Rental restrictions are a common problem facing many community associations today. Here are some ideas on how to manage them
With the rise of the home-sharing market driven by platforms like Airbnb, restricting rentals has become a tough issue for HOAs to enforce. It is easier than ever for residents to open their doors to tenants, and while this may bring in extra income for the homeowner, it can lead to some problems in the community.
Rental properties can have a negative effect on neighboring property values, a chief concern for HOAs tasked with preserving their community’s interests. A steady trickle of strangers in and out of a neighborhood can trigger security issues and cause friction between residents if the tenants don’t respect the neighborhood rules.
So, what options does an HOA board have to restrict and enforce rentals?
The challenges of restricting rentals in managed communities
While it may seem like the obvious solution would be to flatly outlaw rentals – either short- or long-term – it’s not always that simple. The legal system inherently favors the rights of property owners. That means they often have a basic right to do what they please with their property. It’s a mindset that is as old as the “life, liberty, and the pursuit of happiness” ideology that has permeated American culture since the country’s founding centuries ago.
Because an owner’s right to use their property freely is so foundational, HOAs often face opposition in the legal system when trying to create and implement rental restrictions. These measures must be considered to benefit the community at large in order for them to be valid. In short, if the restriction clearly serves a legitimate purpose, then it is a viable option for HOAs to consider.
What form of restrictions can an HOA adopt?
Rental restrictions typically fall into these three categories:
- Rental caps – Setting a ratio of homes in the community that can be rentals (e.g. 20%).
- Lease restrictions – Provisions created by the HOA that must be included with any lease offered to potential tenants. Examples include minimum lease periods (to discourage short-term rentals) or community standards agreements.
- Tenant screening – This varies by state, but some jurisdictions allow HOAs to screen and approve potential tenants.
While there are many directions an HOA can go in pursuing restrictions, the above are the most common and generally supported by the courts.
Enforcing rental restrictions
Even if an HOA’s policies are sound, it can still be tricky to enforce rental restrictions. Tenants are not members of the association, so they are not responsible to the board in the way that traditional residents are. And, while an association can certainly take action against the owner via fines or whatever the bylaws mandate, tenants may or may not be cooperative.
If management finds that these measures are not having an effect, it does have the option of filing a lawsuit against the owner to prevent continued leasing of the home. However, because rental restrictions are complex, many owners choose to contest such actions in the courts. So, it’s a good idea to prepare for an uphill battle if it comes to legal action.
Appropriate restrictions can ensure that the community’s value isn’t tarnished by unwanted or noncompliant tenants. If the HOA needs to implement and enforce rental restrictions, it should be mindful of the methods it uses. Any measures are taken, whether they be in the form of caps, restrictions, or screenings, should serve the ultimate purpose of benefitting the community overall. VendorSmart℠ is a comprehensive web-based marketplace that connects vendors and community managers in one place. At VendorSmart℠, we understand that third-party vendor relationships are critical to the success of any association or condo. Our software and team of industry professionals guarantee full compliance vetting for every vendor employed by your management company at no cost to you or the vendor. Want to learn more? Schedule a demo today.