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Community Associations and Tenants | Part 1 – Why Associations Cannot Prohibit Tenants

May 22, 2011 Posted in Community Association Law

With the decreasing housing prices over the last couple of years, there has been the two-fold effect. First, there are owners who would like to sell their units or homes but cannot sustain the loss if the mortgage is higher than the market price, or “underwater.” As these owners wait for home values to increase, some rent their units or homes to tenants. At the same time, as some homeowners were foreclosed upon or needed downsizing from their units or homes, there has been a tremendous increase in the demand for rentals. A community association, especially ones near major transportation stations, near popular cities, in towns with schools held in high regard, or with amenities such as pools, tennis courts, or playgrounds, would certainly be in demand.

Over the next 4 posts, I will address issues concerning tenants.

There is a perception among some resident owners that tenants do not care as much about the community and that tenants frequently violate the rules and regulations of the community. The evidence of this is anecdotal and not quantified. Nevertheless, the question emerges as to whether an Association may enact an outright prohibition against the leasing of units or homes.

Generally, an Association’s governing documents usually provide that owners have a right to lease their units or homes. Then, depending on the particular community, the governing documents usually contain some restrictions. Some common restrictions include:

  • Minimum lease terms - Some communities have restrictions that require leases to be for a minimum of 6 months. In other communities, it is 12 months. Often, the restriction indicates that the unit or home cannot be used for “transient or hotel purposes;”
  • Lease requirements - The lease must be for the entire home; copies of all leases must be furnished to the community association; leases must be in writing; and, leases must be subject to the community association’s governing documents and must provide that any failure to fully comply with the terms and conditions of any of the documents shall constitute a default under the lease;
  • Eviction provision - If the tenant fails to comply with any of the governing documents or rules and regulations, then the Association is permitted to notify the owner and demand remediation of the violation within a certain time frame. If the violation is not remediated, then the owner, at the owner’s cost and expense, must seek to evict the tenant. The matter may not be compromised or settled without the prior written consent of the Association;
  • Attorney-in-fact provision - If the owner fails to fulfill its obligations to in having the tenant comply with the governing documents and rules and regulations, and, the owner does not evict the tenant, then the Association would have the right to seek the eviction and recover the costs from the owner.

These types of restrictions are minimum requirements. Using what is generally broad rule-making authority, an Association has the right to impose stricter obligations that supplement, but not replace, the restrictions set forth in the governing documents. Stricter obligations cannot, however, include a prohibition on leasing because, as stated above, owners usually have the explicit right to lease their homes.

Theoretically, a prohibition on tenants may be enacted if there was an amendment of the governing document provisions. However, as those of you who live in community associations know, amending documents is often a difficult undertaking.

Moreover, there is probably a section in the governing documents for the benefit of mortgage holders that provides that an amendment that changes the right of an owner to lease the unit or home would also require approval of a very high percentage of the mortgage holders. This would be a Herculean task.

For more information, please contact Griffin Alexander, P.C. at (973) 366-1188.

DISCLAIMER - This posting is intended to provide general information and is not intended as specific legal advice or to establish an attorney-client relationship.

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