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A friend in Atlanta was recently transfered out of state. She rented her condo and now the condo assoc has told her she cannot rent (already at 25%).

Asked by Voices Member, Wed Sep 7, 2011

She wasn't aware of the limit on rentals. She asked for a waiver but they denied it--they said they'd rather the unit go into foreclosure. Is there anything she can do? Also, does the tenant have any recourse against the owner--she has a bona fide lease.

Is it just me, or are these HOA's and Condo Associations a bit out of control?

Louise Warring--Realtor in Orlando area

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Thom Abbott’s answer
Yes Louise, it would sound REALLY crazy that the HOA Board would rather have ANOTHER foreclosure in the community (building) rather than keeping the values up. 90% of my business is in condominiums, and they CAN grant hardships if they choose. Those hardships vary for a number of reasons, based on how the condo docs were written. The HOA Board is certainly acting within the guidelines established, and unfortunately, your friend did not read the rules. I certainly hope a real estate agent did not help her rent it, or bring the tenant as there could be some liability issues for having not checked the rental status....but I'm not the lawyer and as you know, real estate agents can't practice law (unless you also have a law degree)

I've had people petition the Board numerous times and get their hardship rental approved. If this does not work, she should consider a short sale, and try to sell the condo. She most likely will qualify for a short sale with a financial hardship of not being able to pay her mortgage here in ATL and pay rent in Florida.
Web Reference: http://MyMidtownMojo.com
8 votes Thank Flag Link Wed Sep 7, 2011
Most of the answers so far have missed the real issue at hand and that is investor concentration limitation for lending guidelines. All of the agencies (Fannie Mae, Freddie Mac, FHA) have limitations regarding the investor concentration in a condo project. It is not an HOA being unrealistic, going overboard, or anything of the like.

Should the number of investors exceed to allowable limits, then none of the units will be eligible for traditional financing until the number is renters is brought back in line. That move then impacts every single owner within the project who is trying to sell or refinance. The HOA board’s first and foremost responsibility is to the overall project and not to a specific owner. At closing, every owner has to acknowledge being bound by the HOA covenants.

Thom is correct that your friend can see if a hardship waiver can be granted. HOA’s do have to be very careful when considering those. As Sally mentioned, most every HOA maintains a rental list for the owners. Checking on that will let them know how many owners are ahead of her waiting to rent their unit.

Regards,
Rodney Mason, NMLS #151088
Sr Loan Officer
Prospect Mortgage
825 Juniper St NE, Atlanta, GA 30308
Office: (404) 591-2453
rodney.mason@prospectmtg.com
Apply Online at http://www.rodneymason.com
Licensed in Alabama & Georgia
Web Reference: http://www.rodneymason.com
1 vote Thank Flag Link Wed Sep 7, 2011
The actions of the HOA may seem harsh, but are totally necessary to maintain the financiability of all the untis in the market place. When she purchased the property she was given a copy of the covanants and restrictions. She must abide by them as must everyone else for the protection of all.

Your friend needs to meet with a real estate attorney to see what needs to be done with the lease. She also needs to meet with the board to find out how many are ahead of her in the rental list.

The board cannot be threatend that she will let the unit go into foreclosure to get them to ignor the covenants and restictions. The ramifications of esceeding the 25% cannot cause more damage to the overall than a foreclosure.

Sally W. Hamby
Senior Mortgage Banker
Fidelity Bank Mortgage
404 644 7696
1 vote Thank Flag Link Wed Sep 7, 2011
Yes this is unfortunate. However, when an hoa has too high of a rental rate it causes lenders including Freddie and Fannie not to lend in the condo community. At that point the values drop for everyone. So that's what they are trying to avoid happening. You may be able to do s contract for deed. However, definitely get a real estate attorney involved.
1 vote Thank Flag Link Wed Sep 7, 2011
There is a new Legal contract that may help her around this issue. It is called a Joint Residential Ownership Agreement. I would be glad to forward the name of the lawyer that has developed this contract if she'd like to contact me...404-324-9579.
Best of luck!
Kathleen Clementi
Realtor
Keller Williams Realty
0 votes Thank Flag Link Wed Sep 7, 2011
I think that Georgia's homeowners associations in general, particularly the associations that I come into contact with in Intown Atlanta and Decatur, are all righteously indignant and strict if they are well run. The communities that benefit from solvency, good operations and great living for the value are all watching their bottom lines and because most of the condominiums for sale in Atlanta are well within FHA financing range, these associations must maintain themselves and be judicious with their bylaws.

That tenant should review the Georgia landlord / tenant laws - she should have decent expectations.

Your friend has run awry of the HOA do-gooders in that building who are enforcing a bylaw that she must abide by. If she took the step of applying for a hardship, and was denied, then that would be another issue - regardless, she is out of favor with the bylaws.

And, in Georgia it seems that HOA bylaws in general are strict like that, and the 25% rule is based on FHA mandates - I have noticed that all across Florida, the rules are completely different.

One of my potential clients is a multi-national investor who I met here on Trulia - we drove around last month for a few hours looking for "landlord buys.' Their intention in Georgia is to replicate their successful investing model - a model that works quite well in Florida and Brazil, and that has been in place for over a decade.

He wants to buy tenant ready, landlording unrestricted properties at value price points, fix them up for the highest and best rental rate, make sure that they are in communities that have excellent fundamentals then flip them to a buy and hold, conservative investor who likes a steady ROI.

He's not sure about how well he can do in Georgia, because our HOA's don't play, most of the time, nowadays. 1+ year long waiting lists for a landlord privilege are the norm nowadays.

Just look at what has happened in Midtown and Virginia Highland and other Intown neighborhoods, or all over the suburbs - with values dropping by greater than 50% and up to 90% in some buildings and communities in just 5 years, well lawlessness can occur - desperation, distress, and decision-making that sometimes goes against the establishment.

As such, FHA won't touch it.

As such, the best associations in Georgia are pushing back against those who do not abide by their covenants, conditions, restrictions and easements and in doing so they are doing their damndest to protect value.
0 votes Thank Flag Link Wed Sep 7, 2011
I would seek legal advise as soon as possible.

Have a Good Day,
0 votes Thank Flag Link Wed Sep 7, 2011
I have sold many investment properties in newly constructed communities. I satrted to see a change in some of the more recent builds where they were limiting the amount of rentals in a community. I would suspect that the residents in the various communities were concerned about too many rentaalls in the subdivisions. So, they put a limit on how many rentals were allowed by each association. This is much more common and I can understand their past concerns. Are they a bit overboard? Not sure as I can see their point in most residential communities.
0 votes Thank Flag Link Wed Sep 7, 2011
Some times they allow family members, maybe the renter is a long lost cousin?
0 votes Thank Flag Link Wed Sep 7, 2011
Great thought from Russ. A lease purchase might work even.
0 votes Thank Flag Link Wed Sep 7, 2011
Some HOA's think they are GOD. They do not take into consideration the impact that their actions can have on a member. Take a look at the article referenced below and let me know what you think.
0 votes Thank Flag Link Wed Sep 7, 2011
Defintely out of control, especially when you consider the unique times that we live in. Have your friend meet with the board in person (critical) and plead a hardship case to them. Tell them if they dont allow her to rent her unit will go into foreclosure devaluing the entire complex. If she wants to spend the money on it she might have an attorney look at the convenants limiting the number of rental units. There is a good possibility something could be illegal or improperly filed, etc in the covenants and she could defeat the board in court. Good luck!!!
0 votes Thank Flag Link Wed Sep 7, 2011
Not an attorney but maybe she can do some sort of contract for deed, where she the owner maintains the deed and title but allows the tenant/purchaser to pay payments to her.
If the tenant/purchaser fails to continue making payments they default and do not get title to the property.
Would be like owner financing, but there are risk with giving someone ownership interest in a property, consult with an attorney.
0 votes Thank Flag Link Wed Sep 7, 2011
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