Not allowing rentals in your building may put an unreasonable burden on owners. While it's understood why you don't want to turn your very small association into an apartment building, you maybe be pushing some owners into financial hardship. People's situation changes and sometimes they just have to rent a unit.
You may want to consider allowing rentals but limiting it. For example you can limit rental the first year of ownership - this will deter investors, and you can limit what percentage of units can be rented at one time. (If you are in CA there is a new law which would limit this after January 1st, 2012).
In a building so small you probably know every owner. Why not just talk to them and see what the majority wants. You can discuss it at an open meeting or simply have 1:1 conversations with owner.
You must first change the By-Laws. That is the only way you can allow renters.
There is a movement in our condominium to limit renters. At present we have no limitation and about 10% of our units are rented. We have a two year period after purchase during which time an owner may not rent, thus heading off investors or speculators.
There are a few people who have financial hardships and who would like to sell; they are held back by the present market,a market that prices units lower than they once were. People are reluctant to take those prices, and would like to rent instead of selling.
If they are not permitted to rent they will sell, and placing several units on the market will depress the values of all the remaining units.
If they do rent the Association will benefit by a continuing stable flow of maintenance payments and assessments.
We live in a large condo complex which does allow renters. However, we have had problems with renter not abiding by the rules & regulations and generally creating a nuisance with noise, etc.
Is there a way that condo associations can pre-approve those that rent? I agree with the hardship factor for owners attempting to sell during this depressed market, but I also believe that people who rent should follow the "rules". We have also attempted to have this tenant evicted but are now being sued for harassment!
I am Pres of a 22 unit condo assoc. After a recent unpleasant situation where an owner not living in his condo at the time (he is a snowbird) let his granddaughter and 4 yr old son live in his condo. Not exactly a rental situation but could have been. We are not a 55 and older building but we decided to amend our bylaws to address such a situation. We needed 70% approval by owners which we got. We are now an owner occupied with all occupants to be 21 or older. Exceptions with approval of the board and all exceptions to be reviewed quarterly. We realized that there are always situations that we couldn't predict and wanted some leeway.
Did you have this amendment approved by an HOA attorney? It may be illegal to prohibit children unless the condo is a 55+ community.
Jan Larson, when you say "... all occupants to be 21 or older" are you saying that you don't allow kids in the community?
You do realize, I hope, that this will not hold in court even for 1 second.
What is the problem with owner's kids living in the unit. Of course they need to obey by the rules just like any other owner.
You appear to be someone without any financial
worries but definitely no consideration for those who have. Be human and consider the times we live in and the hardships for some. Allow persons rent for a year at a time and then when better real estate market returns they most likely can sell.
Instead of having a waiting period to rent why not put a cap on the number of rentals? That way if an owner is forced to rent he may not have to wait 2 yrs. I would suggest looking at the FHA condo requirements; which require at least 50% of the units to be owner occupied and an investor cannot own more than 10% of the units. You want to meet the FHA requirements otherwise a potential buyer or an owner wanting to refinance would not be able to obtain FHA financing which could limit the field of buyers dramatically. In this market you want to attract as many buyers as possible!
The board should pass a rule which requires an owner to sign a rental agreement. Among other things, the agreement requires the owner to provide the renter with a copy of the rules and regulations. In many instances the renter violates the rules because he doesn't know what they are. If the owner refuses to sign the rental agreement then he is in violation and subject to the same enforcement procedures as any other rule or CCR violation.
FYI, my assn's rental agreement requires:
1) owner must notify the BOD w/i 5 days of renewing a lease
2) the owner shall furnish the BOD with a copy of the lease and any renewals
3) written leases are required
4) the owner must furnish the BOD with a "Rental Control Agreement" form certifying that the owner has furnished the renter with copies of the community documents and the tenant has agreed to be bound by them.
5) owners are reqiired to provide the BO witha Crime Free Lease Addendum signed by the owner and the tenant.
6) the owner must have a city sales tax license, in compliance with city code
7) the owner must also comply with state laws regarding rental properties
We no longer require background checks as that does impose certain legal liabilities on the assn. as per our HOA attorney.
Re-read Niki's comment.Don't assume to know what the "flavor" of our condo building is. Right now everyone is at least 50 or older. They all bought into this bldg because they knew that there wouldn't be a problem of screaming kids etc. If the unfortunate situation had been a rental we would have had leverage to deal with it. In this case we didn't. I researched info-from this blog and also the MN Homeowners state regulations. It states that you can't regulate an age that a person has to be to purchase a condo but you can regulate the age of occupancy and that didn't mean just being a 55 and older building which has more restrictions than we wanted to deal with. We followed our bylaws that said no rental without approval by board but the situation we were dealing with wasn't a rental ie no official contract. Rest assured-we don't do anything without checking the legalities of it.
Thanks, Mary, your information is direct and thorough. This helps greatly!!!
Under the provisions ofyour state condominium act you can have a vote of the council of unit owners and change thwe provisions against renting. Although most stayes require at least a 55.57? approval you have to determine your state's specific requirement. And yes the association can require potential renters to satisfy a published set of criteria
I posted his question.
Our building is full, all HOA dues paid on time, building in great shape, reserve funding on target.
Question is, why would we want to ruin a good thing? Our building has had three resales, in it's 7 years of existence. All buyers said they purchased in large part because there no rentals permitted under the CC&R.
If you do end up permiting some of the home owners to rent their units, here is some advice from our experience dealing with renters. Neither the property management company (if you have one) or the board of directors has any legal ties with the renter. The legal ties are with the homeowner only. If the homeowner has hired a property manager to facilitate the lease that PM does not have any legal ties with the condo assn. All communication is with the homeowner only and this is very important so there is consistancy in compliance with the rules. We used to be nice and work with outside property managers but it always came back to haunt us because the owner's PM is obligated to the owner and the renter, not the association. If the renter breaks rules then the warning letters and fines go directly to the owner. The owner must deal directly with the renter to collect fines or change behaviour. Non-payment of fines is the liability of the owner and, as such, can be liened. Dues come directly from the owner. The renters pay the owner rental each month. Renters are not allowed to attend owner meetings nor complain to the association directly. They must go through the owner. Sticking to these rules will save you untold hours of grief dealing with renters who think the rules do not apply to them.
Mary's post pretty much sums it up. The Board "should" have a copy of the lease. The landlord "should" have the tenants sign an agreement that THEY are responsible to follow the R&R, and any fines will be THEIR responsibility.
BTW - I just rescinded a contract to buy a condo b/c the Bylaws prohibited rental. That's fine in good times, but these are not good times for real estate. This unit will continue to sit empty, until a homeowner comes along with a bunch of cash (no FHA on this condo). And their offer will probably be lower than mine, thus pulling all of the comps down.
Totally disallowing rentals is not a wise move in a housing market that is poised for yet another drop.
Condominiums have a double-whammy - they have never appreciated as well as SFH, even in the best of times, and now the delinquency issues are pulling them down even further.
It only proves that each situation is different and no one size fits all is applicable - Our 11 unit building is 100% owners occupied. No one is "under water" in it. Everyone is paying their HOA dues on time. It's fully occupied except for one individual who has been transferred about 100 miles away.
I can understand why one would want to rent their unit out and could understand why the remaining owners would agree to it, if, the building were only half occupied, people were in arrears on their assoc. dues and the market has tanked for their units.
There is absolutely no advantage to any owner except the one that wants out to allow rentals in a building such as ours at this time. The only people that think it might be a good idea are the ones that want to move or leave. I get that and understand it. Speaking from a purely selfish standpoint which one has to do in a situation such as this I see no upside to allowing rentals.
I'm sure you'll feel that way until you're transferred out of state or some other thing comes up that requires you to rent out your unit! IMO, it's not wise to have it in the docs that rentals are prohibited; however it may be wise to have a limit on rentals.
And what's wrong with having renters anyhow? If the BOD has a rental procedure in place which includes the equirement for the unit owner to sign a rental agreement (see my earlier post) all the problems with renters can be minimized. BTW, all the problems everyone says they have with renters are the same problems I've see with owners! I've never been able to understand why so many people are so down on renters when most of us have been one at one point in our lives.
Mary - I completely understand what you're saying and agree with you for the most part. And yes, it's all in where one sits at the moment as to how they see things.
True enough, we were all renters at one time, and yes owners as renters can be a pain.
I'm suggesting that each building and community is different and one should look at their particular buildings place in the market and hope that the board is savvy enough, smart and sensitive enough to look at al sides of the equation.
Our Association allows rentals due to the soft real estate market and ability or lack of to sell a condo. our BOD has agreed to increased the condo owners association fee by $100. per month to help allevite additional expenses associated with Rental units. Thoughts or comments appreciated
e: Dick R
what are the additional expenses that he BOD has relative to renters? $1200 / yr is a lot of money, please justify for me.
Kate, the $100/mo. was a starting point and may end up $50 or less. Renters become a particular issue when the owner goes south for 6-8mo. and nobody to babysit their property. Additionally, renters don't obviously have same investment in keeping the property up to date nor do they necessarily have the Associations best interest in mind. The owners typically would pass the monthly expense on to the renters. Generally the rent is set higher so the owner makes a return on their rental. The Association should also realize a portion of this investment since the renters are also contributing to issues which need Association involvement. Personally, the owners who rent neglect updating their property to make them more sellable. Financing for condo purchases are also affected with rental properties which has an overall impact on all owners. There just isn't the same investment in the property when you are renting....
Has your BOD thought to run by this rental charge to their attorney? You may find it is in violation of your gov docs which generally state the same fee must be charged to all units. Even when the fee is based upon the size of the unit the sq ft charge is, or should be, the same.
In reading your reply to Kate, it's apparant to me that your board does not fully understand that any violations and delinquencies (even if the assessments are paid by the renter) are the resp of the owner. And if the owner neglects to update the property to make it more sellable they are mostly hurting themselves, so that doesn't make sense. All the negatives you apply to renters can also be applied to owners. Many people want to blame renters for the ills of the assn but that is grossly unfair. I've seen rental properties that look better than owner-occupied properties. Frankly I can't help think that your view of renters is quite warped.
Yes, we have consulted with our attorney and his recommendation is as follows: Basically, we can charge a fee for rentals or we don't have to allow rentals at all as long as the Association votes to support this when presented as an amendment to our Bylaws. That is the key; Whatever approach we take, we will need to amend our Bylaws and present to all owners who must approve this change by 66%.
You are right about good/bad renters and good/bad owners but as an owner, I do have a right to my opinion of renters. You will not convince me that renters have the same rights as the owners. I just don't like the idea of Condominiums turning into rental properties. Sorry!
I agree with you it's not a good idea to let a condo complex turn into rental property. If you want to qualify for FHA funding there must be a cap placed on rentals, among other things.
As for who has "rights", of course any rights the owners have as outlined in the gov docs cannot be passed on to renters. But, just because renters don't have these rights, doesn't mean they must be treated like second-class citizens.
Although I'm not an attorney, I do not agree with your attorney's recommendation that as long as the bylaws are amended the board may charge a fee to members who rent their unit. Just because the members vote to change the bylaws doesn't make that change legal and I believe that type of amendment might be considered discriminatory if challenged in a court of law.
According to our insurance agent, insurance is higher on condo rentals because rentals have more maintenance issues and higher claims. So although individual units may vary, the overall average is seen in the insurance picture. Some condo associations have a high deductible, so a higher percentage of rentals may put them at higher risk for spending their deductible.
In your condo association does your Board review the references for renters? My association leaves it totally up to the owner