Godfaith, Home Buyer in Milpitas, CA

Make the condo for rent while HOA does not allow

Asked by Godfaith, Milpitas, CA Fri Oct 5, 2012

I am interested in a unit in the Meridian Woods, San Jose 95129 and buying it as a rental property. However I heard HOA has to keep a rent ratio so they do not allow the unit to be rented. I wonder what would happen if I rent it out, what is the impact? Is there a penalty?

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Answers

14
Hi Godfaith,

To answer your question regarding penalties assessed to an owner for violations within a community, typically there is a small window of time within which an owner may comply with the rules and not be assessed fines. However, once a judicial hearing is scheduled and then held, the fines, violations, administrative time, and legal fees commence and there is little if any chance of reversing the fines. Compliance will stop the accumulation of further fines, but it will seldom reverse the fines an owner has already been assessed. We need only scan a few notable court cases over time (Frances T, Mrs Nahrsted) to know that fines can become outrageously huge and yet still need to be paid.

Rental rules have been deemed by California courts to be very enforceable provided the HOA enforce those rules, so you can be quite certain that once instituted, the HOA is forced to aggressively enforce the rules and the collection of fines attached thereto or lose the right to do so in the future. So again, more reasons not to "cross swords" with an HOAs recorded restrictions.

Good luck,
Grace Morioka
Allison James
1 vote Thank Flag Link Sat Oct 6, 2012
Thumbs up for Grace. HOAs can foreclose properties. When you buy the property you've accepted the HOA rules and regulations. The majority of the residents support those rules. You might make the residents disgusted with your actions.

If you buy property in a community with an HOA, don't be afraid to ask the HOA if something can be changed, but don't ask for changes that will make the community less desirable for everyone else. If everyone breaks the rules, your investment will be worthless.

Juliana Lee
650-857-1000
Top 3 agent nationwide at Keller Williams
Over 20 years experience, over 1,000 home sales in the south bay
Web Reference: http://www.julianalee.com
1 vote Thank Flag Link Fri Oct 5, 2012
Hi Godfaith and thanks for your question.

First, I'm very familiar with Meridian Woods and with their management company and Board of Directors. If you are hoping to buy an investment or rental property, then SKIP Meridian Woods at this time. The community has already stated that they have too many rental units, and if you do try to rent your home without their permission, you will, as they "rue the day" you even tried.

Right now, the community has so many rentals that there is a "waiting list" for homeowners who want to rent their homes, but cannot do so at this time. So if you buy at Meridian Woods, you'll be waiting quite a while for the privilege to rent at the community.

Second, their Board of Directors and management company assiduously and aggressively defend their CC&Rs and their rules. So if you do rent the home, you'll soon find yourself at a judicial hearing and then having to pay fines that will easily exceed any income you might be making from the rental property. If you fail to pay the fines or bring the home into compliance, the Board may collect through foreclosure actions, and you can lose your home. Most people don't realize this, but the power that an HOA can exert on its members is, in a word, extreme. Don't challenge the HOA especially if you've already been warned since you most assuredly will lose...even in court.

So, since they've already told you that the home cannot be rented, you'd be wise to heed their warning and move on to another home.

Good luck!
Grace Morioka, CID Consultant
Allison James
1 vote Thank Flag Link Fri Oct 5, 2012
They have legal actions that they can take. There are a lot of condos that are trying to maintain a approved FHA status to make resales easier for the owners. Owenr occupied percentage is one of the items on FHA approval. If they go over that percentage of rental units then you can not get an FHA loan on any of the units in that complex. This could have an effect on everyones property value.
1 vote Thank Flag Link Fri Oct 5, 2012
This is 100% the reason why I dont look at condos. Not enough flexibility if you decide you need to move and rent the place out.
0 votes Thank Flag Link Sun Oct 21, 2012
Godfaith now you have opened a whole nother can of worms. You have a binding contract (lease) and can not arbitrarily throw out the tenant as they have rights. You also have a binding agreement for owning property in the community (CC&R). While you are fighting to try to break the lease if the tenant can not be bought out the fines continue. The worst thing that could happen is that you get to tenant/landlord court and the lease is declared valid and the tenant is allowed to remain for the balance of the lease period.
Now you could be looking at the HOA coming after you and the tenant coming after you for whatever in court. Of course durring the time the tenant has an action in court against you the rent goes into escrow with the court but your mortgage payment and the fines (unless you work it out with the HOA) continue.
0 votes Thank Flag Link Sat Oct 6, 2012
Hi there,

According to Grace and all of the other information gathered here, It would be best to just buy it for yourself and it is your home to let live whomever you choose. If that family member just gives you what they can, to help you pay mortgage, I cannot see anything wrong with that. "It is your home"
I would recommend contacting a real estate attorney to set your mind at ease.

Have you thought of looking elsewhere for investment property? I wish you would have called me,
I just went into contract with a beautiful Town home I have on the market here in Evergreen, $324,900.
Lets keep connected I may have another one coming up!

Sincerely,
Diana Valverde-408-693-7463
Davey Real Estate
CDPE
0 votes Thank Flag Link Fri Oct 5, 2012
Thanks all, I will skip this condo then.

Just for the clarity on penaty, if home owner decide to terminate the rental lease and comply to the rule, does he still need to pay fine?
0 votes Thank Flag Link Fri Oct 5, 2012
Thank you for your question and your clarification Godfaith:

Whether your nephew can live in the unit and pay you to live there is an issue that you would need to discuss with the homeowner's Association. All homeowner's Associations are different and they all have different rules.

As Grace pointed out, if the homeowner's Association decides that you have violated their rules they can assess some very expensive financial penalties and they can foreclose if necessary to force you to pay.

I recommend that you consider a single family home instead so that you do not have to worry about violating the rules of a condominium homeowner's association.

Thank you,
Charles Butterfield MBA
Real Estate Broker/REALTOR
American Realty
Cell Phone: (408)509-6218
Fax: (408)269-3597
Email Address: charlesbutterfieldbkr@yahoo.com
DRE#00901872
.
0 votes Thank Flag Link Fri Oct 5, 2012
The easiest way is when you have your tax and HOA bill address registered to something other than the condo. The other way is if you claim the condo and your primary home as owner occupied and the countty comes after you for tax fraud.
0 votes Thank Flag Link Fri Oct 5, 2012
All good answers, but how can HOA find out, I can buy it and let my nephew live for half year, in return, he pays me some compensation. Will HOA care?
0 votes Thank Flag Link Fri Oct 5, 2012
You should call the Meridian Woods Management company and address your question to them. They will have a written policy that will dictate their actions for unauthorized rentals. Every HOA is different so this would be a important step to take with any contemplated purchase. The most important advise is to get their policy in writing from the HOA. Without that you might bet burned. Good luck.
0 votes Thank Flag Link Fri Oct 5, 2012
Thank you for your question:

Many complexes do restrictions for rental properties. The rules for each complex are different and are found in the HOA documents. There usually is a penalty for violations of the rules. Again the penalty is different for each homeowner's association.

For more information you may call me at my cell phone: (408)509-6218

Thank you,
Charles Butterfield MBA
Real Estate Broker/REALTOR
American Realty
Cell Phone: (408)509-6218
Fax: (408)269-3597
Email Address: charlesbutterfieldbkr@yahoo.com
DRE#00901872
.
.
0 votes Thank Flag Link Fri Oct 5, 2012
Hi there,

Some Home Owner Associations do have a Rent restrictions. Who did you hear your information from? They may not be at their full rent capacity? If you need some help, give me a call and I will find out for you! Thank you.

Sincerely,
Diana Valverde
Davey Real Estate
CDPE
408-693-7463
0 votes Thank Flag Link Fri Oct 5, 2012
So far Ive read about an existing codo development and HOA that I assume was formed from the start with no renter rules and everyone bought their properties with that in place. What about an existing community with and HOA that was formed many moons ago. Can the board add such rules and all of a sudden restrict the owners from renting incluidng some who may have several rented?
Flag Wed Oct 16, 2013
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