The governing documents of many common interest developments contain provisions for HOA lease restrictions that restrict the owners’ rights to lease their units. These restrictions range from absolutely prohibiting leasing, to partially restricting leasing, to merely imposing restrictions on tenants’ rights. The validity of the restrictions that are imposed by a homeowners association on leasing are frequently the subject of conflicts between owners who lease their separate interest and their homeowners association. A consideration of the validity of HOA lease restrictions starts with an evaluation of the provisions contained in the associations declaration relative to owners rights to lease. It is crucial to know if the covenants give the board general authority sufficiently broad to allow the association to control leasing or tenants in some fashion. If the declaration authorizes the board to make rules regarding leasing (or, at least, does not prohibit it), counsel should next determine if a proposed restriction is both reasonable and to be reasonably applied.
For example, it may be unreasonable to restrict short-term leasing in a vacation area, but it may be reasonable to totally prohibit leasing in a redevelopment project if the goal is to provide a stable community of owner-occupied units for low- and moderate-income persons. Regardless of whether a court presumes the leasing rule to be valid or subjects the rule to stricter scrutiny, it is in the best interests of the community to enact reasonable rules and apply them reasonably.
As a general rule, covenants that are contained in a recorded declaration are presumed to be enforceable unless they are found to be unreasonable. Because this presumption does not apply to restrictions in bylaws or rules and regulations, it would be wise for homeowners associations to include desired HOA lease restrictions in the declaration rather than in the rules. Irrespective of this general rule, leasing restrictions that violate fair housing laws, or which are determined to be an unreasonable restraint on alienation, will be subject to a court determination that the restriction is void. The following restrictions adopted by homeowners associations that have the authority to implement restrictions specified in their declaration, have been found to be consistent with federal FHA standards and guidelines:
- HOA lease restrictions must be in writing and subject to the governing documents;
- The association may request and receive a copy of the lease or rental agreement;
- The association may request the names of all tenants occupying the unit;
- The association may prohibit leasing of the unit for an initial term of less than 30 days; and
- The association may establish a maximum allowable lease term and a maximum number of rental units (subject to FHA’s then-current requirement).
A restriction that is not permitted is a requirement that a prospective tenant be approved by the association or its agents. (Per HUD Mortgagee Letter 201122)
Total Prohibition on Leasing
If there is a strong public policy reason, courts may uphold a total prohibition on leasing. For example, courts have upheld HOA lease restrictions which: (i) furthered a legitimate purpose of the project that was itself in keeping with the public policy of the state to encourage affordable housing; (ii) were applied in a fair and nondiscriminatory manner; (iii) which did not amount to a forfeiture of the owner’s interest in the property but instead merely required the owner to move back into his unit or put it up for sale; and (iv) where the owner purchased the unit with full knowledge of the restriction.
Partial Restrictions on Leasing
Different methods of restricting leasing have been used by homeowners associations, including user fees and increased assessments and limitations on lease terms. Case decisions that have addressed the validity of partial HOA lease restrictions on leasing have suggested that, if a specific restriction on leasing appears in the declaration, the courts are likely to find it valid unless it is unreasonable, which is consistent with the general trend in favor of enforcing covenants. If the restriction is enacted by the board under authority provided in the declaration, the court is more likely to evaluate the impact of the restriction on the owners. If, however, the declaration contemplates that owners can rent their units, and if the practical effect of a board rule is to eliminate leasing, then the court is more likely to consider the rule unreasonable.
Restriction Violations by Tenants; Eviction Strategies
When the declaration permits leasing, a community association faces enforcement problems if an owner’s tenant engages in conduct that violates the governing documents. Associations have adopted varying strategies and approaches for dealing with such a problem. One approach is for the association to have a leasing restriction which mandates that an owner’s lease contain a provision stating that any tenant’s breach of the declaration or the association’s articles, bylaws, or rules constitutes a breach of the lease. Such a provision would authorize the owner to bring an unlawful detainer action against the tenant if the tenant violates a restriction contained in the associations governing documents. Another approach is to provide that when a tenant violates the governing documents, the association may bring an unlawful detainer action on the owner’s behalf, naming the owner as plaintiff in the action. Unlawful detainer is a summary remedy designed to restore possession of the premises to the party entitled to possession.
Restrictions Contained in an Associations Declaration
A sample of provisions that might be contained in an associations declaration relative to HOA lease restrictions on the leasing of separate interests is as follows:
Section ___. Delegation of Use.
(a) Delegation of Use and Leasing of Residences. Any Owner may delegate his or her rights to use and enjoy the Common Area and Common Facilities to his or her family members, tenants, lessees, or contract purchasers who reside in the Residence, provided, however, that any rental or lease may only be to a single family for Single-Family Residential Use, and for a term of not less than ___ days. The restrictions on multiple-family occupancy imposed by this subparagraph are intended to protect, enhance, and maintain the single-family residential atmosphere that exists within the Development and to avoid an overburdening of Common Areas and Common Facilities.
(b) Retained Rights of Owner-Lessors. During any period when a Residence has been rented or leased, the Owner-Lessor, his or her family, guests, and invitees shall not be entitled to use and enjoy any recreational Common Facilities within the Property. In other respects, nonresident Owners who are leasing their Residences shall have full rights to access the Residence to perform the Owner’s responsibilities as a lessor. The restriction on recreational facility usage by Owner-Lessors shall not apply to any Owner-Lessor who is contemporaneously residing in another Residence within the Property.
Any rental or lease of a Residence shall be subject to the provisions of the Governing Documents, all of which shall be deemed incorporated by reference in the lease or rental agreement. Each Owner-Lessor shall provide any tenant or lessee with a current copy of all Governing Documents and shall be responsible for compliance by the tenant or lessee with all of the provisions of the Governing Documents during the tenant’s or lessee’s occupancy and use of the Residence. A copy of the fully executed lease or rental agreement shall be delivered by Owner to Associations secretary, or managing agent, prior to occupancy of the Residence by the tenant or lessee.
(c) Requirements That Must Be Observed in All Residential Leases. The following specific limitations shall apply to all leases or tenancies of a Residence:
- No Residence may be leased or rented for a period of less than ____ days, and there shall be no right of assignment or sublease;
- The rental shall apply to not less than an entire Residence, including its appurtenant rights (except voting rights in the Association that may not be transferred to a tenant or lessee); and
- Any rental shall be evidenced by a written lease or rental agreement, or an addendum thereto, which shall include provisions stating that: (1) the tenancy is subject to the terms of the Governing Documents and that the tenant or lessee acknowledges that he/she/it has received a copy of the Governing Documents and agrees to comply with all covenants, conditions, restrictions, bylaws, rules, and regulations contained in the Governing Documents; (2) any failure of the tenant or lessee to comply with the terms of any Governing Document relating to residential leases, property use restrictions, or the use and enjoyment of any portion of the Common Area and Common Facilities shall constitute a default under the lease or rental agreement and shall entitle the Owner to terminate the tenancy on 30 days written notice, or such shorter notice period as may be permitted under applicable state laws and/or the lease or rental agreement; (3) there shall be no right of assignment or sublease; (4) the tenant or lessee shall carry renters insurance with such limits as may be determined by Associations Board of Directors, and if the tenant or lessee has a vehicle, automobile insurance with minimum coverage limits as required by state law.
- The Owner-Lessor’s right to terminate a lease or rental agreement because of the tenant or lessees violation of the Governing Documents shall in no way restrict the right of the Association, the Declarant, or any Owner to enforce the Governing Documents, when the Owner’s tenant or lessee is violating the Governing Documents.
(d) Discipline of Lessees. Subject to subparagraph (e), if any tenant or lessee fails to honor the provisions of any Governing Document, the Association shall be entitled to take such corrective action as it deems necessary or appropriate under the circumstances to preserve the quiet enjoyment of other Owners and residents of the Development. Without limitation, the Association’s actions in response to a tenant’s violation of the Governing Documents may include the imposition of fines and penalties against the Owner-Lessor of the Residence.
(e) Due Process Requirements for Disciplinary Action. Except for circumstances in which immediate corrective action is necessary to prevent damage or destruction to any portion of the Development or to preserve the rights of quiet enjoyment of other Owners, the Association shall have no right to initiate disciplinary action against an Owner-Lessor (or the Owner’s lessee or tenant) because of the misconduct of the Owner’s lessee or tenant unless and until the following conditions have been satisfied:
- The Owner has received written notice from the Board, the Association’s property manager, or an authorized committee of the Board detailing the nature of the lessee’s or tenant’s alleged infraction or misconduct and advising the Owner of his or her right to a hearing on the matter if the Owner believes that remedial or disciplinary action is unwarranted or unnecessary;
- The Owner has been given a reasonable opportunity to take corrective action on a voluntary basis or to appear at a hearing, if one is requested by the Owner; and
- The Owner has failed to prevent or correct the lessee’s or tenant’s objectionable actions or misconduct. Any hearing requested under this subparagraph shall be conducted in accordance with Section ___.
(f) Owner’s Duty to Notify Association of Tenants. Each Owner shall notify the secretary of the Association or the Association’s property manager, if any, of the names of any tenant residing in the Owner’s Lot. Each Owner, or tenant shall also notify the secretary of the Association of the names of all persons to whom such Owner, or tenant has delegated any rights to use and enjoy the streets and Common Area of the Development and the relationship that each such person bears to the Owner, or tenant.
The above sample language assumes that the capitalized terms have been defined elsewhere in the document. Examples of such definitions are:
- “Association” means __[name]__ Association, a ________________nonprofit mutual benefit corporation, and its successors and assigns.
- “Board of Directors” or “Board” means the Board of Directors of the Association.
- “Common Area” means all real property owned by the Association for the common use and enjoyment of the Owners and their tenants, guests, and invitees. The Common Area owned by the Association at the time of the Recordation of this Declaration is described in Exhibit ___ attached to this Declaration. Unless the context clearly indicates a contrary intent, any reference herein to the “Common Areas” shall also include any Common Facilities located thereon.
- “Common Facilities” means the __[g., swimming pool and apron area, pool storage and pump house, pool furniture, recreation building, tennis courts, cabana, volleyball court, equestrian and hiking trails as shown on the Subdivision Maps, and the]__ trees, hedges, plantings, lawns, shrubs, landscaping, fences, utilities, berms, pipes, lines, lighting fixtures, buildings, structures, and other facilities constructed or installed, or to be constructed or installed, or currently located within the Common Area and owned by the Association.
- “Development” means the common interest development that was created under the Declaration (as amended and/or restated \) and the other Governing Documents for Association.
- “Governing Documents” is a collective term that means and refers to this Declaration and to the Articles, the Bylaws, and the Association Rules (including any Architectural Rules).
- “Lot” means any parcel of real property designated by a number on the Subdivision Map, excluding the Common Area. When appropriate within the context of this Declaration, the term “Lot” shall also include the Residence and other Improvements constructed or to be constructed on a Lot.
- “Owner” means any person, firm, corporation, or other entity that owns a fee simple interest in any Lot. If a Lot is transferred or conveyed to a trust, the Owner is the trustee or the cotrustees of such trust. Except when the context otherwise requires, the term “Owner” shall include the family, guests, tenants, and invitees of an Owner.
- “Residence” means a private, single-family dwelling __[of townhouse design]__ constructed __[or to be constructed]__ on a Lot.
- “Single-Family Residential Use” means occupancy and use of a Residence for single-family dwelling purposes in conformity with this Declaration and the requirements imposed by applicable zoning or other applicable laws or governmental regulations limiting the number of persons who may occupy single-family residential dwellings.
While it is beneficial for homeowners association directors and management personnel to be familiar with laws and regulations that pertain to HOA lease restrictions, and have a general understanding of the topic, amendments to a declaration to incorporate provisions that do not currently exist require a level of knowledge and experience that is beyond the capabilities of typical volunteer board members and property managers. Accordingly, such amendments should only be undertaken with the guidance and assistance of experienced legal counsel practicing in the jurisdiction where the homeowners association is located.