Condominium associations have become more restrictive of unit rentals over the last several years and have been proposing leasing restrictions. A change in policy to prohibit or limit the number of condominium unit rentals in a complex must be weighed carefully by any board of directors.
After the real estate market crashed, many condominium owners decided to rent their unit if they needed to move and couldn’t sell. As a result, many associations began a review of their rental policy. One concern is that a condo complex with a high percentage of rentals won’t be as desirable to prospective buyers and would end up depreciating everyone’s units. Another concern is that a lot of rental units could impede the ability of unit owners or buyers to obtain mortgages for the units. Both of these concerns do have some merit.
High owner occupancy condominium complexes generally are perceived as being more stable and better maintained than buildings with a high percentage of rental units. Also, lenders have guidelines requiring a certain percentage of owner occupancy in order to lend money on units in the complex, although this has eased up over the last couple of years.
Disallowing condominium rentals altogether can have a big downside. There is always a possibility that if a condo owner cannot rent the unit, it will end up in foreclosure court. Multiple foreclosed units wreak more damage on the overall health of a condominium complex than the existence of some tenant occupied units.
A limit on the number of unit owners who may rent their unit at any given time might be the best scenario. The limitation should be based on a number of factors unique to each association, but the number of rentals allowed should always be somewhere less than fifty percent.
Any change in the condominium rental policy must be done by means of an amendment to the condominium declaration. The amendment must be voted on by a super majority of the unit owners and then recorded with the recorder of deeds. The board should make sure they have the votes to pass the amendment before they start the amendment process. Board members won’t be very popular when they spend the association’s funds to pay legal fees for a useless amendment.