By Deborah Goonan
This blog series – Are Homeowner and Condo Associations “Mini-Governments?” – will compare the typical governance structure of HOAs (using the term generically) to our local governments, as guided by the principles of our Constitutional Republic.
Part 5. Key differences between Homeowners’ or Condo Associations and Local Governments in America: Diluted landlord and tenant rights
- Landlord and tenant rights are diluted in an HOA.
In recent years, it has become common for Associations to enact and enforce rental restrictions upon owners.(1) This causes difficulties for owners that are forced to move to another location for employment, but are unable to sell their homes. In many cases, the HOA has changed rental restrictions (or lack of them) that owners agreed to at the time of purchase. Although it seems very unfair, there is very little that owners can do about it.
When a homeowner is able to become a landlord in an HOA, there are often other unexpected rules to contend with.
- Although you may be able to rent your home or condo unit, the HOA may enforce a minimum lease term, such as 6 months or one year. A new buyer may be prohibited from leasing to a tenant for the first two years. Or there might be a cap on the total percentage of units rented at any given time, and if that maximum has been reached, you will not be permitted to lease your unit to a tenant for that reason alone.
- In some states, the HOA can collect rent from the tenant if the owner is delinquent on assessments.(2)
- Also, the CC&Rs may state that the HOA has the right to approve or reject a tenant, under certain circumstances.(3)
Tenants living in an Association-governed community should be aware of the following:
- The HOA Board can withdraw a tenant’s rights to use common amenities (such as the pool or the fitness center) if the owner-landlord is delinquent in assessments or has failed to pay a fine or other debt related to any one of the properties he owns.
- In some states, the HOA Board can require a tenant to pay rent directly to them, instead of their landlord (see above). If a tenant fails to pay rent to the HOA under these circumstances, the HOA can evict the tenant without the landlord’s permission!
- When renting a condominium in need of service or repair, the tenant must contact the landlord (owner). However, with some issues, such as plumbing or roof leaks, it can be difficult to determine who is responsible for the repair – the owner or the HOA or both. In a typical landlord-tenant situation, if the landlord fails to repair within a reasonable amount of time, the tenant has the right to hire a professional to do the work, and then deduct that amount from future rent payments. However, a tenant in a condo may be prohibited from allowing outside contractors to do work on areas that are owned by the HOA, and may have to wait until the landlord-owner and HOA resolve any disputes about who is liable for the repair.
In summary, both landlords’ and tenants’ rights are significantly diluted in HOAs.
1 Homeowners’ Associations clamp down on rentals, USA Today, Oct 4, 2012
http://www.usatoday.com/story/money/business/2012/10/04/homeowners-oppose-rentals/1614229/
2 Can Homeowners Association Collect Rent from Tenants if Landlord/Owner is Delinquent in Fees? Ward Damon Attorneys at Law, Jan 19, 2015
3 Can an Association approve or disapprove potential purchasers and tenants? Lindsay Raphael, Esq., Sun Sentinel, Condos and HOAs blog, March 16, 2014
Next: Part 6, In Conclusion
I am not an attorney, and I have not read your contract, but I can offer general comments based on personal observations. It is best to consult a qualified attorney to interpret documents for your specific circumstances.
It is common for the bylaws to require a quorum (minimum level of particiaption) for the annual meeting. Most association bylaws require that 20% of total membership vote either in person or by proxy, in order to have a valid election or to vote on any other matter (such as a budget increase or an amendment to the restrictions). If quorum is not met, then the votes are not tallied, and the association goes on as usual, with the same board and using the previous year’s budget. Your governing documents, specifically the bylaws, will specficy the quorum requirements for your assocation.
However, in some states, the law now allows for the HOA to avoid having an election for the board, as long as the number of candidates does not exceed the number of vacancies (terms expiring) on the board. In that case, if the 5 member board has 3 seats up for election, but only 2 or 3 people have volunteered to be candidates, the new candidates automatically become board members without an annual meeting or election. Check the laws for your state.
By the way, Many associations do not require members to vote on a new budget, so long as assessments are not increasing more than 10 to 20% (that threshold would be specified in the CC&Rs or ByLaws.)
So it is possible for the association to continue to function somewhat, even if there are vacancies on the board. However, there is generally a quorum required for board meetings, too, and if there are not enough board members attending meetings, it becomes impossible to make motions, vote on resolutions, and so forth. For example, if there are only two people on a board that is supposed to have 5 people, members might challenge the decisions of the board, on the basis that quorum has not been met.
I have seen Some associations get around that problem by voting to amend the bylaws to decrease the required number of board members to three people, with a quorum of 2.
But, to answer your question, a low level of participation in meetings does not void the HOA contract or CC&Rs. What can happen is that the association becomes inactive or defunct, and that can be a problem if it means no one is willing to serve on the board. With no one taking the lead, common area maintenance does not get done. If your common area is nothing more than an entry monument and a small green space, it may not be a big problem. But if your HOA is repsonsible for maintaining one or more retention ponds or drainage areas, a pool, a boat launch, a lake, one or more private roads, etc. then it becomes a big problem. Also, the board is repsonsible for obtaining and maintaing insurance policies for common property, and to protect the association in the event of theft, fire, floods, etc. Without insurance in place, members of the association are at risk if any adverse event occurs.
When there is no active board, the court may appoint a receiver (someone who does not own property in the community and has no personal interest in the community) to collect assessments, pay bills, maintain and insure the association, etc. That is almost never a good thing for an HOA or condo association, because members must pay for the receiver’s servicess, and those costs are usually steep. Unfortunately, this is the inevitable fate for many struggling associations.
It is theoretically possible for owners to vote to terminate or dissolve their association,but…often the local municipality or county will not allow dissolution unless and until all common areas (infrastructure) are transferred to another entity to take over maintenance. In other words, owners would need to convince their town or county government to take over their retention pond, their private road, or whatever. Usually the local government balks at that possibility, so the dissolution cannot occur. However, if the owners are persistent and willing to work out a compromise – usually meaning owners will pay to bring the common infrastructure up to code via their tax bill over several years – the local government may ultimately agree to take over maintenance.
I have written several articles about this topic in the past.
Condo associations can be more easily terminated if they do not own any infrastructure, other than the building itself, and if they can obtain the required number of votes.
In any termination or dissolution attempt, the association will require the assistance of a qualified attorney.