It should come as no surprise that many people are now looking to rent property after having lost their homes or having had their credit negatively impacted during this economy. Communities that might not have traditionally had many renters might now be seeing an increase.
For some communities, these renters could mean the difference between a unit owner being able to maintain control of the property and continue paying maintenance or foreclosure. Bulk investor owners may be a blessing to some failed projects. On the other hand, other associations see an influx in tenants as a headache waiting to happen.
Associations looking to restrict the number of renters in their community often take a couple of steps. If the governing documents are silent on the issue of renting, the first step is to amend the declaration (the document with the highest level of priority). Any time you seek to amend, you must determine if there are any unusual hurdles to the amendment process; i.e. super high percentage membership approval required or lender consent required. If these challenges do present themselves, your first option is to amend the amendatory threshold first and then seek substantive amendments later.
Most amendments restricting leasing include a combination of the following:
1. Prevent leasing within a certain time period after taking title to a unit. This could be either 6, 12 or 24 months. The rationale behind this kind of amendment is to discourage investors from purchasing in the community;
2. Set a minimum lease term and a maximum lease term;
3. Prevent leasing more than a certain number of times each year (usually one or two). The rationale behind this type of amendment is to encourage long-term leases as opposed to transient monthly rentals. The board should give themselves some leeway to allow hardship exceptions to this restriction in the case of a tenant dying or moving out within a short period of time after signing the lease;
4. Require a common area security deposit (cannot exceed more than one month's rent in condominiums);
5. Require a screening process. This can include the payment of a screening fee so the association can do a background check and a personal interview;
6. Add "for cause" language which would allow the association to deny potential renters for particular reasons; i.e. criminal history, history of creating a nuisance in other communities, failure to fully or accurately fill out the application, etc.;
7. Require owners wishing to lease their units to use only a board-approved lease form or lease addendum which would allow the association to collect rent directly from the tenant in the event the landlord/owner becomes delinquent and to empower the association to evict troublesome tenants;
8. Add language that would allow the association to specially assess the owner for any damage a tenant may cause to the common elements over and above the security deposit; and
9. Put a cap on the number of total rentals in the community at any one time.
Again, the issue of whether or not leasing should be discouraged is specific to the particular community involved. In a condominium, any changes affecting "rental rights" will apply only to new owners who take title after the amendments have been recorded and to existing owners who voted "yes" on the amendments. Interestingly enough, the very changes to Section 718.110(13) made at the request of groups fearing amendments restricting rentals will now work against communities attempting to loosen their rental restrictions. Since the language says amendments affecting "rental rights" that can mean language that makes renting more restrictive and it can mean language that makes renting less restrictive since both impact rental rights. Certainly that was not the intention of the groups pushing for that change initially but it is the reality in today's economy. It is for that very reason that my organization, the Community Advocacy Network (CAN) cautions legislators not to create new laws in a vacuum. Good laws must take into effect that the pendulum will only swing so far in one direction before it heads back in the other.