Get 1 year of free community web site hosting from Community123.com!
Monday, April 06, 2020











HOATalk is a free service of Community123.com:

Get 1 free year community website and email newsletter hosting from Community123.com!
Only members have access to all features.
Click here to join HOATalk for Free! Members click here to login and access all features.
Subject: Rental Violations
Prev Next
Please login to post a reply (click Member Login on the menu).
Author Messages
KevinH8
(North Carolina)

Posts:5


02/17/2020 12:36 PM  
Hello,

We have a HOA community where there is a 15% rental cap in place. We are over the cap with the units we know are bieing rented but also know there are most likely many units being rented that we do not know about. Does anyone have any ideas on how to get this under control? We have been spinning our wheels trying to figure it out. Thanks!
Kevin
SheliaH
(Indiana)

Posts:3061


02/17/2020 1:06 PM  
You’ll have to figure out which unit is currently rented (all of them) and that may not be easy because owners can and do lie. You could try finding out by checking your owner list to see which address is offsite and then poll those owners to find out who’s living there.

You could go to those units in person and talk to whoever’s there, but the tenants may not tell you anything (maybe they’ve been instructed NOT to say anything if the HOA comes along). That’s the problem with rental caps – it’s one thing to set them, but you have to put in a considerable amount of work to keep track of who’s renting, when they started, who started after the cap was reached, when it was reach, did the board issue a waiver upon request (e.g. the owner moved out of state for a new job and needed to waiver to help pay the housing bills until it’s sold).

Also, you didn’t say whether your rental cap grandfathered in the current owners when the homeowners approved it – if everyone was grandfathered in and the homes haven’t changed hands, it’s possible everyone gets to rent out their homes until the house is sold or transferred (and someone may have figured out a way around that like putting the house in trust).

The real problem with rentals is that investor owners don’t always tell their tenants about community rules, and some tenants don’t care about that stuff anyway, so they trash up the neighborhood and the association has to go after the owner (as it should because its contract is with the owner, not the tenants), and then there’s a lot of drama behind that.

Even so, if you’re having problems with people not complying with certain rules, you have to go after everyone, not just the people who rent. Ideally, you shouldn’t be able to tell who rents a house vs. owning and living in it, so you may want to focus on rules compliance. Some investor owners won’t come down on their tenants unless and until it costs them money, so you’ll need to announce increased enforcement on the rules that are most problematic (e.g. illegal parking). Hit folks in the wallet enough times, and they’ll cooperate. At least you may get better tenants.
AugustinD


Posts:2946


02/17/2020 1:46 PM  
Is this a condominium?

How many units are there?

Can the community be gated?
JohnC46
(South Carolina)

Posts:9322


02/17/2020 3:22 PM  
Kevin

In many counties you can go online and see where the tax bill is being sent. If not sent to the address of the unit (as in the owner) than typically the unit is likely being rented. Some rentals will slip under that test as the owner still has the tax bill sent to the unit and the person living in the unit gives it to the owner. Typically this situation is a "family" member and who knows what the rent situation is and should probably left alone.
MelissaP1
(Alabama)

Posts:9136


02/17/2020 5:31 PM  
What is the punishment for doing so? How do you determine who falls under the 15% and those who do not? Is there a timeline? The cat's pretty much out of the bag at this point. Plus rental caps aren't necessarily enforceable. Our lawyer advised us, unless the HOA owned ALL the properties they can't really enforce rental caps etc...

Plus the real "damage" of too many rental properties isn't necessarily the "appearances" of the property. It's that a certain # of rentals like 50% effects certain loan products. Meaning that FHA or other government backed loans will not loan money to potential buyers. Those potential buyers may have to find other resources to get a mortgage. It also effects re-financing rates. Those wanting to refinance may find their rate not as low.

So I think people equate high number of renters with bad property values/appearance. The truth is that it effects the "risk" the bank will take. They will limit or raise rates if they view the HUD form that the HOA fills out during some sales. That HUD form has 25 questions and covers things like rental rate, collection rates, lawsuits, and liens/foreclosures. It's basically an assessment of the HOA. Rental holds some weight on it.

Former HOA President
GeorgeS21
(Florida)

Posts:2336


02/17/2020 5:40 PM  
Actually, in some communities it could be the appearance.

We drove our neighborhood and my wife and friend guessed at close to 90% accuracy which were rentals.

I have rental houses in another neighborhood - I wrap landscaping into my leases ... if a renter doesn’t want it, they don’t get to lease my houses. They get copies of and agree to the CCRs and I have threatened to evict some.

Of course renters’ houses look, on average, worse than non renters.
MelissaP1
(Alabama)

Posts:9136


02/17/2020 6:09 PM  
When I refer to "real" damages it's monetary. It's a measurable thing. You can't necessarily measure or figure out the monetary rate of someone deciding not to buy due to bad appearances of homes. Real #'s are involved for banks.

Former HOA President
GeorgeS21
(Florida)

Posts:2336


02/17/2020 6:56 PM  
Melissa,

You and I will continue to have to disagree on this point.
MelissaP1
(Alabama)

Posts:9136


02/17/2020 8:33 PM  
It's math not vision. Bank's have to measure their "risk". How would they do it? Not from opinion. It has to be numbers. Numbers are used to measure things and provide measurements. A bank is going to look at things like percentage of rental property but NOT directly at the property/neighborhood. A high percentage # of rental reported to them could indicate a higher risk property. A higher risk equals higher rates or a cop-out.

I am NOT saying that a home that has aesthetic issues be it the home itself or it's neighbors, doesn't effect home sales. It just one can not MEASURE that or provide #'s. How as a bank who is putting up the money for a property going to measure you did not buy a house because it's ugly? It's going to tell a home value based on what other similar properties sold for or foreclosed for in a 6 month period. Based on ACTUAL SALES which produce ACTUAL numbers is what a bank estimates HOME VALUE.

Home value to a bank means actual data/numbers. A home value to a potential buyer means it doesn't attract them to purchase. A HOA's purpose is to keep property ATTRACTIVE to potential buyers so homes sale at optimum prices. The bank is looking at that optimum sale price as a home value number.

I was a Quality manager in a former life... We couldn't just assess value based on opinion. It has to have a measurement. A number is tactile and thus can be measured. An opinion has no such measurable value. It's a feeling not something felt.


Former HOA President
MarkW18
(Florida)

Posts:746


02/17/2020 9:35 PM  
Posted By MelissaP1 on 02/17/2020 8:33 PM
It's math not vision. Bank's have to measure their "risk". How would they do it? Not from opinion. It has to be numbers. Numbers are used to measure things and provide measurements. A bank is going to look at things like percentage of rental property but NOT directly at the property/neighborhood. A high percentage # of rental reported to them could indicate a higher risk property. A higher risk equals higher rates or a cop-out.

I am NOT saying that a home that has aesthetic issues be it the home itself or it's neighbors, doesn't effect home sales. It just one can not MEASURE that or provide #'s. How as a bank who is putting up the money for a property going to measure you did not buy a house because it's ugly? It's going to tell a home value based on what other similar properties sold for or foreclosed for in a 6 month period. Based on ACTUAL SALES which produce ACTUAL numbers is what a bank estimates HOME VALUE.

Home value to a bank means actual data/numbers. A home value to a potential buyer means it doesn't attract them to purchase. A HOA's purpose is to keep property ATTRACTIVE to potential buyers so homes sale at optimum prices. The bank is looking at that optimum sale price as a home value number.

I was a Quality manager in a former life... We couldn't just assess value based on opinion. It has to have a measurement. A number is tactile and thus can be measured. An opinion has no such measurable value. It's a feeling not something felt.




Ever work for a bank, or better yet, a mortgage company? From experience, you have no clue to what you're talking about!
MelissaP1
(Alabama)

Posts:9136


02/18/2020 4:52 AM  
Don't have to. I know that decisions made are based on reality not perceived.

Former HOA President
KevinH8
(North Carolina)

Posts:5


02/18/2020 5:24 AM  
Yes, it's condos. We have 126 units and are at about 23% rented. Gating is not a cost we want to incur. Thanks.
AugustinD


Posts:2946


02/18/2020 5:37 AM  
JohnC46 suggested using tax bills. To me, this is the best chance of identifying who is a renter. All sorts of plans can then be implemented to try to weed out which owner is renting her or his unit out. Key word being "try." Because some of the owners may be part-time residents,leaving their unit vacant. Other owners may have started renting their unit when the number was still below 15%. Or as another suggested, family members are using the unit. It's questionable whether they are "renters."

Unless the Condo association wants to gate off something well-used (a swimming pool?), I do not see a way of getting the number down to 15% that does not require an enormous amount of work by management. The total costs of trying to enforce the covenant without gating may exceed just installing a gate.
GeorgeS21
(Florida)

Posts:2336


02/18/2020 5:48 AM  
First, after ensuring you are solid ground with your restrictions, declare a moratorium on additional units being rented, including any continuation of leases from current renters. This gives you an immediate baseline, and hook to the future.

Second, develop list of rented units by reviewing tax records - tax bills will almost always go to the owner’s address vs the taxable property address - if they are the same, it is usually not rented. Not 100% accurate, but a starting point.

Third, as renters move work backwards to 15%.

Now, I gotta tell ya, this is a lot of work - be prepared, have a COA attorney prepared.
SteveM9
(Massachusetts)

Posts:3599


02/18/2020 6:57 AM  
Might as well make a rule saying 15% of people can have sex. Others must abstain. LOL.

Bah, dont waste your time and money. Impossible to enforce what owners do inside their units including who visits, stays, etc.
GeorgeS21
(Florida)

Posts:2336


02/18/2020 7:02 AM  
Steve,

Actually, no it is not impossible, it is done all the time in condos, but it is difficult and requires constant effort to ensure.

Also, an absolutely solid legal basis.
CathyA3
(Ohio)

Posts:836


02/18/2020 7:46 AM  
I'm going to suggest taking a different approach, and that is to deal with the issues that can make tenants undesirable: that is, vigorously enforce your CC&Rs and community rules.

Reasoning:

* A rental cap of x% can be viewed as arbitrary and unenforceable by the courts if someone decides to challenge it. (Our attorney strongly recommended that we not use a cap after reviewing case law.)

* A rental cap is discriminatory by definition since it treats different owners differently.

* A rental cap can also be unenforceable since a violation is dependent on the actions of others and not solely on the person's own actions.

* The costs of enforcing this rental cap (in time and money spent) may not justify the benefits of doing so.

* Enforcing your CC&Rs is a good thing and is the board's duty in any case.

* If your rental restriction prohibits short-term or hotel style rentals, be sure to check the airbnb and similar web sites periodically. This is different from a rental cap, it applies to everyone equally, and the facts are clear. (I'm assuming your CC&Rs contain a statement that the non-enforceability of one provision does not prohibit enforcement of other provisions.)

* You may actually end up reducing the number of leased units when landlords start to experience the consequences of having problem tenants instead of just cashing the rent checks and allowing the neighbors to deal with the fallout. (I'm assuming that your CC&Rs state that landlords are accountable for the behavior of their tenants and will the ones who are fined.)
JohnC46
(South Carolina)

Posts:9322


02/18/2020 10:44 AM  
Kevin

If your docs say no more than 15% rentals you have the power to control it. Others are rambling on about can a limit be set or not but it does not apply to you as you already have one.

How to find the violators is the question and who falls under the 15% another question:

1. Set a procedure/policy for those over 15% such as a $100 per month fine.

2. Search tax records for those owner receiving their tax bill at another address. Assume they are renting it to someone. You will not find all rentals but the tax bill address is a good start.

3. Attempt to find out who has been renting out their unit the longest and build a list. Once you reach the 15%, go after the others as they are the ones violating the docs they signed to adhere to.
AugustinD


Posts:2946


02/18/2020 10:57 AM  
Posted By JohnC46 on 02/18/2020 10:44 AM
Others are rambling on about can a limit be set or not but it does not apply to you as you already have one.
I wondered about capping rental limits some months ago, since I was thinking along the lines of what CathyA3 posted. IIRC, as long as the covenants are clear that certain rental restrictions can be set, then I believe a rental cap is not a problem. The following seems typical of web sites that discuss rental caps: https://www.hopb.co/blog/the-dos-and-donts-of-hoa-rental-restrictions

Having too many rentals is still a factor in some home lenders' decision making, no? And possibly insurers'?
AugustinD


Posts:2946


02/18/2020 11:03 AM  
Here's a truckload of California case law backing up HOAs/COAs restricting renters, including caps: https://www.davis-stirling.com/HOME/Rental-Case-Law .

I also imagine when the number of renters exceeds say 60%, then these non-resident owners will control much of the HOA/COA, and the de facto mission may very well trend towards doing things as cheaply as possible, without regard to the upkeep of the HOA/COA.
SteveM9
(Massachusetts)

Posts:3599


02/18/2020 5:18 PM  
but it is difficult and requires constant effort to ensure.


Maybe they write that on your gravestone..... volunteered 80 hours a week to ensure people didn't rent the homes they own.

Life too short to force people to do stupid requirements.
SteveM9
(Massachusetts)

Posts:3599


02/18/2020 5:23 PM  

Having too many rentals is still a factor in some home lenders' decision making, no? And possibly insurers'?


As I've said before, if you dont track it, you cant report it.

I fill out these docs all the time, I always write: to the best of my knowledge, there are no renters. Why? We dont track them!

If a lender or insurance company wants to knock on every door to investigate who rents and who doesnt, they are free to do so.

We are not doing it for them.
AugustinD


Posts:2946


02/18/2020 5:30 PM  
Posted By SteveM9 on 02/18/2020 5:23 PM
I fill out these docs all the time, I always write: to the best of my knowledge, there are no renters. Why? We dont track them!
Interesting. I would have thought the honest answer is: "I do not know how many, if any, renters there are."

I can appreciate that you as a HOA/COA manager embrace renters in a HOA/COA community. It's really no surprise. Many an investor-owner is with you. Many a resident-owner is not. I am grateful to HOA directors who follow the covenants on whatever.
SteveM9
(Massachusetts)

Posts:3599


02/18/2020 5:45 PM  

I can appreciate that you as a HOA/COA manager embrace renters in a HOA/COA community. It's really no surprise. Many an investor-owner is with you. Many a resident-owner is not. I am grateful to HOA directors who follow the covenants on whatever.


I really have no opinion what people do within their home. They own it. They are free to do whatever they want.
KevinH8
(North Carolina)

Posts:5


02/18/2020 5:46 PM  
Thank you for so many responses. There is great info and points of view here and I can see all sides. A rental cap was put in place in 2012. The Board at that time allowed the current renters an option to be grandfathered. Those are the units that make up the approximate 23% and the units are actually listed on the amendment to our Declaration. As the grandfathered units are sold (ownership transferred), those units can no longer be rented and we are tracking this. We still have a ways to go.

The troublesome units are the ones that are not grandfathered that we end up finding out about either through neighbors or advertisements that we have seen online. We have a very active Board and a fairly decent management company and have started to aggressively try to curb, best we can, the illegal rents. I like the idea of tax records and will look into this. Our pool is gated and residents do need a key (specially coded so it cannot be copied) to enter the pool. We have also considered other methods but am happy to have found this forum so I could ask everyone's opinion. Thanks!

SteveM9
(Massachusetts)

Posts:3599


02/18/2020 5:47 PM  
I would have thought the honest answer is: "I do not know how many, if any, renters there are."


And get someone's mortgage denied? No thanks.

If it was important to the mortgage company, they would send someone out.
KevinH8
(North Carolina)

Posts:5


02/18/2020 5:48 PM  
For me, its the principal of it. When you buy into an Association, you should abide by the guidelines and restrictions that are in place. I'd love to rent my unit but will not because of the restriction. I do not have a very high opinion of others who disregard the rules. If they cant follow them they do not deserve to live here.
GeorgeS21
(Florida)

Posts:2336


02/18/2020 5:53 PM  
Steve,

It’s simply a matter of following the rules.

If this isn’t important to you, you’re probably advising on the wrong forum
SteveM9
(Massachusetts)

Posts:3599


02/18/2020 5:57 PM  
Posted By GeorgeS21 on 02/18/2020 5:53 PM
Steve,

It’s simply a matter of following the rules.

If this isn’t important to you, you’re probably advising on the wrong forum


Your assuming everyone here has the same HOA rules, CCR's and Bylaws. They dont.

As far as following the rules, many rules can be enforced. We still have no black people on our deeds. Want to enforce that?
SteveM9
(Massachusetts)

Posts:3599


02/18/2020 5:58 PM  
I meant "cant" be enforced.
AugustinD


Posts:2946


02/18/2020 5:59 PM  
Posted By SteveM9 on 02/18/2020 5:47 PM
And get someone's mortgage denied? No thanks.
I lived through the Burst Housing Bubble nd Great Recession c. 2008 and totally get your HOA/COA manager's response: Being dishonest in one's profession is okay as long as someone gets their mortgage approved. Really, I get it.
SteveM9
(Massachusetts)

Posts:3599


02/18/2020 6:04 PM  
And what if they wanted to know how many people in your HOA had the herpes virus. Would you spend hours per month inquiring? Would you track it over time?

Not dishonest. I give the most honest answer I can provide.
SteveM9
(Massachusetts)

Posts:3599


02/18/2020 6:05 PM  
Some people think the glass is half empty.
Some people think the glass is half full.

Same glass. Different answer.
KerryL1
(California)

Posts:7052


02/18/2020 6:06 PM  
I actually did not know that Steve of Mass. is a PM. He seemed to me to be a long-time board member. Steve often is curmudgeonly, but also often gives good advice.
GeorgeS21
(Florida)

Posts:2336


02/18/2020 6:08 PM  
I disagree, but mainly because you picked unrelated examples to try and make your point.

Following HOA rules you agreed to abide by is nothing like those examples.
SteveM9
(Massachusetts)

Posts:3599


02/18/2020 6:10 PM  
Posted By KerryL1 on 02/18/2020 6:06 PM
I actually did not know that Steve of Mass. is a PM. He seemed to me to be a long-time board member. Steve often is curmudgeonly, but also often gives good advice.




LOL. I'm not. Owner, sometimes board member, sometimes officer. Gotta take a break every now and then. Serving the HOA for free is not my priority in life, but sometimes needs to be done.
AugustinD


Posts:2946


02/18/2020 6:17 PM  
Posted By SteveM9 on 02/18/2020 5:57 PM
As far as following the rules, many rules can be enforced. We still have no black people on our deeds. Want to enforce that?
That you, a HOA/COA manager, would think unlawful covenants disallowing black folks are comparable to lawful covenants that restrict rentals is nothing short of epic.
SteveM9
(Massachusetts)

Posts:3599


02/18/2020 6:19 PM  
Posted By GeorgeS21 on 02/18/2020 6:08 PM
I disagree, but mainly because you picked unrelated examples to try and make your point. Following HOA rules you agreed to abide by is nothing like those examples.


I was pointing out how silly the question is about how many renters vs how many people that have herpes. They are both dumb questions and not the HOA's job to figure it out.
AugustinD


Posts:2946


02/18/2020 6:20 PM  
Posted By SteveM9 on 02/18/2020 5:45 PM
I really have no opinion what people do within their home. They own it. They are free to do whatever they want.
So covenants have no value and need not be observed. I see.
SteveM9
(Massachusetts)

Posts:3599


02/18/2020 6:21 PM  
would think unlawful covenants disallowing black folks are comparable to lawful covenants that restrict rentals is nothing short of epic.




It wasn't unlawful when it was added to the deed. We have deeds dating back to 1630 here. Cant delete something from a title search.
SteveM9
(Massachusetts)

Posts:3599


02/18/2020 6:25 PM  
So covenants have no value and need not be observed. I see.




Our covenants do not address what people do "within" their home. Do yours?
AugustinD


Posts:2946


02/18/2020 6:26 PM  
Steve, do not know what your point is.
AugustinD


Posts:2946


02/18/2020 6:31 PM  
Posted By SteveM9 on 02/18/2020 6:25 PM
Our covenants do not address what people do "within" their home. Do yours?
Are you kidding me? Examples: No excessive noise. No hard surface floors in upper level units. No fires in units without a fireplace. No hanging curtains or shades that are anything but white in color. No dogs allowed. No interior repairs/remodeling without submitting the licensed contractor's bona fides to the front office. And lastly, no renters unless a copy of the lease, and the name and contact info of the tenant, are submitted to the front office seven days in advance.
SteveM9
(Massachusetts)

Posts:3599


02/18/2020 6:35 PM  
Point is..... every hoa is different.
KevinH8
(North Carolina)

Posts:5


02/18/2020 6:41 PM  
Every HOA may have differences but the concept of abiding by the governing document is consistent.
AugustinD


Posts:2946


02/18/2020 6:41 PM  
Posted By SteveM9 on 02/18/2020 6:19 PM
I was pointing out how silly the question is about how many renters vs how many people that have herpes.
I think if you had said "coronavirus," then we might have something to debate. [wink]

Thank you for the update KevinH8. I am with you. As interested, consider reading some of those California appeals court decisions. They are chock full of HOA-presented evidence of the danger that renters pose. Interestingly and by my reading, the courts there have agreed that it is reasonable for a HOA/COA to be concerned about too many renters.
Please login to post a reply (click Member Login on the menu).



Get 1 year of free community web site hosting from Community123.com!

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