Sunday, October 5, 2014

Does your condominium, cooperative or HOA board know if and when it is appropriate to grant a hardship exemption?

I am often asked by boards for whom I am rewriting or amending governing documents to include the right to grant hardship exemptions for a variety of use restrictions. Typically, boards want the leeway to grant exceptions when it comes to leasing or selling units, altering units  or limited common elements, performing maintenance and allowing certain types of architectural changes or improvements.

What many boards fail to understand is that any time an exemption or exception is granted, they are creating a precedent which may render their restrictions unenforceable in the future.

If there is no mention in the governing documents that a board has the right to grant an exemption then a board should not even contemplate doing so.

If the documents do provide such authority, a board still needs to discuss with legal counsel what the pros and cons are when it comes to exercising that right. Often this right to grant an exemption is tied to the perception that the owner is experiencing a hardship of one sort or another which can be a highly subjective matter.

A classic example of a situation where a hardship exemption might be equitable would be when an owner's tenant dies two weeks into a lease term in a community which restricts leasing to only one time in any calendar year. A board may very well feel that the intent of the restriction to keep the community safe from transient rentals will not be accomplished by applying the restriction under those circumstances.

Boards get into very murky waters when the hardship exemption is being granted to a fellow board member or an owner who is seen as a "friend of the board".

The better course of action when it comes to granting hardship exemptions is to clearly identify in your documents which situations would be eligible for such exemptions.

For example, in terms of leasing and sales restrictions, you might want to clarify that the following situations are eligible for an exemption:

-adding a family member to the deed for estate planning purposes
-heirs taking title to a unit
-death of a tenant within a certain time period after signing the lease
-abandonment of the unit by the tenant within a certain time after signing the lease
-a casualty event rendering the property uninhabitable for a time

These types of exemptions should be identified for other use restrictions and your governing documents amended to take the guesswork out of what does and does not qualify for a hardship exemption.

1 comment:

  1. I am not in favor of adding conditions to the CC&Rs that allow hardship exemptions. It isn't fair to the rest of the owners who are paying their monthly assessments. We do allow payment plans when an owner in delinquent, perhaps that could classify for a hardship exemption. When owners who have investment properties and are having problems with their tenants/lessees, they should be responsible for protecting their investment and not burden the association to help them manage their investment.

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