Rentals Dividing Ownership

Clearly, we’re seeing an uptick in rentals and clearly, we’re seeing an uptick of associations seeking ways to restrict rentals.  But is it the right decision to restrict rentals?  Some owners just don’t want renters, but they need to be aware that (restricting rentals) can negatively impact property values. 

Considering the depth of the economic crisis and the hardships faced by everyone, collecting rent on a property may be one thing that prevents an owner from falling behind on mortgage or assessment payments.  Without the extra income, some owners could become delinquent, face foreclosure and abandon their property.  If that happens, it could become just another unsightly lot with overgrown brown grass, a pile of door hangers and newspapers sitting on the front porch and trash collecting in the yard. 

In addition an empty house becomes another property the association isn’t collecting assessments on, potentially causing more strain on the budget. 

However, investor owners are accused of having differing priorities than resident owners.  Most vote down increases in assessments and are unlikely to invest in improvements.  Renters are also frequently blamed for breaking association rules and policies.  They don’t mow the lawn, they leave their trash cans at the end of the driveway or park in the street. 

Regardless of where residents or boards fall on the resident-owner investment-owner spectrum, courts across the country seem to be declaring associations’ “no-lease” restrictions enforceable. 

Associations should look to alternatives to outright rental bans and should choose the least restrictive rules that protect property values.  Associations may want to look at passing on the costs of rentals to the landlords, which could discourage leasing.  Associations can do that by charging fees to owners each time a tenant moves in or out, for background checks and for new amenity keys.  The best amendment to your DCCR’s (covenants) caps rentals at a set percentage in the community overall.  That way no particular unit is favored and no one is benefited indefinitely.  Upon expiration of a lease, an owner next on the associations waiting list has an opportunity to rent the unit. 

Whether associations develop rental restrictions or not, in this difficult economic climate, it may indeed be a good time to put differences aside to bridge the gap between resident owners and investor owners and their renters.  As a recommendation, involve tenants more.  Let them attend board meetings and volunteer on committees.  If they are part of the community, they’ll be more interested in making it succeed.

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