Rental Restriction Policy

Restricting the number of rentals in homeowner associations is often desirable to protect mortgage financing options.  When the number of rentals exceeds about 1/3 of the total, some lenders restrict lending because the character of the community is changing from owner occupied to investment property.  Investment property loans are higher risk and investors are historically less willing to invest money in maintenance and repairs.  This jeopardizes a lender's collateral and increases the odds of loan default. 

When contemplating a rental restriction policy, closely examine the association's governing documents for existing restrictions.  Generally, one of the following applies:

No Restrictions.  If the governing documents contain NO rental restrictions, then  owners have the right to rent their property.  To change this, an amendment to the governing documents is required that either imposes rental restrictions or allows the Board to make rental restriction rules or regulations. 

Minimum Rental Period.  This restriction is usually intended to prevent short term rentals at resort locations.   To expand that authority, an amendment to the governing documents is the required. 

Rental Restrictions.   There are specific restrictions in the governing  documents allowing the Board to make reasonable rules and regulations regarding rental issues.    

The Association has no authority to either enforce rules or to levy fines directly on tenants.  This is the responsibility of the landlord owner.  But levying fines against nonresident owners for violations of their tenants doesn't quickly remedy a problem.  For this reason, the Board should have a rental policy that states:

1.  Breaches by the tenant of the governing documents or rules is a breach of the Owner's rental agreement.  This requirement would allow the Owner to evict a tenant if appropriate.  

2.  Owners are required to take corrective action against a tenant, up to and including eviction, in case of a violation. 

3.  Owners are required to provide their tenants copies of the association governing documents and rules prior to renting.  The statement "Tenant has received copies of, read and understood the association governing documents and rules" must be included in the Rental Agreement.

In the event that the Board has specific authority to adopt rules restricting rentals, the following Rental Restriction Resolution can be adopted.  Also attached is an Application for Rental Occupancy form for the Board's use. 

Since restricting or prohibiting rentals affects an owner's fundamental property rights, this policy should be enacted only as an amendment to the governing documents.  (The Board should not on its own accord do this.)  Before implementation, it should be reviewed by an attorney specializing in homeowner association law in your state.

Nottacare Condominium
 Rental Restriction Policy

It is the policy of Nottacare Condominium to restrict the number of rental units for the following reasons:            

  • To ensure that all members of the Association enjoy the full privileges of residing in our neighborhood.

  • To increase the number of homes that are owner-occupied resulting in a more stable and enjoyable living environment.  . 

  • To reinforce the ability of potential homeowners to secure mortgage financing  by encouraging a high percentage of owner occupied units.

  • To reduce the negative effect rental housing may have upon home values. 

To achieve these goals, the following rental restriction policy applies:

1.  Maximum Percentage of Rentals.  The number of units that may be rented out at any given time may not exceed thirty percent (30%) of the total number of units in the homeowner association. 

2.  Application for Rental Occupancy.  Any owner who desires to rent their home shall submit an Application for Rental Occupancy to the Board of Directors.  Approval by the Board is subject to maintaining a 70% Owner Occupancy Ratio.  Applications shall apply on a first-come, first-served basis except in the event of an Application received by an owner owning multiple homes.  Single home owners will be given priority over multiple home owners regardless of date submitted.  

The Board will maintain an up to date written record of rental homes to substantiate the Owner Occupant Ratio and also a waiting list of owners interested (in order of application) in renting their property as necessary.     Requests to the Board will be responded to in writing within 7 business days.  Failure to respond constitutes approval of the application.

3.  Existing Rentals Grandfathered.  All units rented at the time this policy is adopted can continue to be rented until vacated by the existing tenant.  To qualify for this privilege, an owner renting a unit must submit a copy of the rental agreement and tenant application to the Board within 30 days of the date that this policy is adopted.  To continue rental privileges after the existing tenant moves, the unit owner must submit an Application for Rental Occupancy to the Board.  Approval of the Application can only be granted if the total number of rentals is less than thirty percent  (30%) of the total units.

4.  Documents to Tenants.  Any Owner permitted to rent their property according to this policy must provide their tenants with a copy of the Association governing documents, rules and regulations. 

5.  Violation and Enforcement.  If an Owner fails to submit the required Application or rents after the Board has denied an Application, the Board may assess a fine of $____ per day against the Owner until the rental is terminated. 

6.  Legal Action. This policy may also be enforced in a court of law by any unit owner or the homeowner association and either shall be entitled to recover attorney fees and costs incurred, whether or not litigation has been commenced. The homeowner association may recoup attorney fees and costs through a assessment levied against the unit owner and/or a lien, if necessary.

7.  Right of Appeal.  Appeals must be received in writing by the Board of Directors within 7 days of the written notice to the unit owner.  Once an appeal is received, the Board will schedule a hearing within no later than 14 days to review the matter with the unit owner. No further legal action will take place pending the outcome of the appeal. If the Board does not schedule a meeting within 14 days as required, the matter may be considered dropped. The Board’s decision on the appeal is final. If the appeal is rejected, the violation notice becomes effective three days following written notification to the unit owner.

Approved by a vote of the members on  _________________, 201___.  

 

Approved by a vote of the members on ___________________, 201__

Nottacare Condominium
Application for Rental Occupancy

In accordance with the Rental Restriction Policy adopted by the Association on                   ,201__, Owner is required to complete and submit this form to the Board for the purpose of approving a home rental.  Approval by the Board of any rental is based on maintaining a 70% Owner Occupancy Ratio. 

Owner(s):___________________________________________________

Address:____________________________________________________

Owner agrees that should the rental be approved by the Board:

  1. All Nottacare rules and regulations will be a condition of the Rental Agreement and contain the following language:  "This Rental Agreement is subject to conditions of the Nottacare Condominium's governing documents, rules and regulations.  Tenant has received a copy of these documents and agrees to abide by them.  Failure to comply is considered a default under the Rental Agreement which may result in termination."

  2. Owner must submit a copy of the completed Rental Agreement and Tenant Application within 10 days of signing.
     

Failure by tenants to comply with rules and regulations, and governing documents may result in fines against the Owner and mandatory eviction of the tenant.   Any and all costs of such enforcement action shall be assessed to Owner.  Owner has the right to appeal the enforcement action to the Board of Directors with a written request.

This approval applies only to this tenant.  Owner agrees to submit future rentals to the Board for approval subject to rental restriction criteria applicable at that time.

Date:_______________, 201___

Owner:________________________________

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