My homeowner association is trying to take away my property rights! They say I can’t rent my home to a tenant. They can’t do that!
I’ve lost track of how many times I’ve heard those words from upset owners of condos and townhouses. Most Americans firmly believe they should be able to do whatever they want with their real estate, as long as no laws are broken. After all, isn’t the ability to lease one of the basic rights of property ownership?
Normally, yes. But owning a home in an HOA community is different. When someone buys a condo or townhouse, their property is subject to the recorded Covenants, Conditions, and Restrictions (CC&Rs) of the homeowners association. An essential element of the HOA lifestyle is that individuals must sometimes subordinate their wishes to the community’s best interests.
This is the most overlooked and misunderstood aspect of living in an HOA community. The majority decides what is best for the association and those decisions are binding on everyone. Those with the power to set policies can also change them at any time (with a few exceptions).
So when changes happen, it’s rarely accurate to say that a property right has been taken away from owners. Instead, owners gave up certain rights for the HOA’s benefit at the time of purchase. That’s why if the majority votes to limit leasing, those who disagree must still comply.
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Human nature is partly responsible for the renting issue being so contentious. Nothing speaks to us as loudly as our own self-interest. Owners feel they should be able to lease their units whenever and however they want. But deep down, those same people are not as steadfast about the neighbors’ right to do so. What if the other owner(s) chooses tenants that break the HOA rules or cause property damage? What if so many people decide to lease that the development begins to look and feel like a rental community? Won’t that hurt the area’s ambiance and property values?
It’s easy to feel sympathy for owners who need to rent their condo or townhouse, but can’t. This is especially true when the rental restrictions were passed after that particular owner bought. That feels unfair, like changing the rules of a game while it’s being played. But it’s legal, as long as the lease limitation was adopted properly and there is no conflicting state law.
However, being legal doesn’t necessarily make leasing restrictions a good idea. People’s lives change and that sometimes requires moving. Losing a job, changes in marital status or medical issues can all create the need to sell one’s current home. Unfortunately, the real estate market for the past few years has been a seller’s nightmare.
Lease restrictions work best in hot real estate markets because they prevent too many investors in HOA communities that want to remain mostly owner-occupied. But in a bad market, these restrictions can harm owners and the neighborhood. When owners can’t sell quickly and can’t have a tenant, the financial and emotional strain of an unwanted property leads to short sales, foreclosures, and abandoned real estate. All of these outcomes drive down property values, the very thing rental restrictions are meant to preserve! In these circumstances, HOA Boards would be wise to liberally grant hardship exceptions to the rental ban.