Many Rentals in Complex Make Lenders Wary
QUESTION: In the article headlined “What to Ask When Buying a Condo” (June 28), Robert Bruss stated that a potential condominium buyer should be concerned if an excessive number of units are occupied by renters and ask whether the complex has rental restrictions.
What types of rental restrictions can a condominium complex impose under California Law?
ANSWER: Mortgage lenders want to know the percentage of non-owner-occupied units. When that percentage becomes too high, the lenders are more cautious about approving a loan. One can assume that lenders believe that a high percentage of renters in a community association means that owning a unit in that complex is not a good investment.
Renters can be very responsible occupants; however, they can also be irresponsible about care of the property and obeying rules. Tenants bring another level of complexity to rule enforcement. The association must deal with the owner when a tenant is uncooperative. Only the owner can evict a tenant who is damaging the common area or creating a nuisance.
Some associations require that owners use the association-approved lease format, even though the association is not a party to the lease.
The lease will state that the tenant must comply with the declaration of covenants, conditions and restrictions, the bylaws and the rules and regulations of the association. If the tenant fails to comply, the owner has the right to evict the tenant.
Some associations restrict rentals to at least a one-month, six-month or one-year term. Tenants who rent on a short-term basis may be less conscientious about abiding by rules. A steady stream of new occupants can cause wear and tear on the common area.
I know of some associations that have amended their covenants to place a limit on the percentage of units that can be rented or leased.
For instance, 20% rentals would put the association in the acceptable range for most lenders. When the 20% threshold is reached, no other owners can rent or lease their units. If the amendment passed with the proper super majority required for covenant amendments, it would probably be considered reasonable and enforceable.
A few years ago, there was a very interesting court case in Southern California involving the owner’s right to rent. The court decided that the owners of a condo unit were prevented from renting out their unit.
The owners did not have that right because the construction and mortgage loans for the complex had been subsidized specifically for low-income buyers by the municipality.
Buyers who could qualify for ownership and residency were required by the covenants to keep their resident status and were not allowed to rent to someone else. Therefore, the court upheld the enforceability of the prohibition of rentals.
Association Takes Aim at Speeding Drivers
Q: We live in a gated community association of single-family homes. The association recently adopted stiff fines for speeding on the private streets of the community, and the association’s security officers are enforcing the rules by citing owners for the bad driving habits of their family members, guests, gardeners, carpet cleaners and anyone else.
The rules state that we are responsible for our guests’ damage to the common areas. Many of the owners feel that extending that to driving violations is unconstitutional. A copy of the rule is enclosed.
A: Your rules contain a long paragraph about your responsibility that appears to be related only to damage to the common area. The heading of the paragraph says “Peaceful Enjoyment of the Property.” It appears that the board has decided that the act of speeding is damaging to the association.
It is understandable that some might feel that the speeding is interfering with their “peaceful enjoyment of the property.”
If you do not agree with the board’s extension of rule enforcement to your speeding guests, put your complaints in writing, attend a board meeting or challenge any fines in the hearing that the board must provide before a penalty is levied. If the board decides that you must pay a fine, you can file an action in Small Claims Court.
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Jan Hickenbottom is a community association management consultant and a founding director of the California Assn. of Community Managers. She selects questions of general interest for the column and regrets that she cannot respond to all questions received. Send questions to Condo Q&A;, Box 5068, Thousand Oaks, CA 91360.
