Leasing restrictions can be one of the most controversial and complicated matters in community association governance. Between statutory requirements, governing documents and VA/FHA regulations, how are Associations supposed to sort it all out, especially when there are often conflicts between them? Not to mention the fact that statutory and lender regulations seem to change just when you are starting to get use to the current requirements. The information below is meant to provide you with a general overview to help you determine if you are properly handling rentals in your association or wish to restrict them. But remember, it’s subject to change without much notice!
Statutory Requirements vs. Governing Documents: One of the most important things to keep in mind is that no matter what your governing document leasing provisions are, if they are in conflict with the Condominium Act or the Property Owners Association (POA) Act, the statutory requirements will prevail. In July, 2016, Section 55-79.87:1 of the Condominium Act and Section 55-509.3:1 of the POA Act were amended to prohibit associations from taking the following actions unless specifically provided for in the Declaration or Bylaws of a condominium or in the Declaration of an HOA: (i) place conditions on or prohibit rentals; (ii) require an association form lease or lease addendum; (iii) charge a rental application or processing fee in excess of $50.00; (iv) charge any other deposit or other rental fee of any kind; or (v) evict tenants. Associations are not permitted to place any of these provisions only in the rules and regulations, they must be in a duly adopted and recorded Declaration and/or Bylaws or amendments thereto. These statutes do provide that tenants must comply with the governing documents and rules and regulations and they also provide for certain contact information regarding tenants that associations have the right to obtain even if these provisions are not in your recorded documents. We encourage you to review these statutes to make sure you are collecting only the tenant information you are entitled to receive.
FHA and VA Regulations: Condominium projects are required to be approved by FHA and VA in order for units to be eligible for FHA/VA financing, which adds an additional burden on condominiums to comply with these lending agency leasing regulations. One of the conflicts we were referring to above is that VA regulations do not allow associations to prohibit the leasing of units that are subject to a VA loan; that is unit owners with VA loans must be allowed to lease. The best way to deal with this requirement is to include in your declaration a provision that exempts units with VA loans from any restriction on the number of units that may be leased at any one time (often referred to as a rental cap). Although VA has no requirement that a certain percentage of the units be owner-occupied, FHA requires 50% of the units to be owner occupied. FHA and VA regulations also do not allow the association’s governing documents to: (i) require an association form lease or addendum; (ii) approve or “vet” tenants – not even a tenant’s credit worthiness; (iii) require that a unit owner occupy his unit for any period of time before being allowed to lease the unit; (iv) allow minimum lease terms less than thirty (30) days; (v) require age restrictions (other than that the tenant be over the age of 18) unless the project qualifies under the Housing for Older Persons Act; or (vi) violate any provision of the Virginia or Federal Fair Housing Acts.
It’s a good idea for associations to periodically review the leasing provisions in their governing documents to insure that they are not in conflict with statutory requirements and/or FHA/VA regulations and consult your legal counsel about amending them if necessary. You will also want to make sure that your rules and regulations are not in conflict with statutory requirements and/or your governing documents. Our goal is to help you avoid the legal fees that can result from improperly denying an owner’s right to lease There are other articles posted on this site concerning the pros and cons of leasing restrictions.