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Condo owner question whether HOA can ban rentals

Ilyce Glink and Samuel J. Tamkin, Tribune Content Agency on

Q: Is a homeowners association allowed to prohibit rentals in a development? Can the board of directors decide to update our regulations to get rid of rentals? Our condo complex units are being purchased by real estate companies and rented out. All of these rental units are creating an unstable neighborhood.

A: Well, your question is a good one that doesn’t have an easy answer. We can start by saying that you need to look at your governing documents to see what they say about renting units in your development.

Let’s say your governing documents state that rentals are allowed. But the language also says that any rental must be for longer than one year but not more than two. In this situation, the board would be hard-pressed to try to prohibit rentals without amending the governing documents.

On the other hand, the governing documents may say that rentals are allowed but the board has the right to pass rules and regulations governing these rentals. In this situation, you can have a board that might limit how and when rentals can go forward.

Recently, Sam has seen a fair number of condominium buildings change their rules to limit rentals. Among the changes that disincentivize investors is a rule that requires any owner that wants to lease out a unit to have lived in the unit for at least a year or 18 months before renting it.

In addition, some associations limit the number of units that may be rented at one time. The association might cap rentals to 20% or 30% of all units. They can also pass a rule that allows rentals for up to two years, but once those two years are up and the rental cap is hit, the next in line on the rental list would get to rent their unit.

There is an infinite number of ways, and rules that a board can pass, that limit how and when units can be rented in a development.

The question is whether the board has the right to make these changes on their own or whether they need a vote of the owners to make these changes. Here again, you need to review the governing documents of an association to determine the powers of a board in enacting rules relating to the rental of units.

Some developers set up associations where any unit owner is allowed to rent their units — the governing documents specifically state that rentals are allowed without restrictions. If the board wants to make rules or limit rentals, they might need to get a majority vote of the owners to pass these rules.

In other situations, the permission to rent units in a building can be unrestricted but subject to the rules passed by the board. In this situation, the board can pass rules that require landlords to pay a fee to the association each time the owner leases a unit and would require the tenant to abide by the rules and regulations of the association. In this situation, the board may have limited ability to restrict or prohibit rentals in the development.

 

Lastly, you have governing documents that specifically state that the board has the right to pass rules that can allow or restrict rental units in a development. In this case, the board would need to properly notify owners of pending changes to the rules. They would also generally need to give the owners an opportunity to attend the meeting where the rules would be discussed. At that meeting, the board could pass these proposed rules as they would any other rule for the association.

On a separate note, buildings need to consider the impact these rental restriction rules can have on property values. Sometimes, rules have unintended consequences.

Sam has seen buildings where rentals have been prohibited, but the buildings may have issues that prevent units from being sold. Once you have a large number of units being simultaneously marketed in a building, the building can be worse off than if it permitted rentals. This is especially true if the units are vacant or need work.

As we wrote this we started talking about some of the buildings in Florida that have passed huge special assessments to cover needed improvements. Many owners purchased those units for investment purposes or as second homes and now want to get rid of them. The price of these units has dropped drastically, and if the unit owners can’t rent the units, the units may sell, eventually, at a fire-sale price. The owners will lose tremendous amounts of money and the building may suffer from the low sales for years to come.

Allowing owners to rent their units is a preferable outcome.

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(Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, a financial wellness technology company. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through her website, ThinkGlink.com.)

©2025 Ilyce R. Glink and Samuel J. Tamkin. Distributed by Tribune Content Agency, LLC.


 

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