Many Americans are familiar with subdivisions because many Americans live in one. When you build or buy a home in one, there are no laws that say you can't lease the property to someone else. However, some subdivisions have homeowners' associations. Some HOA's have their own rules. They can issue fines, assign fees, and yes, even rule out leasing the property. They can generally fine owners who fail to comply.
Covenants, Conditions and Restrictions
If you choose to live in a subdivision with an HOA, you choose to abide by its rules. HOAs create their own rules, regulations and guidelines called Covenants Conditions & Restrictions. It may include a promise that you'll only own certain kinds of pets and you won't paint your home in colors that clash with the other homes. It may include something about leases. The paperwork at the closing of any home signing is overwhelming, but you must read it carefully to see what those leasing restrictions are and if you want to live with them. Once you sign, you're subject to the CC&R rules whether or not you have reviewed or understand them.
According to MSN Real Estate, an estimated 40 percent of communities governed by HOAs impose restrictions to keep homeowners from becoming landlords. Some bylaws only allow the homeowner to lease the home if it is due to a hardship. The CC&Rs may not define what constitutes a hardship, which means the HOA can use any reasonable criteria. You may need to prove your case to the board before permission is granted.
Reasoning Behind the Bans
HOAs do have a good reason to ban leasing by its members. Renters don't always care as much about preserving the community. High leasing ratios tend to decrease buyer demand, which results in low market prices throughout the subdivision. If leasing levels exceed more than half of the subdivision, the entire community may be classified as an investment property. That can increase the HOA's insurance policy, which in turn may increase your dues.
What You Can Do
To avoid buying in a subdivision with an HOA that bans leasing, request a copy of the CC&Rs before you submit an offer. Carefully review all the requirements and make sure you agree. If leasing bans or restrictions were recently introduced to your CC&Rs, check for a grandfather clause. Although not required, some HOAs understand current tenants have a leasing situation, and they'll let that continue even if they changed the rules. If you have an issue with any of the rules, discuss the matter with the president or subdivision board of directors. You'll need to convince them that changing the rule will not only benefit you, but the entire community.
- MSN Real Estate: Many Towns Tightening ‘No Rental’ Rules
- Rebecca Law: Rental Restrictions - The Third Rail of HOA Policies
- Sirkin and Associates: Homeowners Associations (HOA) FAQs
- Sun Sentinel: Does Florida Allow HOAs to Evict Tenants From a Home
- Neighborhood Link: Should Your HOA Allow Rentals?
- Realty Times: Banning HOA Rentals