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Subject: Condo rental cap selection process
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Author Messages
PhilipB4
(North Carolina)

Posts:10


11/17/2020 12:57 PM  
Once a cap is reached what are the selection process options which creates fairness between owners who are currently renting and owners who want to rent.
MelissaP1
(Alabama)

Posts:9714


11/17/2020 2:41 PM  
Good luck on that. Your HOA most likely can't really enforce it. You can write as many caps as you want but doesn't mean you have any actions to punish/enforce. Is there a fine schedule in place?

Plus need to check into STATE law. That overrides your HOA's rules. Many states don't necessarily allow rental limits.

Former HOA President
JohnC46
(South Carolina)

Posts:10130


11/17/2020 2:52 PM  
Phil

Rental limits are a very hot topic. Unless expressly in one's Covenants/Bylaws that all agreed to when they bought in, they usually are not enforceable.

Many BOD's try to pass Rules & Regulations about rentals that are neither enforceable nor legal. Where did your rental limits originate from?
SheliaH
(Indiana)

Posts:3577


11/18/2020 5:23 AM  
That should have been part of the process when this policy was established (whoops!) This is also one of the unintended consequences of rental caps no one thinks about. There's no mandatory selection process or criteria, so your board will have to do the work and figure out what works best for your community.

This would also be an interesting topic for a special homeowners meeting where people can debate and offer suggestions, so you may want to start there (yes, it will get heated, so be careful and set some behavior standards before you start). And check with your association attorney to see what you can and can't do.

Generally, I'd say owners will have to claim hardship - explain why you should be allowed to rent and provide written verifiable documentation. For example, did you accept a job out of town and need the income to cover housing expenses until this one is sold? That would go further with me than someone who simply wants to make money - I live in a townhouse community and that's what happened here.

JeffT2
(Iowa)

Posts:570


11/18/2020 7:58 AM  
One system is first come first served. This means that your existing rentals were first, so they continue and cannot be stopped. Any new rentals over the limit cap are simply not allowed, until one of the existing rentals stops being a rental.

If necessary or desired, you can start a registration system, where all the rentals are registered with the board. When there is a request for a new rental, it goes into the registration system on a first come first serve basis and that rental request is given priority over any requests for registration that are received at a later time.

If a request is made but then the property is not rented out, then the registration request should only remain valid for six months (or whatever time limit you want), and no automatic renewal. This prevents an owner from making the request over and over just in case they might rent some day.

If a property changes hands, the new owner must register it in the system, which means it may not be able to be rented if you are over the cap and there is another request already in the system ahead of the new owners request.

It's good to have a hardship procedure, which means your community can go over the limit if necessary to accommodate a hardship such as loss of job, illness, death, or rent while selling.
SheliaH
(Indiana)

Posts:3577


11/18/2020 8:35 AM  
Jeff's idea is an interesing one. I might add something to my documents stating people cannot rent at all for, say two years, after the house is transferred or sold. I've heard of some communities who've put that in their CCRs to reduce the number of investors.

My only concern with registrations is that people lie a lot, and who's to say you don't go to a house that you know is being rented, but the tenant says something like "oh, this is my uncle's house and he's letting me live here for free - I just pay utilities and what not." How you prove or disprove that? And what happens when you start seeing a series of nephews, nieces, grandchildren, in-laws and other folks moving in and out of the community?

We failed at getting a rental cap in our community and I never did find out for certain if the number of rentals depressed property values. Personally, I think there was some impact, but all the delinquencies we wrestled with while I was on the board likely had a larger impact. Nowadays, I think rules enforcement is the key. Be fair and consistent with everyone, because you shouldn't be able to tell if a house is being rented or owner-occupied because everyone's in compliance. That may also help keep out the slumlords.
CathyA3
(Ohio)

Posts:1368


11/18/2020 9:53 AM  
Posted By SheliaH on 11/18/2020 8:35 AM
.... snip ...

We failed at getting a rental cap in our community and I never did find out for certain if the number of rentals depressed property values. Personally, I think there was some impact, but all the delinquencies we wrestled with while I was on the board likely had a larger impact.
... snip ...



Rental caps can affect property values.

At a certain level, lenders will no longer approve mortgage loans or they will charge higher interest rates. The higher interest rate definitely lowers the price people can pay for a home. And ineligibility for mortgages at all will limit the pool of buyers to those who can pay cash. Property values tend to rise when buyers compete for homes, and both of these things depress competition.

I also think that high rental rates also make a community less desirable in general, although I don't know how to quantify it.

For one, rental communities can look shabbier, although this is not always the case. For another, if I'm going to live around a bunch of renters, then I want the benefits of being a renter myself (ie. no responsibilities and the ability to leave whenever I get my neck full). Owners in a community with a high level of renters have the worst of both worlds: the responsibilities and liabilities of home ownership along with the disadvantages of living in a rental community.


As for the OP's question, I think rental caps are arbitrary by definition. When our attorney drafted our amendment, the first thing he did was check case law around the country and recommended against the cap because a number of courts have shot it down. To be fair, some also upheld it - but why do things that invite a legal challenge?
JeffT2
(Iowa)

Posts:570


11/18/2020 10:16 AM  
Posted By CathyA3 on 11/18/2020 9:53 AM
As for the OP's question, I think rental caps are arbitrary by definition. When our attorney drafted our amendment, the first thing he did was check case law around the country and recommended against the cap because a number of courts have shot it down. To be fair, some also upheld it - but why do things that invite a legal challenge?


What did your attorney draft? That would be very interesting to hear.

PhilipB4
(North Carolina)

Posts:10


11/18/2020 10:32 AM  
First thank you to everyone who has responded and those who will. I think this is a learning process for everyone and out of this can come some good for those struggling with this issue.

I want to comment on the good points I've heard
1) We plan to have a waiting period for at least 1 year maybe two. This will discourage investors who buy on Monday and rent on Tuesday.
2) We will have a hardship clause for people to rent for one year - moving for a job, illness, financial hardship, etc.
3) We have check with our attorney and as long as the rules are not unreasonable they will hold up in court.

The point here this place started out 100% residential and over time renting has increased. We are all for renting, at some point an owner may need to rent for a host of reason but it needs to be controlled.
We want to keep it residential and want buyers who look at this as Home first, Investment second versus just Investment. Be a community.

The central issue still comes back to what to do when the CAP is reach. Yes Grandfather, first come first serve is straight forward but it is owner/renter bias. I am safe and I plan to rent for the next 10 years so who cares about the 70% of owners.
Can we find a process which is more "fair", i.e. like the Waitlist comment I made in my earlier post.

Looking for alternative ideas and if you have an alternative process, would love to see it.

Keep the comments coming and if you have any links I should look at, please send.
PhilipB4
(North Carolina)

Posts:10


11/18/2020 10:38 AM  
Jeff,
We had language already done for waiting period and I believe notification process and hardship. When we are totally done with this I will share all I can to the group.
JeffT2
(Iowa)

Posts:570


11/18/2020 11:03 AM  
Another idea is that any new rental, which has not been rented before or has not been rented in the last six months, can only be rented for three years and then cannot be rented for at least a year. This allows rentals for the reasons you listed, but does not allow permanent rentals to go on and on. This should help with the fairness, since all the new rentals (from the time of the amendment onward) will be turning over every three years and opening up new opportunities for owners to rent.

Why does it need to be fair?
AugustinD


Posts:4421


11/18/2020 11:15 AM  
I hope the discussion here on rental caps is not being conflated with discussion of short term rentals. I think the legal aspects of each are quite different.

In two states where condominiums are common, I am finding that condo rental caps are not flat-out illegal:

-- In California, Beginning January 1, 2021, rent caps more restrictive than 25% are unenforceable and all associations with rent caps were required to amend their governing documents to conform to 25%. (Civ. Code §4741(b).). There is more to this. See https://www.davis-stirling.com/HOME/Rental-Restrictions

-- In Florida, if the original covenants have rental caps, then whatever the caps are, they are legal. "[I]f the condominium documents do not contain rental restrictions, there are limitations on the ability of the association to adopt new rental restrictions. Section 718.110(13) of the Act states, “[a]n amendment prohibiting unit owners from renting their units or altering the duration of the rental term or specifying or limiting the number of times unit owners are entitled to rent their units during a specified period applies only to unit owners who consent to the amendment and unit owners who acquire title to their units after the effective date of that amendment.” " More at https://www.floridacondohoalawblog.com/2020/10/12/limits-on-amending-rental-rights/

-- I have yet to see an appeals court precedent or discussion of same where a state's appeals court has prohibited rental caps. Quite the opposite: A number of appeals courts have upheld the caps.

-- One of the veteran posters here recently cited a 2006 Indiana appeals court case, Villas West II of Willowridge Homeowners Ass’n, Inc. v. McGlothin, that said a rental prohibition violated the Fair Housing Act, since for the particular community, the party who brought the case showed, with extensive evidence, that the prohibition effectively discriminated against racial minorities. Yet in 2008, a federal trial court decision ruled otherwise, though importantly, the facts differed from the McGlothin opinion.

-- Curiously to me, and like CathyA3 pointed out, the Federal Housing Administration continues to make it harder to get an FHA loan when the rental percentage of a HOA/condo is higher. On the one side is HUD wielding its Fair Housing Act tools to keep HOAs, condos, apartment complexes, and home sales in general from discriminating against racial minorities among others. On the other hand, the Federal Housing Administration clearly views a high percentage of rentals as having an adverse impact on property values. I wonder if the Federal Housing Administration has ever been accused of unlawful discrimination on these particular grounds (making getting a loan harder when a HOA/condo has a high percentage of rentals).
AugustinD


Posts:4421


11/18/2020 11:18 AM  
Posted By JeffT2 on 11/18/2020 11:03 AM
Another idea is that any new rental, which has not been rented before or has not been rented in the last six months, can only be rented for three years and then cannot be rented for at least a year. This allows rentals for the reasons you listed, but does not allow permanent rentals to go on and on. This should help with the fairness, since all the new rentals (from the time of the amendment onward) will be turning over every three years and opening up new opportunities for owners to rent.

Why does it need to be fair?
If it's in the covenants (a contract) and disclosure to the buyer was done properly, then to me and by definition, the rental cap is fair. In general it appears the courts want to see grandfathering for any rental that would otherwise be affected by an amendment.
PhilipB4
(North Carolina)

Posts:10


11/18/2020 11:28 AM  
AugustinD,
Thanks - I have seen some of these rulings but thanks for sharing and providing links.
Our current rental is 31% (in a 127 unit condominium) and I plan to actually increase it to 33% or 34%. So back to the point if it is "reasonable" the courts will uphold.

Like JeffT2 - keep the ideas coming.

The Holy Grail would be someone who has a innovative policy with lessons learn experience.
CathyA3
(Ohio)

Posts:1368


11/18/2020 11:35 AM  
Here is a summary of what our attorney drafted.

All rentals are prohibited with the following exceptions and provisions:

** All current landlords are grandfathered until they sell the condo to a new owner. The new owner is subject to the same leasing restriction as everyone else.

** Anyone may rent for up to two years * to a single tenant * for any reason. (The lawyer recommended against calling it a "hardship exemption" because we would be constantly arguing over what constitutes a "hardship".) The exemption ends when the tenant leaves or the two years is up, whichever comes first. Your tenant leaves after six months, you've used up your exemption.

** First degree relatives (parents, adult children, and siblings) are exempt and do not count as rentals.

** Short-term rentals (less than 6 months), hotel-style and corporate rentals are prohibited. (This was in our original CC&Rs and we opted to leave it in there and spell it out.)

** All rentals must have a formal lease, a copy of which is provided to the property manager. Renewals do not require new copies of the lease.


Unfortunately even this mild restriction was not approved by the membership, although it did receive a majority of yes votes - just not a super-majority of 75%. It didn't help that we had one owner who voted against it because she didn't think it was strict enough, and managed to convince a couple others. (Honestly, who thinks this way? And then she strongly encouraged the board to try again. Yeah, no, we just spent $1000 on a wasted effort. People who didn't like this mild restriction will not go for something stricter.)

One regret I had was that I did not lobby in favor of this amendment. I figured that people would assume the board supported it, otherwise why would we be doing this - and I didn't want people to accuse the board of unfairly influencing the vote. And now we're vulnerable to a take-over by the investor class.

PhilipB4
(North Carolina)

Posts:10


11/18/2020 12:17 PM  
CathyA3,
Great feedback.
We will exempt Family AND Roommate. Many of our owners are elderly and have a friend living with them.
Leases minimum 12 months and we want a formal lease request policy but have not worked out details.

Your comment about up to two years to a single tenant. This is even if the CAP is reached? But once the two years are up you must follow the normal rent policy, i.e. first come first serve based on availability? And it is a one time exemption? Interesting idea if I got it right.

This might overcome the bias Grandfather option and create some "fairness" opportunity for owners.

As for your vote, I have been harping with my team it does not matter if you think it is a good idea if we do not go out and sell, sell, sell it to residents and they do not understand what they are voting for they will vote NO.

As for the one offs who are negative for their own reasons we have to lobby and win them over. Sounds like government doesn't it ha, ha


CathyA3
(Ohio)

Posts:1368


11/18/2020 12:46 PM  
Posted By PhilipB4 on 11/18/2020 12:17 PM
CathyA3,
Great feedback.
We will exempt Family AND Roommate. Many of our owners are elderly and have a friend living with them.
Leases minimum 12 months and we want a formal lease request policy but have not worked out details.

Your comment about up to two years to a single tenant. This is even if the CAP is reached? But once the two years are up you must follow the normal rent policy, i.e. first come first serve based on availability? And it is a one time exemption? Interesting idea if I got it right.

This might overcome the bias Grandfather option and create some "fairness" opportunity for owners.

As for your vote, I have been harping with my team it does not matter if you think it is a good idea if we do not go out and sell, sell, sell it to residents and they do not understand what they are voting for they will vote NO.

As for the one offs who are negative for their own reasons we have to lobby and win them over. Sounds like government doesn't it ha, ha






We had no cap specified - that's what our attorney said could invite a legal challenge since your right to rent your condo is entirely dependent on timing and what others have done.

If our amendment had passed, rentals would have been prohibited altogether except for the specific exceptions I mentioned (first degree relatives, current landlords who are grandfathered, and the two-year exception for everyone.) Everyone is treated the same except for the current landlords because it would have been unfair to yank the rug out from under them (and to be pragmatic, because none of them would have voted for the amendment).

The idea was to let attrition get the numbers down and to keep the investors out. It wouldn't have been perfect, but the board believed that over time things would have improved.

Just an FYI on FHA eligibility: the current acceptable percentage is 50%, but during the housing downturn in 2008-2014-ish, the percentage was dropped to 25%. That meant communities who were in the 25%-50% rentals range abruptly lost their FHA eligibility, and owners who wanted to refinance their FHA loans were unable to do so. There is nothing to stop something like this from happening again. (I'm expecting the pandemic to beat the dickens out of the housing market, with another wave of investors snapping up cheap units. I'm surprised it isn't underway yet, but I haven't seen it yet in my area.)
PhilipB4
(North Carolina)

Posts:10


11/20/2020 12:23 PM  
Hi All,
Any other ideas? Thank you again Cathy. Grandfather protects the current landlords but what the owners, what's a fair deal for them?
AugustinD


Posts:4421


11/20/2020 12:48 PM  
Posted By PhilipB4 on 11/20/2020 12:23 PM
Hi All,
Any other ideas? Thank you again Cathy. Grandfather protects the current landlords but what the owners, what's a fair deal for them?
Posted By PhilipB4 on 11/18/2020 10:32 AM
I want to comment on the good points I've heard
1) We plan to have a waiting period for at least 1 year maybe two. This will discourage investors who buy on Monday and rent on Tuesday.
2) We will have a hardship clause for people to rent for one year - moving for a job, illness, financial hardship, etc.
3) We have check with our attorney and as long as the rules are not unreasonable they will hold up in court.

The point here this place started out 100% residential and over time renting has increased.


I would keep in mind that this amendment creating rental caps is going to be voted on by the Owners. If the proper procedure for amending is followed, and since prior to purchase, all Owners knew the covenants could be amended thusly, in my opinion whatever goes down is per contract (the covenants) and so is inherently fair.

Philip, I think the biggest battle may be writing the amendment so that it will get enough membership votes to pass it. If you have enough clauses in this amendment, someone may find reason to vote against the amendment just because of the one clause. It's the nature of law-writing, as I trust you know.

What fraction of the homes are currently rentals? How many Owners must vote in favor of an amendment for the amendment to be passed? Is there a realistic chance of an affirmative vote to amend the CC&Rs?
PhilipB4
(North Carolina)

Posts:10


11/20/2020 1:55 PM  
Yes, our intent is to keep it simple - too many clauses and lack of clarity people will naturally vote NO. We have 31% landlords and 69% owners so owners do have a 2/3 voting block. Our proposal would be to increase the CAP to 33%, thereby creating some 2 or 3 slots for owners. On the surface this would seem to be easy but to get 100% of the owners to vote and vote Yes will be a challenge so I will need some votes from the landlords. Grandfather should allow me to get some landlord votes BUT I've got to throw the owners something in return (above and beyond adding 2 or 3 slots), otherwise they may vote No just because they feel the Grandfather clause is not fair. Cathy had a good idea by providing all owners a one time exemption to rent. Might there be others? Or has someone tried using some type of lottery system when tenants move out of a unit.
AugustinD


Posts:4421


11/20/2020 2:02 PM  
Posted By PhilipB4 on 11/20/2020 1:55 PM
to get 100% of the owners to vote and vote Yes will be a challenge so I will need some votes from the landlords.
Do the governing documents require 100% approval, or only super-majority approval (typically 2/3rds or 3/4s)?

I think CathyA3's condo/HOA's experience is quite a lesson on this issue and on passing amendments in general.

I think you are doing a lot of work but from CathyA3's experience, I am not hopeful. Especially if 100% consent of Owners is needed for this amendment.
CathyA3
(Ohio)

Posts:1368


11/21/2020 6:23 AM  
Posted By AugustinD on 11/20/2020 2:02 PM
Posted By PhilipB4 on 11/20/2020 1:55 PM
to get 100% of the owners to vote and vote Yes will be a challenge so I will need some votes from the landlords.
Do the governing documents require 100% approval, or only super-majority approval (typically 2/3rds or 3/4s)?

I think CathyA3's condo/HOA's experience is quite a lesson on this issue and on passing amendments in general.

I think you are doing a lot of work but from CathyA3's experience, I am not hopeful. Especially if 100% consent of Owners is needed for this amendment.





Adding to all of the things people have mentioned, I think an important first step will be an education effort and getting a good sense for the community's opinion on this. We paid around $1000 for the legal work involved in drafting the amendment and preparing the legal papers to notify the homeowners (including text of the amendment, "plain English" version, and ballot/return envelope for voting). You don't want to go through the expense of doing this if there is reasonable doubt that the amendment will pass.

Altogether, it took us about a year from the date we asked our attorneys do prepare the amendment up until the voting was completed and the amendment recorded with the county, so factor that into your planning.

If I had it to do over again, I would spend more time educating myself and the rest of the board on what other communities and states have done, including the unpleasant consequences of not having a robust rental restriction. I would also spend time educating the community and campaigning before and during the voting process, since I believe strongly in the importance of keeping a condo community primarily owner-occupied.
CathyA3
(Ohio)

Posts:1368


11/21/2020 6:36 AM  
Adding to my previous comments, if you are not confident that the current community will approve a rental restriction, I recommend:

* Focus on your education campaign. Your goal is to have better informed owners. Ditto the board members. See what your state laws have to say about tenants in condos - I know that I've read about a few condo associations that have the right to evict problem tenants even if the owner won't do it, so it would be good to know if that's an option for you. (In many states, though, associations have to take a hands-off approach to tenants or they risk being sued by the owners for "tortious interference with a contract", so you want to be sure you're on solid legal ground first.)

* Enforce your CC&Rs. A lot of the problems caused by tenants are violations that are ignored by the condo owners. You want to make it painful for the owners to ignore them, so that they either do their jobs or rethink the whole landlording idea.
AugustinD


Posts:4421


11/21/2020 7:34 AM  
Posted By CathyA3 on 11/21/2020 6:23 AM
Altogether, it took us about a year from the date we asked our attorneys do prepare the amendment up until the voting was completed and the amendment recorded with the county, so factor that into your planning.
Did your rental restriction amendment pass? I thought two posts of yours above said it did not.
CathyA3
(Ohio)

Posts:1368


11/21/2020 8:38 AM  
Posted By AugustinD on 11/21/2020 7:34 AM
Posted By CathyA3 on 11/21/2020 6:23 AM
Altogether, it took us about a year from the date we asked our attorneys do prepare the amendment up until the voting was completed and the amendment recorded with the county, so factor that into your planning.
Did your rental restriction amendment pass? I thought two posts of yours above said it did not.




It did not, unfortunately. Two other amendments we did at the same time were approved and recorded.

The timeline for a failed amendment is about the same, though, with the exception of the recording which the lawyer handled. That's another reason I recommended not proceeding unless you're pretty sure an amendment will be approved - otherwise you go through all of the work and expense, and have nothing to show for it at the end.
MelissaP1
(Alabama)

Posts:9714


11/21/2020 8:59 AM  
You can pass all the rental caps and restrictions you want. Doesn't make it enforceable. Like my lawyer told us. The HOA does NOT own your home. It owns the common areas around your home or shared amenities. It can tell you what to do on the front exterior of the homes to make them in sellable condition. Like no bright colors, this type of siding/windows, or no dark shades in windows. It can tell you NOT to use it as a business like an auto shop etc... A business that would attract parking and traffic issues.

Rental property isn't about aesthetics only. It is more than that. They amount of rentals effect loan packages and refinance rates. The banks look at the PUD form of which this information is reported. They see a high rate of over 50% they tend to bulk a bit. Your more worried about what it "looks like" can be controlled by the HOA by holding the owner's feet to the ground. People needing/wanting to use their property rental is more in the bank's privy.

My recommendation is always this: Make sure if there is going to be rental that ALL owners have their tenant sign an addendum in the lease to agree to follow the HOA's rules. This protects the owner and the HOA. It allows the owner to remove a tenant violating the HOA rules for a lease violation. Otherwise, the owner's hands are tied because it's NOT a lease violation. If they are not violating their lease, then they can't evict legally.

Tenant's have rights too. So you can't violate those. That is the other side of this coin the HOA has to look at. I can't randomly kick out a drug dealer whom is renting as the HOA. The owner can't either because that person would have to be in violation of lease agreement which may mean being convicted of a crime while living in the home. Something that has to have the person arrested, convicted, and proven. This takes months. Plus eviction process takes around a month to 6 weeks. It's NOT an overnight thing.

Former HOA President
CathyA3
(Ohio)

Posts:1368


11/21/2020 12:57 PM  
I came across the following article dealing with rental restrictions in HOAs:

https://www.hopb.co/blog/vacation-short-term-rental-property-restrictions-in-hoas

The article deals mostly with short-term "rentals" (Airbnb and others of that ilk), although it does talk about rental restrictions in general and quotes at least one court case that upheld a broad restriction. Quote:

"Though state HOA laws can vary considerably from state to state, multiple state legislatures have recognized that the right to rent out a property is valuable enough for homeowners to warrant some statutory protection. In general, state-law limitations on rental restrictions do not say that rental restrictions are per se unenforceable. Instead, the laws seek to protect property owners' due process rights and avoid a scenario in which an owner is deprived of a valuable property right without adequate notice."
SteveS32
(Illinois)

Posts:9


11/23/2020 7:46 PM  
I am in the middle of a mess about this myself, Phil.

I live in a 24 unit condo building in Illinois - started out all owners. I became an accidental landlord because when I got married and moved for more space, it was in the winter at a bad time to sell, and I failed to sell so I started renting. Turned out, finding good responsible tenants wasn't all that hard for my area, so I've been renting 5 years now.

My board's HOA is now pushing for a very conservative cap of just 5 units.

They're trying to find a "fair" waitlist, and their suggestion is absolutely HORRIBLE in my opinion. Here's the problem...

You have to decide what you're looking for:

1) You do still want some owners to be able to rent out their units (but have a cap)

2) You simply want all renters out, even if that means "voting out" owners

There's really no in between here in terms of fairness. Here's why...

My HOA is proposing a revolving door waitlist -- every time a tenant decides not to renew a lease, the owner goes to the bottom of the wait list. They've convinced people (we need 2/3rds to add this to our declarations) that this is "more fair" because "Everyone will get a chance to rent out" -- but practically speaking, this means that if we're at the cap, you could rent 1 year, then your tenant decides to move for more space or whatever, and you're stuck either not renting for a few months (while you wait on an arbitrarily long waitlist), or having to move back in. Are you really gonna rent your place for ONE year, then potentially have to move back in? Suddenly what's "more fair for everyone" turns out to be really freakin' impractical.

The middle ground I've seen suggested is "limit renting to X consecutive years" - like 3 or 5. Renting, though, generally comes up in either a distress scenario (like you failed to sell your place), or an investment scenario. If you rent your place for 3 years or 5 years, then hit that cap -- are you really gonna move back in? Doubtful. So again, this whole idea of "rotating around" who gets to rent isn't all that practical.

So, as far as I've been able to surmise, the only fair way to accomplish #1 up there (allow some folks to rent their units) is basically that whoever's currently renting gets to keep renting, and any new folks (after the cap) wanting to rent have to get on a waitlist. Their turn comes when a unit is sold or an owner chooses to stop renting. Yes, this means other members could be waiting ages to get to rent -- but having owners who rent their place out for several years in a row is what keeps them owners.

My board president is desperately trying to cling to this revolving door idea, and I'm desperately trying to defeat it, because while it seems "more fair for everyone" it's really good for NOBODY -- unless "good for us all" is voting the 5 current owners who are renting their units out of the building altogether and forcing us to sell. If the revolving door passes and there's a waitlist, I cannot afford 2-3 months (or more) of continuing to pay my mortgage, but with no rental income.
AugustinD


Posts:4421


11/23/2020 7:58 PM  
SteveS32, how many Owners must vote in the affirmative to amend your condo's Declaration? Do you think that this many Owners will vote for an amendment to the Declaration with regard to new rental restrictions? Legally, I think these are the only two questions that matter right now.
SteveS32
(Illinois)

Posts:9


11/23/2020 8:03 PM  
Posted By AugustinD on 11/23/2020 7:58 PM
SteveS32, how many Owners must vote in the affirmative to amend your condo's Declaration? Do you think that this many Owners will vote for an amendment to the Declaration with regard to new rental restrictions? Legally, I think these are the only two questions that matter right now.




It's 2/3rds, and they're trying to push through the votes. I do think they'll vote for it because only 5 are owners who rent out their places - leaving 19 who aren't really thinking about the logistics of what it means to have a waitlist like this, they're probably just like "that sounds fair to me!" or "I never intend to rent anyway, and a cap seems like it'll protect my home values!"

The board already tried and failed to get 2/3rds to vote, but they're trying again next week via proxy votes and they seem to think they have the votes. I'm trying desperately to stop it. I'm not against a cap, but I'm 100% against the way they're trying to implement it. It screws me and 4 other very long time owners pretty badly.
SteveS32
(Illinois)

Posts:9


11/23/2020 8:04 PM  
Posted By SteveS32 on 11/23/2020 8:03 PM
Posted By AugustinD on 11/23/2020 7:58 PM
SteveS32, how many Owners must vote in the affirmative to amend your condo's Declaration? Do you think that this many Owners will vote for an amendment to the Declaration with regard to new rental restrictions? Legally, I think these are the only two questions that matter right now.




It's 2/3rds, and they're trying to push through the votes. I do think they'll vote for it because only 5 are owners who rent out their places - leaving 19 who aren't really thinking about the logistics of what it means to have a waitlist like this, they're probably just like "that sounds fair to me!" or "I never intend to rent anyway, and a cap seems like it'll protect my home values!"

The board already tried and failed to get 2/3rds to vote, but they're trying again next week via proxy votes and they seem to think they have the votes. I'm trying desperately to stop it. I'm not against a cap, but I'm 100% against the way they're trying to implement it. It screws me and 4 other very long time owners pretty badly.




I should just add: thanks to COVID this is all being managed over email - we were just sent an email with "vote on this" and a proxy ballot... no forum for discussing the pros and cons, etc. Not like we all got on a zoom call or anything, either. They just sent it and asked us to vote.
PhilipB4
(North Carolina)

Posts:10


11/24/2020 10:16 AM  
First of all I would like to thank everyone who has spent the time to respond - seems I have touched a nerve - Rental Caps
Yes out of control rentals will impact ability for potential buyers to get loans, property value could suffer, etc. but a key reason I am driving this is I want our building to have a "residential" atmosphere, were we know and greet our neighbors and has a sense of community. Just because it is a "building" does not mean it isn't Home for many of us. This does not mean I am naïve when it comes to rentals. I am OK with the ability to rent (I might want to some day) but it should be controlled IF you want the reputation of your building in the marketplace to be a "Luxury Condominium" vs "Apartment Complex".
After reading all the good input the number one message I am getting - develop a "simple" plan which will pass - this means there has to be something for current owners who rent and owners who occupy as we will need votes from both groups. Once this is formulated, it must pass the legal test and finally back to Cathy's comment - educate, communicate and sell, sell, sell the plan before a vote.
I took a look at the history of the current rentals with regards when they were bought and 25% were bought when the building open (investors) and nearly 40% after the second year AND in the pass two years we've had no new rentals - interesting!!
I am leaning towards a plan which includes;
1) Grandfather existing renters, with no restrictions or time limits
2) Add 2 - 4 rental slots to the current rental units and it becomes the CAP
3) Give each owner a one time exemption to rent for up to two years. Once two years are up they must abide by the rental cap policy. If a slot is open they can continue to rent, if not they get put on a list til someone stops renting - this was an idea from Cathy - thank you

Interested in comments.
AugustinD


Posts:4421


11/24/2020 10:51 AM  
PhilipB4, is your Board attempting to create these restrictions via Board-written Rules? Or is the Board going to seek a membership vote to amend the Declaration?

If the Board is going to attempt to create these restrictions via Board-written Rules, then the courts say that, to be lawful, whatever the Board writes has to be "consistent" with what's in the Declaration. To begin to judge whether what you are proposing is consistent with the Declaration would require a review of the Declaration.
PhilipB4
(North Carolina)

Posts:10


11/24/2020 12:35 PM  
AugustinD,
We will amend our bylaws which will require a 2/3 vote to approve. Hence the comment why we need a plan which we are confident will win coupled with a major effort behind education and communication. We need to count votes before we have the vote.
AugustinD


Posts:4421


11/24/2020 12:48 PM  
Posted By PhilipB4 on 11/24/2020 12:35 PM
We will amend our bylaws which will require a 2/3 vote to approve. Hence the comment why we need a plan which we are confident will win coupled with a major effort behind education and communication. We need to count votes before we have the vote.
Thank you. For what it is worth, from my further reading on rental restrictions, amending the covenants, via a membership vote, to reflect the desired restrictions is the preferred approach legally by far.
PhilipB4
(North Carolina)

Posts:10


11/24/2020 1:00 PM  
Thank you for legal comment
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