The short-term rental controversy in homeowner, condo associations

By Deborah Goonan, Independent American Communities

 

For several years, association-governed communities have been struggling with internal conflict over a controversial issue: what to do about short-term rentals?

Should short-term rentals be allowed or not? If so, under what conditions? Is it possible to make rules and restrictions that are fair to all members? Can those rules be enforced?

The clash of viewpoints on the issue of short-term rentals is closely related to the core conflict in HOAs.

The core conflict in many shared ownership communities is the fact that members of the common interest corporation often hold opposing goals and values.

In this case, owners who purchased their property mainly as an investment property are pitted against owners who purchased their property as a primary residence or seasonal second home.

Investors want to maximize profit potential by renting their units as often as possible. The more short-term rentals they can find using Airbnb, Home Away, VRBO, or similar venues, the more revenue they can earn. Some investor-owners occasionally vacation in their unit, but many never spend time in the community.

Owner-occupants, on the other hand, want a peaceful home and community with neighbors they know, as opposed to sharing space and common amenities with strangers. They do not wish to feel as if they are living next door to – or in – a hotel.

In common interest developments of all kinds, there will always be compromise of individual property rights, one way or the other. And as an individual owner, there’s just no telling whether you’ll be on the winning side or the losing side of the controversy.

First, your property rights  depend on what’s written in your governing documents. The covenants and restrictions might allow short-term rentals only under certain circumstances, they might give the owner free reign to arrange vacation rentals year round, or they might prohibit all short-term rentals, allowing tenants only if approved by the association with a minimum 6 month lease. The Association might also set a maximum ratio of rental units to owner-occupied units, preventing relatively new owners from leasing their units under any circumstances.

But be aware that governing documents can also be changed by a super majority of voting interests. Normally, amending CC&Rs is very difficult to accomplish. However, it all depends on the investor-to-owner-occupant ratio in your condo or homeowners’ association. In some cases, once investor-owners acquire multiple units in an association, they can amass a super majority voting interest, and change rules and restrictions without consent of dissenting owners.

As a housing consumer, it is wise to consider your purpose for buying a home in an association-governed, common interest community.

If your goal is to invest in real estate, you will run into fewer obstacles if you buy into a known vacation resort, as opposed to a mainly residential neighborhood.

If your goal is to relax or retire peacefully in your Dream Home, then look for a truly residential neighborhood, not a resort-style community or vacation getaway destination.

 

Sometimes I hear from a condo owner who tells me she plans to rent out the unit to vacationers for the next few years, then move in permanently upon retirement. Or another homeowner tells me he and his family use their lake or oceanside home every summer right now, but plan to move in full time someday.

That makes me cringe, because it tells me that the property owner has two completely different purposes for buying into a community association.

I can almost guarantee that, if and when those owners move into their investment-retirement homes, their perspectives will change drastically.

Almost over night, as owner-occupants, they will not be tolerant of frequent comings and goings of strangers in their neighbors’ units. They are likely to complain about late night parties, the difficulty of finding an open parking space, and being unable to enjoy the pool, the beach, or the clubhouse in tourist season.

And don’t expect the courts, state or local law to protect or uphold your property rights either. There is no consensus of opinion as to whose property rights should prevail, even in associations with restrictions.

For example, in Michigan, an appeals court recently ruled in favor of a ban on short-term rentals, classifying the activity as a commercial use of property.

But, in Florida, the courts have ruled just the opposite – renting one’s personal property is a residential use unless the owner also provides “hotel-like” services such as room service or maid service.

Some cities forbid outright bans on short-term rentals, especially if the city’s economy relies heavily on tourism. Other municipalities require owners to be licensed, and then regulate short-term rental activity. Some cities or individual community associations enact and enforce ordinances and restrictions that make short-term rentals practically impossible or unprofitable.

Bottom line: before you buy, be certain about your purpose for purchasing property in an association-governed community. Then exercise considerable due diligence to determine whether or not your goals are realistic and achievable.

Carefully read and review all terms of governing documents, examine financial reports and the most recent reserve study, and talk to other owners and residents to learn what they like or don’t like about the community.

Most of all, recognize that, due to factors beyond your control, the association-governed community may evolve over several years – transitioning from a residential community to a vacation resort community, or vice versa, in direct opposition to your peronal goals.

Recommended Reading – legislative and legal perspectives on short-term rentals:

Short-Term Rentals in Flagler County:
The View From Home Owners’ Associations

Vancouver condo council develops anti-Airbnb strategy 

Ian Lind: Condo War Breaks Out On Maui When Homes Become Hotels

MICHIGAN COURT OF APPEALS RULES IN FAVOR OF HOA ON SHORT-TERM RENTAL BAN

SHORT TERM RENTALS: HOW IT AFFECTS HOMEOWNER ASSOCIATIONS (FL)

 

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