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My condo association effectively banned renting through an ammendment to the Declaration back in 2004. We are currently in discussions to allow llimited renting and are going through all the fun stuff that surrounds it.
What is being considered is charging a fee - billed separate from the standard monthly assessment - on any unit that is being rented. Here is the idea:
- A monthly fee for each month that a unit is occupied by a non-owner. Probably in the realm of $100-200 per month (units would likely rent for $2500+ per month). Payable in advance.
- An annual lump sum fee that would be equal to 10x the monthly fee. Payable in advance.
- We would allow the owner to choose which fee to pay
- We would also charge a fee of about $150, specifying that it is used to review the lease agreement, perform background check, etc. Again this would be clearly separate
So the obvious questions...
1.) Is such a fee legal?
2.) If so, would it be necessary, legally speaking, to provide justification for the fee? Or otherwise define what the fee is for? I believe that when we restricted (effetively banned) rentals back in 2004 the language had to include a (suitably broad) justification that doing so would be in the interest of the community for some reason.
We would of course seek legal counsel before actually implementing anything, but wanted to try and do some initial research online.
Anything passed would be an ammendment to the Declaration (rather than simply the bylaws). We are in Illinois if that makes a difference.
Thanks for any help or inisght!
Wasn't sure which forum this really belongs in... it's not really a question about renting so didn't want to put it in there.
Before you spend time researching the legality, I would suggest you understand the process for getting this passed among your owners. As a buyer, I would not purchase a property in an HOA that did not ever permit renting out my property. In fact, I believe this is counter-productive to all the owners' interest. I do understand that having more than 60% renters will lose FHA loan availability for buyer in a complex, but forbidding renters means you will wind up with a high foreclosure rate as people have to move and cannot always sell. If there was a different HOA monthly rate for a unit occupied by a tenant v. owner, I might consider owning a place there if the higher HOA rate for an tenant occupied unit was reasonable.....let's say 10% higher than the regular rate. In the end, you have to make sure that your rules support both buying and selling within your community or all your efforts are futile. I know resident owners dislike having an abundance of renters.....but you are shooting yourself in the foot by forbidding them or making the costs sooooo high that you will never attract buyers to your community.
Squirl - We fully understand the process and the arguments for/against have been heard ad nauseum. As chicagojlo pointed out, renting is already restricted... we are trying to change the effective level of those restrictions. Our building is not FHA approved and we do not plan to seek it, so not worried about that. Having a rental fee effectively does mean a higher all-in monthly payment for tenant occupied units, but we wanted to specifically keep the fee separate for possible legal reasons, rather than simply adding to the HOA rate.
chicagojlo - We have seen that absentee owners generally do not participate in helping maintain or oversee the association's affairs, increasing the burden on the rest of the owners. Most importantly... the fee may be somewhat of a political necessity to get enough people onboard in order loosen up the rental restriction from its current form.
The general consensus in the association is that renters are not desired, but it may be a prudent thing to allow given market realities. However, if it is going to be condoned (I was going to say permitted but it's already technically permitted) then some meaningful benefit is going to need to accrue to the association and not just the unit owners who rent. The fee is one way to do that. I'd love to hear other ideas if you have them.
If 10 units were to be rented, they would represent at least $20,000 in additional funds for the association...annually!
Squirl - We fully understand the process and the arguments for/against have been heard ad nauseum. As chicagojlo pointed out, renting is already restricted... we are trying to change the effective level of those restrictions. Our building is not FHA approved and we do not plan to seek it, so not worried about that. Having a rental fee effectively does mean a higher all-in monthly payment for tenant occupied units, but we wanted to specifically keep the fee separate for possible legal reasons, rather than simply adding to the HOA rate.
chicagojlo - We have seen that absentee owners generally do not participate in helping maintain or oversee the association's affairs, increasing the burden on the rest of the owners. Most importantly... the fee may be somewhat of a political necessity to get enough people onboard in order loosen up the rental restriction from its current form.
The general consensus in the association is that renters are not desired, but it may be a prudent thing to allow given market realities. However, if it is going to be condoned (I was going to say permitted but it's already technically permitted) then some meaningful benefit is going to need to accrue to the association and not just the unit owners who rent. The fee is one way to do that. I'd love to hear other ideas if you have them.
If 10 units were to be rented, they would represent at least $20,000 in additional funds for the association...annually!
In terms of legality, I can't respond. I think it might be more reasonable to have the same HOA fee for all owners but a "homestead exemption" for resident owners that gives a certain % discount. That more mirrors what happens in tax appraisal districts for non-owner occupied properties. I think $200 is too high if it represents more than 10% over resident owners' rates.
$200 a month? An owner would be paying your fee, plus a property manager fee, plus their own mortgage and regular HOA fees on the unit... are you kidding me? You want to charge more than 10%? I don't see you getting enough votes from the home owners to pass something like this.
Would these fees in some way go to reduce the fees of non-renting owners? If not, I can't see how that would persuade someone against renters to change their mind.
In my local area, condo associations that do not permit renting tend to be smaller associations with limited amenities. They have held their value better than local associations that allow renting. Go figure.
Those associations that allow leases and impose themselves on the process, tend to charge a non-refundable application fee. They generally perform a credit check. The approval process needs to be without bias and compliant with fair housing act.
Section 8 may become a hot button. Federal assistance is not a protected class and some HOAs prohibit such rentals. Note that seniors represent a majority of Section 8 beneficiaries.
HOAs that attempt to regulate renting usually do so by specifying minimum lease terms and do not allow rooms to be let out. Some may also limt the total number of rented units.
If the association allows pets, they also tend to not do so for renters.
It's not uncommon to impose an assessment surcharge on unit owners who lease. Those that do, do so as a deterrent and also because the renter is less likely to know or follow association rules and it gets complicated.
Having said all this, it is becoming increasingly common in my state for associations to pursue a court order for eviction of occupants , owners or their tenants, when assessments become seriously delinquent. They do so in the best interests of all owners. The association then leases the unit to recoup back payments and stay current because it may take years for the foreclosure to happen. Associations that do this tend to have a lot of amenities and thus the assessments reflect this and accumulate quickly.
Other stategies include a court order to have rents payable to the association, when the owner does not make good on assessments.
Laws vary state to state and sometimes within state. Consult with an attorney with a n HOA practice.
My condo association effectively banned renting through an ammendment to the Declaration back in 2004. We are currently in discussions to allow llimited renting and are going through all the fun stuff that surrounds it.
What is being considered is charging a fee - billed separate from the standard monthly assessment - on any unit that is being rented. Here is the idea:
- A monthly fee for each month that a unit is occupied by a non-owner. Probably in the realm of $100-200 per month (units would likely rent for $2500+ per month). Payable in advance.
- An annual lump sum fee that would be equal to 10x the monthly fee. Payable in advance.
- We would allow the owner to choose which fee to pay
- We would also charge a fee of about $150, specifying that it is used to review the lease agreement, perform background check, etc. Again this would be clearly separate
So the obvious questions...
1.) Is such a fee legal?
2.) If so, would it be necessary, legally speaking, to provide justification for the fee? Or otherwise define what the fee is for? I believe that when we restricted (effetively banned) rentals back in 2004 the language had to include a (suitably broad) justification that doing so would be in the interest of the community for some reason.
We would of course seek legal counsel before actually implementing anything, but wanted to try and do some initial research online.
Anything passed would be an ammendment to the Declaration (rather than simply the bylaws). We are in Illinois if that makes a difference.
Thanks for any help or inisght!
Wasn't sure which forum this really belongs in... it's not really a question about renting so didn't want to put it in there.
Don't try to act like it goes to pay for background checks, it's a way to bring in revenue and most people who want to rent are going to shovel it out b/c they are probably in a bind.
Most leases are 12 months. YOu really need to collect $1200 to do a background check?
Give me a break. Either charge a reasonable fee if your going to act like it goes to cover costs. Otherwise just call it what it is a tax/extortion.
I don't necessarily think it's a terrible idea, some might assume renters don't care as much about property so that money can go to paying for extra people to care for common area, etc but dont act like its a fee to cover a background check.
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and the arguments for/against have been heard ad nauseum. As chicagojlo pointed out, renting is already restricted... we are trying to change the effective level of those restrictions. Our building is not FHA approved and we do not plan to seek it, so not worried about that. Having a rental fee effectively does mean a higher all-in monthly payment for tenant occupied units, but we wanted to specifically keep the fee separate for possible legal reasons, rather than simply adding to the HOA rate. 
