Restrictions on Renting Your Home in a Planned Unit Development

Your homeowners’ association (HOA) may have strict rules and restrictions -- or a flat-out prohibition -- regarding rentals.

Interested in renting out a home you own in a planned unit development (PUD) or common interest community (CID)? Perhaps you bought the property for a rental, or you are moving out but don’t want to sell. Before advertising your home for rent, check your homeowners’ association (HOA) rules and restrictions regarding rentals. And if you do end up renting, be sure you comply with relevant landlord-tenant laws.

Review Your Development’s Rules on Rentals

First, make sure your proposed rental won’t get you in trouble with your HOA. This means you must research rental restrictions in your development’s governing documents, including the HOA’s articles of incorporation and bylaws, as well as a declaration of covenants, conditions, restrictions, and easements (CC&R’s). If you don’t already have a copy of your HOA’s governing documents, you can obtain one from your HOA, or from the real estate records in the county in which your development lies. Also have a chat with your HOA’s board of directors for advice on any applicable provisions.

Depending on the development, HOA rental restrictions can vary widely -- from a complete ban on rentals to no restrictions on rentals at all. Most developments’ rules fall somewhere in between. Common CID and PUD regulations do the following:

  • limit the percentage of rental units existing at any one time (sometimes involving a long waiting list for owners wishing to rent out their units)
  • set lease terms (such as requiring a minimum of a one-year lease), or
  • require tenant registration, tenant deposits, or fees.

Additionally, your development might allow rentals, but restrict the activities of renters, such as prohibiting tenants from using common areas, or restricting community events to “owners only.”

What Happens If You Violate Your HOA’s Rental Restrictions?

Although you might be tempted, renting out your unit despite HOA restrictions is typically a bad idea. Most HOAs are empowered to enforce the development’s regulations by assessing fines and penalties for rule violations (see your development’s governing documents for details). Keep in mind that in addition to HOA enforcement actions, you also risk alienating your neighbors and fellow owners.

Check Federal, State, and Local Landlord-Tenant Laws

Assuming you receive a green light from your HOA, the next step (before accepting applications or signing a lease with a tenant) is to find out what laws apply to your property.

For example, your state might specify the maximum amount of security deposit you charge tenants, or what terms you must include in your lease. Your local zoning rules might limit how your home is used (such as by prohibiting your renter from running a business in your residential neighborhood). Local rent control rules may additionally apply.

The Landlords and Rental Property area of Nolo.com is a good place to start researching relevant laws, especially the section on state landlord-tenant laws. Some state laws exempt landlords who rent out only one or two properties, so be sure you understand whether a particular law applies to your situation. If you’re completely new to landlording, see Nolo’s First-Time Landlord book. You can consult with a local attorney for more information on what rental restrictions apply to your home.

What If Your Development Restricts Rentals?

If you are upset because your development restricts or prohibits renting your unit, remember that when you purchased in the development, you agreed to abide by all its rules and regulations. Meeting with your HOA can help you better understand the reasons behind the rules, which often include the following.

  • Maintaining property value. A PUD’s or CID’s rules and regulations are adopted with the goal of benefitting all of the owners in the development (rather than any one owner). Since owners typically take care of their property better than renters, many developments create rules restricting rentals to better preserve the overall property value in the development.
  • Complying with mortgage rules. Another common reason for limiting rentals is to meet the requirements of mortgage lenders, such as Fannie Mae, Freddie Mac, and the FHA, which will not finance a home in a community with a large percentage of rental properties.
  • Assuring a well-run HOA. Additionally, a development with too many rentals risks not having enough owner-volunteers available to run the HOA -- a critical factor in keeping a development running well.

Changing HOA Rental Restrictions

If you just can’t live with your development’s rental restrictions, you can try changing or eliminating the restrictions by amending the rules.

How to Amend HOA Rules

Unfortunately, amending a development’s governing documents is commonly a difficult, sometimes expensive, and almost always time-consuming process. Eliminating or changing a restriction typically involves obtaining the vote of all the HOA members (all owners in the development), or at a minimum, a vote of the majority of the HOA board of the directors.

Generally, the document containing the regulation specifies the procedures necessary to amend it. It’s critical that you carefully follow the required procedures. An experienced local attorney can assist you in determining the necessary amendment process, and in attempting any amendment.

Talk With Your HOA Board First

Meeting with your HOA’s board of directors before attempting any rule change is a wise idea. Rental restrictions are commonly a hotly contested issue in developments. Chances are good that your HOA has encountered other owners unhappy with the rules, who have previously requested or attempted a regulation change.

The HOA board is also probably familiar with the general opinion of the community on the matter. Your HOA board can likely provide you with invaluable insight about the chance of a successful amendment, as well as information on any previous rental rule modification attempts.

Find an Unrestricted Property

If you are unable to amend your development’s rental restrictions (or if you determine trying to do so is not worth the time and expense), you do, of course, have another option -- sell your property. You can then buy another home in an unrestricted location, and spend your days as a landlord, renting out your home as you please.

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