How would a condo board know a unit is being rented?
April 22, 2009 8:27 AM Subscribe
I'm on the board of HOA of my building and we have a bylaw which prohibits leasing of units. But it occurs to me, couldn't an owner just rent on the sly?
For example, they could say someone is house-sitting their condo. Or they could say they're letting a friend stay at their place for a while.
How can a condo board prove a unit is being leased?
Speaking as someone who has rented on the sly and called the renter a "house sitter," yes, someone could do that. I think that the remedies for this problem would be worse than the risk of someone renting on the sly, though. Do you really want to start harassing people who allow friends to stay in their condo for a while?
One way to fix this situation would be to allow people to rent their units but to require HOA approval of the renters. That's what my building eventually did, and I think it worked out well. The next summer, we found some nice law students who were in town being summer associates, and everyone was satisfied with the arrangement.
posted by craichead at 8:38 AM on April 22, 2009 [1 favorite]
One way to fix this situation would be to allow people to rent their units but to require HOA approval of the renters. That's what my building eventually did, and I think it worked out well. The next summer, we found some nice law students who were in town being summer associates, and everyone was satisfied with the arrangement.
posted by craichead at 8:38 AM on April 22, 2009 [1 favorite]
Many homeowners do in fact lease their properties in violation of their homeowner's covenants. Unless the HOA brings an enforcement action--which they're likely to win in most cases--nothing at all will happen. That's actually what HOAs are intended to do: enforce contractual provisions for which there is no supporting local ordinance or state statute.
Most developments, and almost all condos, have restrictions on the use of the property intended to preserve the quality and integrity of the community. With the exception of race-based covenants, the Supreme Court has upheld most such restrictions. But said restrictions are created by restrictive covenants that run with the land, and as such, no government has any interest in enforcing them. You can't complain to code enforcement or the cops, because the activity in question almost certainly doesn't violate any laws. So if you become aware or begin to suspect that someone is leasing their property (or engaging in another violation of the HOA bylaws), you can have the HOA (through a lawyer it retains) send a cease-and-desist, and when/if they don't comply/respond, file a lawsuit.
At that point, the HOA will submit a discovery request for any documents related to what they believe is a lease. The defendant homeowner will then be compelled to produce such documents under penalty of having the court simply construe them in the plaintiff's favor. If there truly are no documents, the court may still find that the relationship violates the terms of the deed and rule in the HOA's favor.
You're probably going to want to talk to a licensed real estate attorney in your area for more detailed information.
posted by valkyryn at 8:44 AM on April 22, 2009
Most developments, and almost all condos, have restrictions on the use of the property intended to preserve the quality and integrity of the community. With the exception of race-based covenants, the Supreme Court has upheld most such restrictions. But said restrictions are created by restrictive covenants that run with the land, and as such, no government has any interest in enforcing them. You can't complain to code enforcement or the cops, because the activity in question almost certainly doesn't violate any laws. So if you become aware or begin to suspect that someone is leasing their property (or engaging in another violation of the HOA bylaws), you can have the HOA (through a lawyer it retains) send a cease-and-desist, and when/if they don't comply/respond, file a lawsuit.
At that point, the HOA will submit a discovery request for any documents related to what they believe is a lease. The defendant homeowner will then be compelled to produce such documents under penalty of having the court simply construe them in the plaintiff's favor. If there truly are no documents, the court may still find that the relationship violates the terms of the deed and rule in the HOA's favor.
You're probably going to want to talk to a licensed real estate attorney in your area for more detailed information.
posted by valkyryn at 8:44 AM on April 22, 2009
The HOA has a fiduciary interest in limiting the number of renters due to mortage rules and such. Also commonly held insurance on shared elements may very well require that the HOA ruling board has a knowledge of the use and condition of the units. Renters can run a drug operation which would impact all owners in a very negative way. Unit owners have the insurance coverage on the inside of the units and that insurance has limtis on renters I am sure. Secret renting would be a fraud risk. This should be spelled out in the documents covering the implimentation of this state's condo law. In other words you signed up for one thing and cannot, without some sort of open and clear due process, change that.
Mail delviery is also an issue and might trip up the secret scheme.
posted by Freedomboy at 8:58 AM on April 22, 2009
Mail delviery is also an issue and might trip up the secret scheme.
posted by Freedomboy at 8:58 AM on April 22, 2009
I'm also not directly answering your question, but I will try and provide relevant information that may help you.
First, a problem that a lot of HOAs face is that if they have a rule and it is not enforced, then it can easily become an unenforceable rule. So if the rule is important to the HOA, then it should be enforced. Note, this is why you see a lot of HOA do what appear to be counter-productive things like tell decorated veterans to take down their flag poles.
So with that background it becomes imperative that the HOA thoroughly think through the rules they want to enforce and understand how some rules can lead to unintended consequences (like the flag example above). More to your question on enforcing an HOA rule that does not allow leasing. In my opinion this is a definitely not a good rule, as it is ruling against an activity that has no direct external impact to the HOA environment. I can think of all kinds of situations that can lead to the HOA being portrayed as cruel and heartless for enforcing this rule, yet if they don't enforce it the rule becomes meaningless.
So my advice is before going to the enforcement stage, work with the HOA to ensure this is indeed the rule they want to enforce.
On preview: valkyryn is correct that enforcement can escalate to a civil lawsuit. When I mentioned a rule can become "unenforceable", what I meant is that if the defendant in the lawsuit can show the HOA knowingly allowed the behavior in the past without enforcement action, then any judgement would have to consider why the suit was brought in this case and not the other cases. I know of a case where this exact scenario played out, and the lawsuit by the HOA was thrown out.
posted by forforf at 9:15 AM on April 22, 2009
First, a problem that a lot of HOAs face is that if they have a rule and it is not enforced, then it can easily become an unenforceable rule. So if the rule is important to the HOA, then it should be enforced. Note, this is why you see a lot of HOA do what appear to be counter-productive things like tell decorated veterans to take down their flag poles.
So with that background it becomes imperative that the HOA thoroughly think through the rules they want to enforce and understand how some rules can lead to unintended consequences (like the flag example above). More to your question on enforcing an HOA rule that does not allow leasing. In my opinion this is a definitely not a good rule, as it is ruling against an activity that has no direct external impact to the HOA environment. I can think of all kinds of situations that can lead to the HOA being portrayed as cruel and heartless for enforcing this rule, yet if they don't enforce it the rule becomes meaningless.
So my advice is before going to the enforcement stage, work with the HOA to ensure this is indeed the rule they want to enforce.
On preview: valkyryn is correct that enforcement can escalate to a civil lawsuit. When I mentioned a rule can become "unenforceable", what I meant is that if the defendant in the lawsuit can show the HOA knowingly allowed the behavior in the past without enforcement action, then any judgement would have to consider why the suit was brought in this case and not the other cases. I know of a case where this exact scenario played out, and the lawsuit by the HOA was thrown out.
posted by forforf at 9:15 AM on April 22, 2009
They'll know because someone living there will be observant enough to put it all together. House-sitting for how many months, now? Someone will ask your renters, and what are they supposed to do? Lie for you? How crazy good is the rent you're offering them?
This kind of prohibition sounds like it could be hard for them to defend, really. You should have a legal specialist go over your HOA terms with you and evaluate the consequences of renting and being found out. There's a chance they won't be able to actually do much of anything to you. Or whatever remedy they can apply might be less severe than what you're losing by not being able to rent.
posted by scarabic at 9:43 AM on April 22, 2009
This kind of prohibition sounds like it could be hard for them to defend, really. You should have a legal specialist go over your HOA terms with you and evaluate the consequences of renting and being found out. There's a chance they won't be able to actually do much of anything to you. Or whatever remedy they can apply might be less severe than what you're losing by not being able to rent.
posted by scarabic at 9:43 AM on April 22, 2009
The most obvious way to be discovered is by your utility bills. If it changes names, that means there's a new owner. You COULD keep the bills under your name, of course, but that leaves your credit score vulnerable to the renter.
The HOA may have the power to foreclose / sell your unit right out from under you due to breach of contract. I know it's happened before when people haven't paid their association dues. INAL.
posted by steeb2er at 9:55 AM on April 22, 2009
The HOA may have the power to foreclose / sell your unit right out from under you due to breach of contract. I know it's happened before when people haven't paid their association dues. INAL.
posted by steeb2er at 9:55 AM on April 22, 2009
The most obvious way to be discovered is by your utility bills. If it changes names, that means there's a new owner. You COULD keep the bills under your name, of course, but that leaves your credit score vulnerable to the renter.We sublet short-term, while we were away for the summer, and kept the utility bills in our names. We just added the typical utility costs to the rent we charged and continued to pay the utility bills ourselves. That's actually what we did the next summer, too, when we were able to sublet above-board.
posted by craichead at 10:05 AM on April 22, 2009
You might also want to check with your HOA attorney to see if there were any other considerations in play when the occupancy/no sublet rule was established. Our HOA is for a cooperative housing association and not a condo, but in our state our property tax is based on an arcane provision of the homestead law that requires owner occupancy for 11 out of 12 months. People do sublet here but the HOA board will stomp on it if they become aware because it jeopardizes our insanely low property tax. So, we have a vested interest in enforcing the no sublet provision. Many members resent and some openly flaunt, but the board maintains a consistent opposition precisely so that we can defend ourselves in court.
posted by beelzbubba at 10:12 AM on April 22, 2009
posted by beelzbubba at 10:12 AM on April 22, 2009
In my opinion this is a definitely not a good rule, as it is ruling against an activity that has no direct external impact to the HOA environment. I can think of all kinds of situations that can lead to the HOA being portrayed as cruel and heartless for enforcing this rule, yet if they don't enforce it the rule becomes meaningless.
posted by forforf at 12:15 PM on April 22 [+] [!]
On the contrary, rules preventing everybody from renting out their house do have a purpose.
When we were looking to rent a house, one of the neighborhoods we looked at was peppered with "for rent" signs on every third house.
If the perception of a neighborhood is that it is majority-transient (renter), it lowers property values.
posted by Ziggy Zaga at 12:16 PM on April 22, 2009
posted by forforf at 12:15 PM on April 22 [+] [!]
On the contrary, rules preventing everybody from renting out their house do have a purpose.
When we were looking to rent a house, one of the neighborhoods we looked at was peppered with "for rent" signs on every third house.
If the perception of a neighborhood is that it is majority-transient (renter), it lowers property values.
posted by Ziggy Zaga at 12:16 PM on April 22, 2009
Response by poster: Thank you guys for your posts. I find them really helpful.
posted by rsol44 at 8:37 AM on April 24, 2009
posted by rsol44 at 8:37 AM on April 24, 2009
This thread is closed to new comments.
I'm not sure exactly how you could prove this without staking out the place. I don't think it's illegal enough to warrant police intervention. Does your law state something like that one cannot have a house guest for more than 7 consecutive days? That seems to be how some of my past leases have attempted this sort of problem.
posted by sickinthehead at 8:34 AM on April 22, 2009