Rental Prohibition Policy

Rental Prohibition Policy

Prohibiting rentals in homeowner associations is often desirable to protect mortgage financing options. When the number of rentals exceeds about one third 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.

Restricting, as opposed to prohibiting, rentals presents several problems for the homeowner association:

Some unit owners enjoy a privilege (the right to rent) not enjoyed by all. This could make those units more valuable. At some point, this inequity is bound to create ill will with an owner that wants or needs to rent a unit.
The Board must monitor and administrative the rental pool carefully to ensure the allowable number is not exceeded. This is not always an easy task with renters coming and going and certain owners not abiding by the rules. It is a set up for conflict with a renter caught in the middle.

When contemplating a rental prohibition 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 the 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 required.

Rental Restrictions. There are specific restrictions in the governing documents allowing the Board to make reasonable rules and regulations regarding rental issues. In the event that the Board has specific authority to adopt rules restricting rentals, the following Rental Prohibition Policy can be adopted.

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 Prohibition Policy

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

To reinforce the ability of buyers to secure mortgage financing by encouraging owner occupied units and,
To reduce the negative effect rental housing may have upon home values in the Association and,
To enact rules and regulations that help achieve these goals.

The following policy applies to rental units:

1. Rental of Units is Prohibited. From the effective date forward, no unit within the Homeowner Association may be rented or subleased with exception of those described in Item 2.

2. Rentals Grandfathered for One Year. All units which are rented at the time this policy is adopted are permitted to continue as rentals for no more than one year from the effective date of the policy. To qualify, the Owner of a rented unit must provide the Board a copy of the written Rental Agreement, tenant name and contact information within 10 days of the effective date of this policy. If a qualifying tenant moves during this one year period, the unit owner is subject to the Rental Prohibition requirement stated in this policy. All unit owners that have grandfathered rentals shall immediately inform their tenant that the rental will terminate by no later than one year from the effective date of this policy.

3. Violation and Enforcement. If an Owner violates this policy by renting a unit after the effective date of this policy, the rental agreement is subject to immediate termination and a fine of $_____ per day will be levied against the unit owner until the tenant is vacated.

4. 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.

5. 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__.