HOA won't let you rent out your home

[Robert Steele]

I have a rental property in a nice neighborhood with a HOA that I picked up in two years ago. The HOA just adopted some new rules that make it difficult to be a landlord.

First of all any prospective tenant and lease must both be approved by the HOA. They also want private tenant information such as phone numbers, emails, drivers licenses. I'm not sure how my prospective tenants would feel about sharing this with a HOA.

I also wonder what their turn around time is? Hours, days, weeks? I'm betting it will be the latter. So now my rental sits on the market waiting for the HOA to approve a tenant and 2 weeks later when they say no I have paid 2 weeks holding costs. I might try again, and again, and again. At what point, 2 months holding costs?, do I give up and sell the property.

They also reserve the right to evict your tenant for whatever reason. I wonder how this would fly in court? I know I certainly cannot evict my tenant without cause.

There are many more little dictatorial rules but the one that I found most egregious is that when you purchase a property in this neighborhood you cannot lease it out for a period of 12 months!

That is going to stop any landlord from buying there. Or more likely it will screw any landlord that does buy there because how many investors actually demand a copy of the HOAs CC&Rs during their due diligence period.

The HOA is making bad policy in my opinion for two reasons. One, you cannot keep out sex offenders and criminals from buying a property (unless of course that is in their CC&R's too?) and any landlord worth their salt does these checks themselves. But two, and most importantly, when the housing market turns down and the neighborhood starts filling up with foreclosures who is going to swoop in to put a floor under the market prices in that neighborhood? Typically this would be investors and unless the properties are distressed more likely they would be buy and hold landlords.

[Brie Schmidt]

@Robert Steele - Yep this is all pretty common with HOA - I would try and sell asap

[Robert Steele]

@Brie Schmidt Wow! Really? I have rentals in several HOAs and this is the only one I have seen making this change. Maybe it's the wave front? Maybe I need to go back and read all the CC&Rs.

On a side note I don't see what damn business it is of theirs. Sometimes I really wonder who owns my private property - the county? (taxes) the city? (rental inspections) the HOA? (rent restrictions) or me? (holds title)

[Account Closed]

Never buy in an HOA. When you find out who each HOA board member is let them know you will be conducting a background check on each member to see if they have a shady pass. I did this on EXCEL Association Management, Inc in Houston, Texas and they back away from not letting investors rent out their homes.

My experience

Joe Gore

[Brie Schmidt]

@Robert Steele - Many HOA's have it in the bylaws that no rentals are allowed, or that there is a restriction, ect. Then the crash came and allowing rentals because the only alternative to foreclosures so they bent the rules. It depends on the areas and the market but here in Chicago it is a constant problem for people who bought condos as investments.

[Brie Schmidt]

My step mom rents in a HOA building and she had to get board approval to move in - it was insane

[Robert Steele]

Originally posted by @Account Closed:
Never buy in an HOA.

Joe, being local you should know that Texas has maybe the most HOAs in the country. I cannot buy a newer property without it being in a HOA and I don't like buying older properties (I still have a few) because they require more maintenance.

I do like your suggestion. Do you actually do the background check and then use any dirt you find to get your way or just the threat of a background check and the hope that one or more of the board members have a shady past? Unfortunately blackmail is typically illegal so maybe a better approach would simply to make the dirt public and take over their position on the board :)

[Gerald K.]

Wow! it would suck to buy a place and then have the HOA change the rules against renting the place. They should make the rules apply only to new purchases after the rule change.

Yes, some HOAs don't allow houses to be rented, or limit the number of rentals in the community. One place I checked required an extra fee - like 50% extra HOA dues if you rent your house. When I asked what the extra fee would be used for, they had no explanation. I figured, the HOA felt tenants do not take care of the homes, yards, etc as an actual owner would. Pride of ownership thing. But the opposite can be true. Look at all the foreclosures that real estate investors pick up, rehabbed, and rented out. Much better for the neighborhood than the empty homes.

[Andrew Syrios]

Some HOA's don't care. We bought a condo that said you weren't supposed to rent it for the first three years you owned it. But when talking to the HOA they said no one follows that rule so go ahead. Another HOA does absolutely nothing (in fact they charge us only $23/year and seem to only exist to delay closings).

Of course, other HOA's are basically fascist.

[Robert Steele]

Originally posted by @Gerald K.:
Wow! it would suck to buy a place and then have the HOA change the rules against renting the place. They should make the rules apply only to new purchases after the rule change.

Yes they do. We are grandfathered in. But as soon as our current tenant leaves we have to start jumping through the hoops.

Thankfully they don't know when the lease ends as they do not have a copy of it. Unfortunately they wont give us access to the pool without providing them with a copy of the lease, background checks and all the other personal tenant details. The tenant doesn't want to give up those details.

I don't even know how they figured out there was a tenant living there. Maybe they troll the MLS.

[Account Closed]

@Robert Steele,

I don't make threats. When I say I will do a background check, I do it, and if they have a shady pass, I will let them off the hook from being in the news, as long as they clean out their desk.

Joe Gore

[Walt Payne]

@Robert Steele HOAs are bad news. A good one can turn bad, or a bad one worse, with one new pushy board member that has an agenda. And there are few limits on what they can require. And don't worry, if the current rules don't allow it they will change the rules. I won't buy where there is a HOA.

[Robert Steele]

Originally posted by @Account Closed:
@Robert Steele,

I don't make threats. When I say I will do a background check, I do it, and if they have a shady pass, I will let them off the hook from being in the news, as long as they clean out their desk.

Joe, please don't think I was impugning you. Thanks for the clarification. I have asked the HOA secretary for the names and contact details of all board members so that I can return the favor and perform background checks on them on behalf of my tenants. I will also follow through on my promise. We will see where it goes.

[Account Closed]

@Robert Steele,

On the letters, you get from the HOA should have all members listed.

Joe Gore

[Bob E.]

Maybe you should tell the HOA that, due to the new rules, you will not be renting your unit but since it is such a nice home you are donating it to a local halfway house to use as they transition recovering drug addicts back into the mainstream.

[Walt Payne]

Originally posted by @Bob E.:
Maybe you should tell the HOA that, due to the new rules, you will not be renting your unit but since it is such a nice home you are donating it to a local halfway house to use as they transition recovering drug addicts back into the mainstream.

Lol I love that answer.

[Pat L.]

We inherited a nice Villa under the dictatorship of a HOA. Then the HOA tightened the rules regarding rentals.

We were 'referred' to a local property manager who negotiates all the hoops & hurdles & the face to face required for the screening of our seasonal tenants. 5 years & counting she has made it very worthwhile....but NEVER again!!!

[Matthew Paul]

I have a customer who would bring his work van home and park it in his driveway . The Hoa threatened him with fines etc . So he read the rules and they stated " no vehicle with a company name is allowed " he also found out that the roads are not private , they are owned and maintained by the county , so he parked his van in front of the house and they sent him a letter . He took the letter to the board meeting and told them he doesnt own a van , that the commmunity should send the letter to the owner of the van , the name is on the side . He then shows the board the county law where it is legal for anyone to park on a county street and he showed that the community rules do not apply to the county owned roads within the community . The van gets parked there every night The HOA lost that battle .

[Michael B.]

Hey @Robert Steele .

I'm guessing that Florida will give Texas a run for your money on the prevalence of HOA's. Here you either buy in a HOA or you buy something built in the mid '60's or earlier. Everything I own is in an HOA (including my home).

Two of the 6 HOA's that I own in have a rental approval process. It's usually not too bad. I've never had an approval go over 3 days and never had a tenant rejected. In mine its just a way to make sure you're exercising just a little bit of caution as to who you bring into the neighborhood. And as for the information required the HOA has a reason to know who lives there -- police issues, emergency issues, etc.

Remember that HOA board members are usually retired guys. They serve on the board as a way to fill their days. They live to talk to people. Go to a board meeting and swap a few fishing/hunting/sports stories with them. It becomes a lot easier to discuss business if you recognize you as a person and not just a landlord. Most of them are always ready to offer advice on about any given subject. Just nod occasionally and smile a lot. Makes the relationship work much better.

[Cliff Mccue]

@Robert Steele 

I remember talking with an attorney who was a real estate investor and he told me that what he would do is instead of drawing up a regular lease. He would draw up a lease option contract or maybe it was a lease to own contract. The sale would have to be executed after each year and the given price. If not, then there would be a new contract drawn up. He said the reason why this worked is because the HOA is not allowed to stop you from selling your place under whichever terms you choose. Also they are unable to pick who you sell to.

The one downside to this is that you now have a target on your back and the HOA will look to make your life difficult at every turn. This method has been tested in the courts in Illinois.

I am not a lawyer, nor is this legal advice.  

[Jake Stenzi]

@Robert Steele if you sell the property and hold the note, you can still have the monthly cash flow coming in and not have to deal with the tenant. Have you done owner financing before? This could be a win win.

[Rolanda Eldridge]

HOA (FL).Actually towed my tenants vehicle.. Something about blocking sidewalk and his company sign on vehicle..the community security guard gave several warnings.. It was ugly..I paid half the tow fee to keep my 2 yr tenant happy!!..

[Wayne Brooks]

HOA's Do have the right to approve/disapprove a buyer, and the lease option thing is bogus as far as getting around the rental restrictions.,

But, @Robert Steele HOA restrictions/regulation of rentals is extremely common here. Generally, it's no big deal as Your criteria for your tenants will generally be tighter than the HOA's....they're generally more interested in the criminal past side. Generally helps the property value side of things too.

[John T.]

@Robert Steele 

One possible remedy is to sue the HOA in the United States District Court (not state court) alleging that the HOA's "no rental" policy violates the Fair Housing Act.

You could alleged that "protected clases" of people are more likely to be renters and that the HOA's "no rental" policy "has a discriminatory effect where it actually or predictably results in a disparate impact on a group of persons or creates, increases, reinforces, or perpetuates segregated housing patterns because of race, color, religion, sex, handicap, familial status, or national origin." See Code of Federal Regulations § 100.70(d)(5) and § 100.500 (a). See http://portal.hud.gov/hudportal/documents/huddoc?id=discriminatoryeffectrule.pdf

I'm not giving you legal advise. You may wish to consult with an attorney licensed in your jurisdiction regarding this matter.

[Chad Ballard]

I served on a board at a condo that we own ( and still own but rent out).  What a pain to get anything done.  I remember two meetings we spent the entire time debating wither we should buy a $500 TV or $750 TV for the clubhouse.  We had an annual operating budget of over $300k and our water bill each year was more than $30k but we spend all our time worrying about the small stuff.  Learned a lot but that was because there was another more experienced investor on the board.  He ended up being replaced because he stopped showing up for meetings because they were wasting time.

There are now FHA requirements that you cannot have more than 50% or your units as rentals. This was a bug issue for the homeowners worried about selling eventually. Not surprising that boards are adopting rules for more control.

[Rachel H.]

Interesting to hear your experience Robert. I believe Lisa Phillips on here has run across this issue in the past.

Personally, I try to stay away from HOAs as much as possible when it comes to buying and holding. Seems like there are more and more stipulations, this one is news to me!