Authored by David Wilson & Harmony Taylor
We are often asked by board members for HOA and condominium associations to review their community’s documents and “update” them or “make them more modern.” While there is no one-size fits all solution for any community association, we have noticed that some amendments are a good idea for most communities. Over the next few articles, David Wilson and Harmony Taylor will be exploring some of the amendments that we frequently recommend to the associations that we represent.
Whether you are a single family, townhome, or condominium community, you may want to think about some of the amendments that we describe and see if you and your community would benefit from one of these changes.
In Part One we examined insurance amendments. In Part Two we looked at amending to clarify the application of payments for delinquent homeowners. In Part Three we look at amendments that restrict leasing of property.
Part Three: Rental Restriction Amendments for Your HOA or Condominium
In either North Carolina or South Carolina, one of the most common amendments we are asked about is one that would restrict, in some form or fashion, the ability of homeowners to lease their property.
Some of the common concerns surrounding leasing are that high percentages of leased properties detract from home values, problem tenants / landlords who don’t restrain problem tenants, that renters have a general lack of concern for the specific property they are renting and for the community at large, and that maintaining a revolving door of occupants detracts from the cohesiveness of the community—that it is no longer a community bound together by families but instead it is a hotel where people have no long-term interest in the success of the community.
Add to that the concerns created by an even more drastic type of renting (the short-term rental explosion in recent years) and you have many communities wanting to amend their covenants to restrict leasing in some way.
In North Carolina we have been following developments for a new HOA bill that would limit the ability of a homeowners association to restrict rentals. As reported by our colleague, Jim Slaughter, House Bill 594 (HB 594) has passed the House and crossed over to the Senate. It is currently with the Senate Committee on Rules and Operations. In its current form the Bill will place limits on all new homeowners associations’ ability to restrict rentals. It does not limit the ability of a condo to restrict leasing. The Bill is still subject to change until passed, but it is likely that some form of the Bill will make it into law. So, Boards of Directors for HOAs in North Carolina should be aware that their ability to restrict leasing in their communities may be limited some time in the next several months and should certainly consult with a knowledgeable HOA attorney prior to attempting to amend their documents.
In South Carolina there is not currently any legislative push to limit an HOA or condo’s ability to restrict leasing.
Once your association has decided that it wants to amend, there are many factors to consider. Some important factors to think about that aren’t so obvious when considering a rental amendment could include:
- How many lots or units are currently leased? It can often be hard to know when a unit is actually rented so there may be more rentals in the community then you are aware of already.
- Consider the record-keeping requirements of any proposed rental. Some rental restrictions entail keep track of things like which lots are rented, whether a copy of a lease is on file, when leases expire, etc. These rules may sound good, but could mean greater cost for the association in management fees.
- Does the association want a hardship waiver to allow the board some discretion to allow rentals in cases of family or job emergency, even if the cap is already met?
We have helped many associations amend their documents to add or revise rental restrictions. If your community would like to find out more about amending your documents to restrict leasing contact our community association attorneys in one of our Charlotte, Greensboro, Triangle, or Coastal offices.