a HOATalk.com official sponsor and is identified as such in the posted message or on our sponsor page.)

Copyright HOA Talk.com, A Service of Community123 LLC ( Homeowners Association Discussions )   Terms Of Use  Privacy Statement