Do I have any rights?

Hi, I am the owner of a condo in a high rise building in Chicago. I bought it on 2003 and have never been late in my mortgage nor my assessments. I used to love it there, but a year ago I had to move to another state, due to losing my job (layoff) and a family emergency, where I was the only care taker.

Anyway, on 2003 there was no regulations in my building regarding renting a unit, if you wanted or needed to. Five years later (2008), the HOA decided to change the rules and now only people that were renting before 2008, are grandfathered and can continue to rent all they please...

I know the building has a 20% rental cap and they said they are above that...however, most of those rental units are owned by investors that had never even lived in the building and are just making money off of their units. I on the other hand, only want to rent so that I can keep the unit and sell it when the economy is doing better. Right now, I will be lucky if I don't have to pay to the bank more than what the unit is worth. I also don't want to default and damage my credit!

My question is can they do this? I didn't buy into this!!!! had I known that I could never rent my place, I would have never bought it. I am in a critical situation now, and can't afford not to rent!!! I also can't afford an empty condo, and my rent at my current residency.

As you probably know, today's economy is forcing people out of their comfort zone and you have to go where the jobs are...why can't the association see that the economy is different now than in 2008??? Please help! I need to know what are my options. Is there any law that can protect me? this rule was established after I bought the condo.

Thanks!

Brian is right about checking your governing documents carefully.

As you are reading, look out for a hardship clause in the rental limitations clause. Most rental limit clauses allow the board to permit rentals under specific hardship circumstances, such as being called out of state.

You could also check board minutes to see if other hardship cases have been granted, and under what circumstances, to see if you ought to qualify based on past actions.

If someone in our community ignored the rules they would be fined and then subjected to legal action. Our fines can run to $25 per day. After only three months the debt would be enough to file for foreclosure, attachment of bank accounts, or garnishment of wages. I can expect a similar reaction from other boards of directors. It is dangerous just to ignore the rules.

Under our Covenants and Georgia laws fines are a specific assessment treated just as any other annual or special assessment. Once the total owed to the Association reaches $2,000 we file for a judgment in Superior Court. The filing may also ask to include the remedy of judicial foreclosure. Once the judgment is granted we seek license to attach bank accounts or garnish wages with a writ of fieri facias (FiFa). All lawyers fees and court costs for this process are added to the amount owed to the Association.

Hmmm... $25 per day = $750 month. If I'm getting $1800 month for rent, its profitable to just pay the fine and keep getting a fine. Hehe.

This kind of thinking is at the root of many of the problems reported concerning HOAs. When someone buys into a homeowners association he or she is entering into a contract that is legally binding. Just like a contract to deliver goods or provide services, the terms are enforceable in the courts, with remedies of financial compensation and injunctions. Treating an HOA like a social club whose rules can be treated lightly or ignored leads to serious problems and expensive legal battles. In the end, if the Board of Directors has been doing its job, the HOA will win. It's far cheaper and much less hassle to keep within the rules from the beginning.

Hi Sandra:

Here is an article that may help answer some of your questions:
http://www.ksnlaw.com/?t=11&la=1186&format=xml&p=1672

In here it makes this statement:

Under the principles of Apple II and Hinojosa, a rule to limit or restrict leasing rights must (1) be in the best interests of the association, (2) be nondiscriminatory, (3) be applied even handed-ly and not create a hardship, (4) not restrict any owner's rights under the First Amendment or any other constitutional or public policy provision, (5) be binding on all present and future owners, (6) not be antagonistic to the legitimate objectives of the association, and (7) be intended to promote the health, happiness, and peace of mind of the owners.

While a board-adopted policy must meet these tests, an amendment to the declaration is presumed valid unless proven otherwise. Therefore, an association is always better off amending the covenants than relying upon board-adopted policies and then being subjected to a much tougher standard.

As I believe it was Brian stated above, you need to check the documents and see if it is a rule or if they amended the covenants. A rule under (2) in first paragraph cannot create a hardship. An amendment to the declaration is a more strict policy.

Melissa,

You may be right that morally an HOA should not institute rules restricting leasing property, but legally the right to do so has been upheld in court many times in many states.

Hi Sandra,
I live in an IL HOA (condos). Our Declaration does not address rental restrictions. We (BOD) wanted to place a rental cap but learned we would need to amend our Declaration which requires a percentage of the homeowners to agree, so we did not pursue it.

Based on what you stated, your HOA has a 20% cap on rentals – where is this written – Declaration or rules/regulations? And you said the rules were changed in 2008. Could you please provide the language for both of these? It would help in answering your question.

Thank you,
Bonnie

Sandra:

Each property has its own documents under which they operate and each state has their own rules regarding the operation of HOAs and condos.

As no one who has responded lives in your state I would guess most have never faced this issue in the state of Illinois.

As to the suggestion you simply rent the property and then ask for forgivness well IMO that would be a bad approach. It could prove costly and in the end you might come up on the losing end. To deliberatly violate a rule which you were aware of well very tough to stand up with that position in court.

As to the suggestion that HOAs or similar properties cannot prevent owners from renting their property that is simply nonsense. And to that point what occurs on other properties has no affect whatsoever with YOUR situation.

Many people express opinions based on limited knowledge and then lay claim that because their property or their state contains such rulings it follows most do the same. This is simply not true.

So now I will give you my opinion. Before you proceed I would meet with an attorney who is well versed in condo/HOA law. Bring along all the documents pertaining to your property and those detailing the rules against renting. Then after they provide a plausible explanation as to what you might be able to do legally with a good chance of prevailing you will need to decide what is the best course of action for you.

I would not advise you taking advice in such a matter provided from this or any other site as in the end it will be you who must answer for your actions and suffer any consequences if any should result.

Good luck.

Melissa,

When a homeowner agrees to abide by the Covenants of an HOA he or she gives up the complete freedom to whatever they want. This is the fundamental legal basis of a common interest community.

I know of no local, state, or federal law that gives a homeowner unrestricted ability to lease their property. Covenants that were written to include leasing restrictions, and those that have been properly amended to add them, are entirely enforceable. Saying otherwise is the same specious argument that people use when they say they can paint their house any color they want.

Unless you know of a particular irregularity in the way that a leasing restriction was enacted, challenging the fundamental right of an HOA to restrict leasing is an expensive and losing proposition.

I think we scared SandraM7 away.......

Here is my last post to my "hijacked" posting in regards to Rental property and HOA's. Let's make this personal. You need to rent your property due to losing your job and moving to another state. You have 10 neighbors. The HOA's say that 20% of the members can rent out their property without facing fines/charges. That leaves 2 owners that can rent. 2 of the owners are on the verge of going to a nursing home. 1 owner works out of state/travels. 1 has their property For Sale. 2 members already rent their property out. 1 owner lost their job and is being foreclosed on. 2 owner's owe HOA backdues. What are YOU to do?

If you had to fight your HOA for the right to rent what process would you go through to be able to? THINK about the process if right now you had to rent your home out in the above circumstances. Which by the way are pretty much typical and magnified to a greater number than 10.

Once you work through the process tell me then IF limiting Rental property in a HOA is acually feasable and doesn't already lead to the situation a HOA is already in regarding excessive rental property. There are ALWAYS special circumstances in regards to exceeding any rental capacity. Wouldn't you think your situation would be "Special"?

Would you be willing to face the fines for renting out your property? Would you really sue your HOA considering suing a HOA is suing yourself and your neighbors? What point would you realize that a HOA suing a homeowner is a bad choice on the HOA's behalf? HOA spending money to enforce a rule that fines equal less than legal costs to pursue?

All in all limiting rental property is a good idea but the practice is an entirely DIFFERENT thing...

Hello this is Sandra.

I am sorry it took me a while to reply to your posts. I want to thank everyone of you for taking the time to give your input. I am still confuse and as most people stated I must review the associations rules and I did. It clearly states that from 2008 on only those who were renting before that year will grandfather rental rights and the building only has a 20% cap for rentals. Now my question is, when I bought the property it didn't have this limitations neither did it stated it was a possibility. Had this been the case, at 26 years old, I would have never purchased something I would have been tied up for life, with no possibility of renting. On the other hand, if I am being forced to sell for less than what the unit is worth, and on top of it all I have to disclose to future owners that they will be purchasing something they could never rent out than that limits me even more as a seller! I am so upset! all I wanted was to rent the unit and sell at a better economical time... Thanks!

Hi Sandra,

I'm also in IL and in a condo. You probably missed my response & question due to the point-couterpoint that has been going on.

Please provide the excat anguage from your Declaration, Rules, etc. regarding rental restrictions. Then I/we can try to better answer your questions.

Thank you,
Bonnie

Ok. Below this message is my Association's ARR. It's an exerpt of the Leasing/Selling rules. Please review and let me know what you think. Also, I didn't mentioned this before because I didn't want to make public personal issues, but here it goes: Last year after my fiance had a critical car accident and I had to move to another state to help him and and top of it I had just lost my job, I wrote a hardship letter and was given permition to rent for one year. However, the year is up and my situation hasn't change much, other than I now have a job. My now husband is unabale to work and I am supporting us for now. The tenant I have at the unit is wonderful and keeps the unit as if it was his own and treats the building the same way. I dont make any money off the rental as if it's just enough to pay for the mortgage and I still have to come up with $500 extra to pay for the assessments. The damage here is that in order for me to keep the condo is by renting it. There's no way I can come up with $1,600 montly to pay for an empty apt. and support me and my husband in the state we are at. I cant move back to chicago, as I will then be unemployed!!! so I basically can't win! And yes, I tried to get the hardship extension but it was declined.

Thanks for your help.

*********
Moving, Selling, and Leasing

In order to preserve the residential character of The ???? Condominium Association, effective November 18, 2008, the following leasing restrictions will apply:

1. Subject to the exemption for current leased Units stated below, the purpose of this rule is to limit rental Units to twenty percent (20%) of the total Units in the Association.
2. No more than one (1) rental Unit shall be permitted per individual Unit Owner. The Board will not recognize multiple entities formed by individuals to circumvent this rule.
3. All existing rental Units as of November 18, 2008, shall be “grandfathered” or exempt from this rule until sold or transferred. Existing investors may continue to rent their Units, but unless they qualify for a lease under the future twenty percent (20%) limitation, investors must sell their Units to resident Owners.
4. Hardship cases for Unit Owners experiencing difficulties in selling a Unit or experiencing other personal hardship shall be heard on an individual case by case basis by the Association’s Board of Directors. The decision of the Board of Directors on a particular hardship request shall not establish a precedent for future applications for a hardship exemption.
5. If the Board of Directors grants a leasing hardship exemption to a Unit Owner, the Unit Owner may lease his or her Unit for a period of one (1) year.
6. The sale or lease of a unit requires the filing of forms before the Board can waive its right of first refusal. These forms can be obtained from the Management Office.
7. As soon as an owner decides to sell or lease, he must file a ‘Notice of Intention to Sell or Lease’ with the Management Office.
8. Three additional forms must be filed with the Management Office when a sale or lease has been arranged:
A. Notice of Pending Sale or Lease
This form must be completed by the unit owner. It attests that the owner understands his/her obligation to the Board, including the furnishing of information about the purchaser or lessee and the right of the Board to act within a 30 day period.
B. Memorandum of Understanding
This form must be signed by the purchaser or lessee. It attests that the purchaser or lessee has knowledge of the Declaration of Condominium Ownership and By-laws and his/her willingness to abide by its terms, and of the right of the Board to a maximum period of 30 days before waiving its right of first refusal.
C. Information on Purchaser/Lessee
This form is confidential and must be signed by the purchaser or lessee. It requests
information concerning occupation, finances, and references.
9. A transfer/move-in fee will be charged to anyone moving into a unit, with the exception of a move on the same floor, where the elevator is not required.
10. Upon filing the forms with the Management Office, the purchaser or lessee must contact the Management Office to schedule an orientation meeting with Association representatives.
11. Based on the above information, the Board will decide whether to waive or exercise its right of first refusal. If the Board waives its right of first refusal, it will execute a ‘Consent to Sell or Lease’ form, which is needed to close on a unit or validate a lease.
12. The Association requires a credit report on a new purchaser or lessee. This is to be treated as confidential information. The credit report should come from a licensed commercial credit reporting agency.
13. All leases shall be in writing and shall provide that the lease is subject to the terms of the building's rules and regulations, Declaration and By-laws, and the Illinois Condominium Property Act. The lease packet supplied by the Management Office contains the lease form incorporating the City of Chicago Residential Landlord/Tenant Ordinance. This lease must be used to comply with the City of Chicago and the building. Lessees assume all obligations of the unit owner to the Association, except for financial obligations, although the unit owner is not relieved of these obligations.
14. Leasing of a unit for less than one year is prohibited.
15. Owners or renters will not be allowed to move into the building before the following has been completed:
A. All paper work,
B. An orientation meeting,
C. Schedule of moving dates and service elevator reservations with the Management Office.
16. Owners must make it known to their tenants that a tenant may not move into the building before being seen by a representative of the orientation commission.
17. All moving activities must be scheduled through the Management Office. There is no moving on Sundays or designated holidays.
18. Any damages attributed to the resident's moving activities will be charged to the owner.
19. The Association has no obligations with respect to the Chicago Landlord/Tenant Ordinance. Those obligations will be between the unit owner and his/her tenant.
20. If any tenant moves into or moves out of a unit in the building without abiding by this section of the Rules and Regulations or the By-laws of ??? Condominium Association, following notice
and opportunity for a hearing, the Board of Directors may levy a fine in the minimum amount of $200 against the owner; and the Board may file suit to evict the tenant. Failing to comply will also result in the tenant's name being omitted from office records, the mailbox, and cessation of maintenance services.

I did ask for an extension, and it was declined.

I don't have the answer to that, What is the difference between the Resolution and an Amendment? This is the most update ARR that was given to me.

Bonnie,

Thanks again for your feedback. All I have is the ARR is that what you are referring to? I don't know of anything else...please tell me what I should request from the Association so they can send it to me. Thanks!

Did you explain the situation. You cannot afford it if you cannot rent and owe $150,000 on a condo that will sell for $100,000 forcing you to short sale. A short sale will hurt all other people trying to sell their condo's because it will lower their appraisal making their condo worth less and then they will be underwater too.

Let them know if you cannot rent it, you will have to list it with a Realtor on MLS for $20,000. Note: This will start a bidding war, and you might get close to what you owe, but will have serious effects for all people trying to sell their condo in the future if they look at past listings on similar condo's in the building. People will have very low offers for the next 10 years if they saw you listed yours for $20k. Most people use the internet to buy now and Zillow, trulia and others keep price history forever....

Hi John06,

I have a similar issue as the original post in Georgia. There was no lease provision in my HOA convents when I purchased my house, but one was added right after the housing bubble burst. Specifically, the HOA added that only 10 units of a neighborhood that includes >200 homes can be leased at a time and that you must obtain a permit in order to lease. Of course, there are at least 10 units being leased currently. From what you posted, it seems that this may be an added restriction to my land use that may be unenforcable. If so, what can I do to gain the right to lease legally? This was added by amendment and was added with the use of a law firm, so my guess is that it was handled correctly. Thanks in advance for any insight.

Thanks BradP. Advice taken!

if you can not get an extension based on your continuing hardship ... you need to get an attorney

Hi Daniel:

Welcome to HOATalk.

Can I please ask you to start a new thread with your question? This thread was initially started in 2011 and you are from a different State than the original poster. In order to avoid confusion between various states it is best to keep each state and corresponding questions/answers separated.