How do Short-Term Rentals Impact Home Owners Associations?
If you are a homeowner, or own a second home, leasing it out as a vacation spot might sound appealing, especially with websites such as Airbnb that make it easier than ever to do short-term rentals.
You need to carefully screen the renters and clean up before and after they leave, but with minimal effort, short-term leasing may allow you to secure a sound, steady stream of revenue which likely more than pays for the property.
It sounds fine on the surface, until you get into the fine print.
Even if you own your home or second home, you may not be free to do what you want.
Some neighborhood associations or counties prohibit short-term rentals. Check with your specific county to find out their guidelines.
Where you will definitely find the most restrictions are in homeowners’ association (HOA) rules which often prohibit short – term rentals.
When you live in a condo or townhome community, an HOA provides some degree of protection for everyone’s property values. For the most part, no one wants to see a big-rig parked on the front lawn or a motorcycle chop shop in the driveway, and when you buy into a neighborhood with an HOA, you have become a member and agree to the restrictions.
Restrictions might also include the color you can paint your house, the type of fencing allowed and whether you can use environmentally-friendly vegetation.
An HOA will usually be accompanied by a monthly fee and/or annual dues to pay for community upkeep. There may be special assessments to cover unexpected yet necessary repairs to keep the community maintained.
This is why HOAs are not for everyone, especially the person who wants to decide what he can and cannot do with his own property.
Read the Language in Your Association Documents
An HOA has a board of directors elected to enforce the rules and regulations laid out in the Declaration of Covenants, Conditions and Restrictions.
The language in your association’s documents should spell out exactly who the renter is, how long they can rent, if at all, and the minimum rental contract.
Rules are one thing, enforcement is another.
The documents will contain the fines residents face for not following the rules. In addition to a fine, the HOA can also place a lien on the property if the homeowner does not pay the fine or the monthly assessments.
A lien must be paid before the property can be sold.
Rules and Enforcement
Ultimately, most condo or HOAs have restrictions about the number of units that are required to be “owner occupied.” Do the documents restrict the number of cars parked outside the unit? What is the minimum time one can lease their property? How many persons can live in that property? Can the property be used for business purposes?
An HOA is only as good as its enforcement, and since the board members live in the community and serve voluntarily, HOAs sometimes have a reputation of being overbearing, but regardless, the choice of most homeowners is for everyone to follow the rules.
Again, you have technically agreed to the rules by virtue of living there, and you have a choice not to live in this particular community.
End Run Around Rules
The HOA Leader, which covers the HOA industry, reports that some individuals who want to skirt the rules may have a tenant sign a contract for a six-month lease or whatever the minimum time period is allowed. The contract then will include a penalty to break the agreement early of $10.
This technically allows for someone to rent a property for a couple of weeks or a couple of months, pay $10 and essentially have a short-term lease.
This is an end run around the rules and may be addressed in your covenants. If not, perhaps it’s time for an amendment to the covenants, conditions, and restrictions. At St. John, Bowling, Lawrence & Quagliana, LLP, our legal team has extensive experience representing a large number of community associations and condominium developers, and we have authored organizational documents for multiple condominium projects in Virginia. We are available to address your association’s needs at 434-296-7138.