What can homeowners do when they are caught between the need to rent their condo or townhouse and a policy that restricts rentals in the HOA community?
There are two main policy exceptions to explore – grandfather clauses and hardship exceptions. First, review the HOA Governing Documents. Was the rental restriction an original provision or was it added later? If the rule came later, get a copy of the HOA Board meeting minutes, the amendment Resolution and any materials explaining the rationale for the leasing limitations.
Does the rental policy have a “grandfather clause” which provides temporary or permanent permission to ignore the rental restrictions? HOA Boards often create grandfathering provisions for current owners when the association’s policies change, but this is not required. The most common grandfather clause allows owners with existing tenants to continue those arrangements under certain circumstances. Grandfathering options include allowing leasing until:
1. the existing lease term ends;
2. a specified date, such as a year after the rule change;
3. the existing tenant no longer wants to rent that unit;
4. the existing owner sells the unit.
Some HOAs let everyone keep all leasing rights if they owned before the new policy was implemented. Upon sale, the revised rules would then apply to the new owner. This solution feels the most “fair” to existing owners because it preserves the privileges that applied when they purchased the condo or townhouse.
(A few states have adopted laws restricting the power of homeowner associations to prevent leasing. Contact a real estate attorney to determine whether there is an applicable law in your jurisdiction.)
Whether or not a grandfather clause exists, most rental policies provide ways for the HOA board to grant a hardship exception. Boards have discretion in setting the definition of a “hardship”, so review the leasing policy carefully. Typical examples of qualified hardships include extended absences from home due to military service or medical conditions.
Financial problems cause the most requests for hardship exemptions in tough real estate markets. And HOA’s are split on whether job relocations, family changes or financial difficulties will meet their hardship test. Even Solomon would find it hard to balance the requests for hardship exceptions against the HOA’s need to retain a high percentage of owner-occupancy.
And like grandfather clauses, hardship exemptions can expire even when the hardship itself still exists. Most associations allow owners to re-apply although the HOA Board is not obligated to approve extensions.
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