HOA Rental Caps

Posted on February 27, 2009. Filed under: HOA Rules & Governance, What HOA Boards Need to Know | Tags: , , , , , |

The challenging economy is taking a toll on many homeowners.   Owners who had no intention of renting their homes a year ago, are now looking at renting their homes as a viable alternative to selling their property in a deteriorating market.   As a result, many self-managed homeowners’ associations are considering whether or not their community needs a rental cap.  If your HOA board is struggling with this decision, there are a few questions you should ask yourself. 

Have you made every effort to involve the renters in your community?  Renters should be engaged in the same way that homeowner’s are engaged, with the one obvious exception –  they cannot vote.  What are the real reasons for considering a rental cap?  What toll will a rental cap have on responsible owners in your community  who may have lost a job and can no longer afford their home? 

Sommerville Estates is a community of thirty-two homes.   Sixteen of which are rentals and two more are in the process of being foreclosed upon.  Sommerville is considering a rental cap for some very valid reasons.   Historically most of Sommerville’s covenant violations emanate from the community’s rental properties and the absentee homeowners virtually ignore the fines and processes.  The steps to cure the violations are slower with rentals than other homes.  With half the homes in their community looking shabby, the overall property values are impacted. 

Perhaps more importantly, Sommerville is losing its voting membership.  Most rental owners are “absentee” not attending meetings or engaging in the neighborhood.  Gaining quorums for annual or special membership meetings is next to impossible…making conducting business extremely difficult.   Clearly this also impacts the eligibility of residents to serve on the board of directors too. 

So if your community is at the point where you must consider a rental cap… now what?   Your association board cannot simply pass a rule or resolve to change the policy.  Rental caps  materially change the homeowners’ rights regarding property use.  Your community will need to seek input from all homeowners and will need to garner enough support and votes from the owners to change the declaration.  This will not be an easy feat, but it is possible. You may need to launch a full-scale campaign informing owners of the rationale, needs and benefits of a proposed cap.  You will likely have to grandfather in many existing rentals and clearly explain any policies in regard to exceptions for extreme hardship cases.   You may need to meet with absentee homeowners personally to discuss their concerns and explain the benefits of the cap. 

The jury is still out on what is the “appropriate” percentage for the cap.    Typically, caps seem to fall somewhere between 10 and 30 percent.  However, this is something your community will need to determine for itself.  Lastly, if you are successful in the effort to legally amend your declaration to include a rental cap, don’t forget to file copies of the amended declaration with the county clerk’s office.

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Are Renters a Problem for Your HOA?

Posted on February 20, 2009. Filed under: Communications Tools, Uncategorized, What HOA Boards Need to Know | Tags: , , , , , , |

When meeting with a new client, it generally doesn’t take long for the topic of rental properties to arise. Many associations have seen a sharp increase in rentals in their neighborhoods.  Few associations in Washington have rental caps to limit the percentage of homes that can become rentals.  Discussion of rental properties almost always involve eye rolling and discounting… you know that trashy house on the corner with the tacky inflatable dinosaur in the front yard. But what is the truth? Are rentals a bad thing?

The answer is complex. They are what you make of them. It is true that rental properties typically do not look as spiffy as the resident owned properties. Absentee owners often do not (or cannot) put the same care and detail into a rental property that they would put into their own residence. So yes, you may point a finger of blame at the rentals for not maintaining the highest standards of the community, but remember when you point, three fingers are also pointing back at you.

Many associations treat renters as second-class citizens. While they may not purposely discriminate against them, they typically exclude them from the benefits of the community; simply because they do not have voting rights.  Renters often have no clue what is happening in the community because they simply are not communicated with.  Odds are  they do not know that they cannot put up the inflatable dinosaur in the front yard, because they were never given a copy of the declaration or the rules when they signed the rental agreement. 

Think about it.  When sending out an association newsletter or communication, does your HOA typically mail to just the the homeowners of record?  Or do you also include the renters?  How many rental property owners do you think actually take the time to forward information from the association on to the renter?  Answer: zero.  How can you blame a renter for not following the rules when you have no assurances they were ever actually given the rules? 

So here is the thought for the day.  The truth is rentals ARE twice the work of any other home.  You must communicate with two stakeholders, the rental’s owner and the rental’s occupant.  When new renters move in, welcome them as you would any other new homeowner with a small token and a copy of the CC&R’s and rules.  Invite them to community meetings, explaining that they cannot vote, but they may be interested in what is going on within the community.  

Bottom line… before talking “rental cap” – embrace your renters.  Don’t discount them as temporary occupants; sometimes renters have the potential to be future homeowners.  Even if they don’t purchase a home in the neighborhood, they can still be actively involved in building your community.  Two helping hands on neighborhood clean up day… are still two helping hands… regardless of whether they are attached to a homeowner or a renter.

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    Whether you are a homeowner or a community board member, a degree of reasonableness will go a long way.

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