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:
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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