There Goes The Neighborhood: Can The HOA Prevent Me From Renting Out My Condo?

Terry Jessop & Bitner Newsletter

Issue 17, January 2015

The Problem

Here's a problem. You buy a home in a nice subdivision, or a condominium in a nice development. At closing you are handed a stack of paper written in legalese and you are told that these are the Covenants, Conditions and Restrictions ("CC&Rs") that govern your use of the property. They are daunting and you don't read them. Now let's say that life either takes a turn for the worse, or you see a business opportunity, and you decide to rent out the property on a short-term basis, perhaps as a summer home to vacationing tourists. The HOA catches wind of your plan and threatens to sue if you follow through. Can the HOA prevent you from renting out your property? The answer lies in the CC&Rs.

The History

The desire to control home or unit rentals within an association is nothing new, especially when it comes to short-term rentals. Unless the project was originally contemplated as a resort or timeshare property, people generally want to maintain stability and a certain level of aesthetics within their subdivision. People who reside in their own homes usually care more about maintaining the structure and landscaping. Short-term renters, on the other hand, are not always careful about how they treat the property and may not stick around long enough to clean up any mess they make. Long-term owners don't want the property next door to turn into a run-down party house. But what about the guy next door who loses his job or gets called up in the military? Shouldn't he be able to rent out his unit on a short-term basis until he gets back on his feet or returns to civilian life?

The Law

As a general rule, the law favors the unrestricted use of real property. But the law recognizes that the owners in a particular development may wish to impose certain restrictions concerning use and aesthetics. Any such restrictions must be recorded in the county records to be enforceable. They are typically put in place by a developer, before any third parties purchase any lots or units.

Under Utah law, an association has the right to impose rental restrictions, including a complete ban on rentals. (See UCA 57-8a-209.) The rental restriction must be stated in the CC&Rs. If the restriction is sufficiently clear it will be enforced. In 2010, the Utah Court of Appeals upheld a restriction against weekly rentals where the CC&R restriction read: "No timeshare, nightly rental or similar use will be allowed on any single family residential lot." See South Ridge Homeowners' Association v. Brown, 2010 UT App 23, ¶ 2, 226 P.3d 758.

However, Utah law requires an HOA to carve out exceptions for owners in the military who are deployed, immediate family members of the owner (i.e., parent, child, sibling), owners whose employers require them to move for at least two years, and owners who convey their property into a trust for estate planning purposes and the trust benefits immediate family members. (See UCA 57-8a-209(3).)

The Conclusion

In short, the HOA can prevent you from renting your property if the CC&R's clearly give the HOA that right. If you have a question about the legality of a unit rental within your development, give us a call. We can help.

© Terry Jessop & Bitner January 2015