In almost any homeowners association, the subject of rentals divides owners between those who rent their units, or might want to, and those who don’t rent their units and oppose the idea altogether.  The situation can be additionally controversial in the event the community has been subjected to a series of “bad actor” tenants who have little respect for their neighbors and the community’s covenants and rules.

In response, some boards have taken action to try to protect the community from the impact of renters.  Aside from attempting  to outright limit or prohibit an owner’s ability to lease his/her unit, some boards have attempted to address the issues they perceive to result from leased units by imposing additional fees on those owners who rent their unit or enacting special rules that apply only to tenant residents.  As discussed below, such actions are often not permitted by the association’s governing documents and they may violate Fair Housing laws.

Special Fees for Owners with Rentals

Because they anticipate that tenants will create headaches, legal and otherwise, some associations think they should impose a separate administrative fee on owners who elect to lease their units.  Although that idea has a superficial logic, it typically contradicts the assessment provisions in the governing documents that require that the fees paid by owners should be based on their proportionate ownership interest in the community.  Although many sets of covenants provide for the imposition of individual assessments in certain circumstances, these circumstances are typically limited to disproportional benefits received or disproportional expenses incurred in connection with the unit and not any type of speculative costs.

Although the above does not preclude an association from imposing fees on one group of owners, those fees must be based on clear and quantifiable expenses for which only those owners are responsible.  For that reason, courts in many jurisdictions have rejected investor fees.  In addition, courts are hesitant to support boards that may use investor fees as an indirect way to discourage rentals instead of addressing the issue directly.  A direct approach would be for the association to amend the association’s documents to prohibit or restrict rentals.

Special Rules for Tenants

Another method boards have attempted is to impose rules that apply to tenants but not owners.  The most common of these restrictions prevent tenants from owning pets, even if owner-occupants are allowed to keep pets. The logic is that tenants may not be as conscientious about pet care as owners who have a financial interest in their units and in the common areas.

However, federal and state laws prohibit discrimination against “protected classes” of individuals with respect to use of housing.  These laws make it illegal to discriminate against individuals based upon factors such as race, color, religion, sex, handicap, familial status, and national origin.  You may be saying to yourself that “tenant” in itself is not a protected class and therefore, associations may adopt special rules for tenants that don’t apply to owners.

Although rules against tenants do not directly discriminate against a protected class, such rules may effectively discriminate against a protected class based upon “disparate impact.”  Discrimination through disparate impact occurs when a seemingly neutral rule has the effect of only targeting or applying to a protected group.

A typical example of this type of discrimination is a rule that prohibits tricycles in the community. Although the rule does not specifically single out children, it has the effect of only affecting families with children. Thus, such a rule is likely to be considered discriminatory against a protected class (families) based on disparate impact.  A similar argument may be made with respect to rules targeting tenants.  For example, in the event that a disproportionate number of tenants consist of a certain race, color, or religion, it may be argued that a rule targeting renters is nothing more than a rule targeting individuals of a specific race, color, and/or religion.

It should also be noted that rules targeting renters often result in unintended consequences.  Targeting renters with rules not applicable to the rest of the community can make tenants feel like outcasts and second class citizens which, in turn, lead to a deterioration of a feeling of community and a disrespect for association rules and covenants.

As set forth above, it is advisable to avoid both special fees for owners with rentals and special rules for tenants.  Instead, boards should review their rules and regulations to ensure they target and prohibit the undesirable behavior.   In the end, the undesirable behavior is just as problematic whether it is the result of the actions of tenants or owners.  The board should also review their covenants and rule enforcement policies.  If necessary, these policies may be revised to take a more aggressive approach to certain violations of rules and covenants.

David A. Closson
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