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Placing a cap number of rentals in condo complex

I’ve been asked by my HOA board members to gather information on putting together a questionaire for a cap placed on the number of rental units in my condo complex, since I keep bringing it up at monthly meetings. I bought my unit last year based on the information on the County Assessors website showing only approximately 17% rentals. But since I moved in I’ve discovered the number is closer to 40%. I’m angry to say the least because of the dishonesty of homeowners in the “business” and so are other homeowners whom live in the complex, due to the problems that some of the rental units have caused. How do I go about wording my questions so that I can achieve a quorum to get a cap on the rentals and effect the change in the CC& R’s. Currently there is no cap on the number of rental units. I’m wondering why the HOA board allowed so many investors and people in the rental business to get such a large foothold in the community and why the board has not directed the management company to scrutinize prospective buyers better. Because of the number of rentals and the cash reserves being low, FHA lenders will not issue loans in the complex. Only cash or conventional loans. Any advice you can give would be greatly appreciated. Thank you.

1 Response

  1. Dennis Legere

    Carol,
    Excellent question. The issue is very complicated and all depends on how exactly your community documents are structuted particularly the CC&R’s. That document defines the sum total of the covenants and restrictions placed on your property by the developer. If the CC&R’s do not place restrictions on the ability of the homeowner to rent his/her property than the association is powerless to change that without the unanimous consent of all homeowners. The issue is property rights. If the community documents do not limit an owners ability to rent or lease his unit than it is the owners fundamental property right to do with his property anything that he wants. This issue has come up most recently relative to short term rentals via AirB&B and similar services. But that does not appear to be your primary concern.
    As you mentioned many CC&R’s written in the last 10 years include provisions that allow the association board to establish limitations on the number of units or homes that can be leased or rented to comply with the FHA limits of financing further home purchases, to maximize the value retention on those properties. If the FHA threshold is exceeded every home in the community’s value is potentially negatively impacted,.

    If your CC&R’s have that provision than your board is empowered to enforse that financing restriction without any further CC&R change. If it is not there you would have to change the CC&R to apply such a limitation.

    The real question is how many votes would be required to do this. If you Community is a condominium than both Arizona Law and Property Servitude Common law would dictate that unanimous consent of all owners would be required to implement such a change. If however you are a planned community than Arizona law is silent on the issue but Property Servitude common law would still apply, and the same unanimous consent would be required.
    Many HOA attorneys would advise their clients that they would only need the number of member to approve such a change as is specified for any other change of the CC&R’s. I’m not an attorney and represent no one but myself but from my study of Property Servitude’s common law which is the compilation of case law decisions on the subject from across the country the unanimous consent would be required.

    If you can provide me an electronic copy of your CC&R I’ll read them and have a better picture of your actions going forward. One thing you have to remember is that CC&R changes are for ever and should never be undertaken lightly. They not only affect all current homeowners but also affect all future homeowners in your community. Most CC&R require a super majority of all homeowners of 2/3 or greater to vote for a change . This is not out of the quorum for a meeting or even the votes case at a meeting this is of all eligible votes in the community. So in this case any non vote counts the same as a no vote on the issue. It is a very difficult thing to achieve but can be done with a plan and effective and honest communication with all homeowners on the issue.
    Send me your CC&R at help@azhoc.org. And I’ll look them over for you and we can go from there.
    Dennis

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