By Deborah Goonan
I’ve had this discussion with people on numerous occasions, and the question was just posed again in an online forum. Many condominiums allow owners to lease their units, and, in a growing number of these communities, tenants occupy at least 20%, if not a majority, of the units. Most condo associations are either in highrise or low-rise multifamily buildings, but some are townhouses, and a few others, modular homes. Some of these Associations are located in resort destinations, and serve mainly as temporary vacation lodging. But most condominiums are residential and offer units for long term lease with a minimum of 6 months or a year.
In some housing markets, the shortage of rental property in recent years has led to more condo unit owners leasing to tenants. The unit owner might have purchased their condo when prices were high, has had to move on after a career change, marriage, children, or divorce, and now leases their unit as a matter of survival. At the same time, plenty of investors have entered the market since the real estate crash, snapping up condos at bargain prices. They are taking advantage of rising market rates for rent, at least until they decide to resell in the future.
Your rental market will vary
If you’re looking for a place to rent, depending on the real estate market, you will be able to choose either an apartment in a rental community, a unit in a condominium association, or a townhouse or detached home that may or may not be part of a homeowners’ association. Since the vast majority of tenants seek the lower cost and maintenance requirements of multifamily rather than detached homes, I will focus on lifestyle considerations for tenants in apartment-style units.
First of all, it depends on the caliber of dwelling you expect. If you’re looking for high end finishes and amenities, you will probably only find these in luxury condominiums. Unlike some European markets, where it’s common to rent (such as Germany), here in the US, except in very large cities, there are few truly high end rental apartments. Perhaps that’s a market niche that needs to be filled.
The other consideration is that some of the most affluent, sought-after addresses are zoned for condominiums, but not rental communities. There’s a pervasive prejudice against tenants and in favor of homeowners in some pocket neighborhoods that have essentially blocked construction of rental properties for decades.
On the other end of the scale, low income tenants will generally find a shortage of affordable housing where landlords accept rent subsidies. Public housing is scarce in many cities and towns. An increasing number of low-income housing rentals can be found in condominiums or mobile home communities. Overall, choice may be limited.
What to consider if you have a choice
For most people, particularly in the middle and lower income ranges, it can be argued that there are many advantages to renting in an apartment community vs. a condo association.
First of all, the tenant of an apartment only has to make one service request to the manager when needed. If a problem arises in a condo — let’s say a water leak — the tenant may have to call both the landlord (unit owner) and the manager. In some cases, as a tenant you may have to rely on the landlord-owner to contact management on your behalf. Then the two parties — the unit owner and the manager — will probably go back and forth about who is responsible for the repair, and who should pay. That could mean a delay in service.
A growing number of apartment communities here have fairly liberal pet allowances and flexible lease terms. That usually isn’t the case in a condo association, where it is common to find restrictions against pets of any kind, or where, if pets are allowed, there are strict weight limits and prohibitions on certain breeds of dogs. The minimum lease term in condominiums is usually 6 months or 1 year. So if you’re between jobs or house hunting, it can be tricky to coordinate a move without breaking the lease.
Condo associations also tend to have resident owners who don’t really like having a high concentration of tenants in their community — especially if the tenants are young or have children, and the resident owners are 55+ and have an (unrealistic) expectation that the entire condo association is only for retired people. Many owners have a misguided perception that tenants are less likely to take care of their units, respect the common areas, and be courteous of their neighbors. The reality is that either an owner or a tenant can be a bad neighbor, but a substantial number of owners are biased in favor of owner-occupants rather than tenant occupants.
Note: Federal Law prohibits discrimination on the basis of race, color, religion, sex, national origin, disability, and familial status. In addition, housing providers that receive HUD funding, have loans insured by the Federal Housing Administration (FHA), as well as lenders insured by FHA, may be subject to HUD program regulations intended to ensure equal access of LGBT persons. For more information, or to file a complaint, visit the HUD portal.
http://portal.hud.gov/hudportal/HUD?src=/program_offices/fair_housing_equal_opp
A condo association also comes with additional rules and restrictions that can be difficult to live with, so be certain to thoroughly review these before signing a lease. Pay close attention to parking restrictions, restrictions on use of outside spaces if included, and use of common areas.
In some states, the tenant may be ordered to pay rent to the condo association
It may sound unbelievable, but in some states, such as Florida and Massachusetts, a tenant can get caught in the middle of disputes between the landlord and the Condo Association. For example, if a unit owner falls behind on assessments, the tenant can suddenly receive a letter from the manager of the association, or the association’s attorney, demanding that rent payments be made to the condo association, not the landlord! That can be very awkward for the tenant, particularly if the landlord protests. If the tenant refuses to pay the Association rather than the landlord, the Association can evict the tenant.
Some states, such as Ohio, require a judicial process before the Association can collect rent from a tenant. Either way, a notice letter can catch a tenant by surprise.
There are other ways the tenant may be forced to pay for the misdeeds of the unit owner-landlord. For example, in some states, the law also allows an Association to prohibit both owner and tenant access to amenities in the event of financial delinquency by an owner. Some leases include a requirement that the tenant will pay the owner’s maintenance fees. ( So, as a tenant, you might not be able to use that sparkling pool, the exercise equipment, or the game room until and unless the owner regains good standing with the Association. Seems unfair, especially if your rent was supposed to include those perks. This is simply not an issue in an apartment community, without a unit owner as the go-between.
Bottom Line: Choose Carefully
If you choose to rent a condominium rather than a home or apartment without a condo or homeowners’ association — or if you find you have no alternative — here are a few tips to protect your interests:
- Review all rules and restrictions carefully before signing the lease, to be sure you can live with them.
- Review state laws pertaining to tenants in homeowners’ and condo associations.
- Check out the payment history of landlord (unit owner). An inquiry at the County Clerk or Recorder’s office and/or the tax assessor’s office can uncover property tax delinquency or foreclosure proceedings by a lender or the HOA.
- If the landlord owns multiple units, ask for tenant references.
- Talk to other tenants in the community, to get a sense for their level of satisfaction or dissatisfaction with management and neighbor relations.
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