1.4 How HOA Rules May Impact Renting Your Home

Updated: Apr 24

We believe it's crucial to consider Homeowner Association (HOA) restrictions in your decision-making process, as discovering that short-term rentals are prohibited can render all your hard work useless. In this post, we'll explore HOA restrictions, discussing examples of HOA bylaws, common restrictions, and what you should do if you’re impacted.

What is a Homeowners Association?

A homeowner association (HOA) is an organization in a neighborhood or condominium building that makes and enforces rules for the property and residents. Those who purchase property within an HOA's jurisdiction automatically become members and are required to abide by outlined rules.

30% of the U.S. population now resides in a homeowners association

National and State Statistical Review for Community Association Data (source)

An HOA usually has a board of directors, who are elected to enforce and oversee the HOA's rules and regulations. An HOA typically has a document called a Declaration of Covenants, Conditions, and Restrictions (CC&Rs) that set certain conditions for owners about the maintenance of their properties. These conditions can include structural restrictions (no sheds), landscape regulations (no overgrown grass), minor aesthetic choices (exterior paint colors), rental rules (no STR), etc.. A CC&R typically also outlines the penalties for violating the guidelines, which could include fees, forced compliance, or litigation in drastic cases.

3 Examples of HOAs at Play

1. Rental Restrictions

In post 1.2, we mentioned that our townhome was a new construction. The block of townhomes included eight owners who shared a common water meter and driveway, so an HOA was set up by the builder. Since it was brand new and no one really had a strong interest in running the HOA, Amanda became the president (haha) of the HOA. She drafted and gained approval of the CC&R, which only outlined the monthly HOA fees, shared insurance guidelines, and outlined the monthly water meter reading process.

Amanda’s CC&R for our Seattle home was very loose and allowed each owner to do as they pleased with their townhome.

2. STR Restrictions

Nick’s parents bought a home in a gated community on a golf course near Gulf Shores, Alabama, right before COVID. With the stay-at-home order, Nick’s parents decided to rent out their place. When they reviewed the HOA guidelines, they found that they could rent out their place for any duration over three months.

Nick’s parents’ CC&R was clear that the HOA allowed for long-term rentals but did not allow short-term rentals, so they reached out to a real estate agent to find them a long-term tenant.

3. LTR & STR Restrictions

Nick’s sister bought a condo in Chicago around 2010. After she got married in 2022, she and her husband moved to a single-family home in the suburbs and were thinking of renting out her condo in Chicago. After reading the HOA bylaws, she realized that STRs were not allowed, and there was a 5% cap on LTRs in her building, which means that only 5% of units could be used as rentals. When inquiring further, she found that the LTR cap was at capacity, and there was a multi-year waiting list.

Nick’s sister’s CC&R was very restrictive, so she ended up selling her condo.

Common HOA Bylaws that Restrict STR

Short-term rental bans where some HOAs outright prohibit short-term rentals within their communities
Duration limits, which say that guests must stay longer than or shorter than a certain duration; for example, no stays shorter than two weeks
Occupancy limits where HOAs may impose restrictions on the number of days short-term rentals can be offered; for example, no more than 120 days per year or no STRs between June - August
Other restrictions that won’t prohibit you from doing a STR, but may impact your listing:
- Guest screenings & limitations (e.g., number of guests, adults only, no pets, etc.)
- Quiet hours
- Amenity & parking access (e.g., pool & gym access, guest parking, etc.)
- Fees & reporting requirements (e.g., registering their STR, rental activity reports, etc.)

Common HOA Bylaws that Restrict LTR

Rental bans where some HOAs outright prohibit all rentals within their communities
Rental caps where HOAs may limit the number of units within the community that can be rented out at any given time
Duration thresholds where HOAs may impose minimum or maximum lease terms for long-term rental agreements; for example, they may require leases to be for a minimum of six months to promote stability within the community
Other restrictions that won’t prohibit you from doing a LTR, but may impact you:
- Tenant screening & approval
- Guest limitations (e.g., number of guests, adults only, pets, etc.)
- Amenity & parking access (e.g., pool & gym access, guest parking, etc.)
- Fees & reporting requirements (e.g., registering their STR, rental activity reports, etc.)
- Use restrictions (e.g., no businesses)

Uh oh, I have HOA Rental Restrictions - What Should You Do?

While it may be tempting to try to circumvent HOA restrictions, it's essential to understand that doing so can have serious consequences. Homeowner Associations typically have legal authority and mechanisms in place to enforce their rules and regulations. Attempting to bypass or violate these restrictions can lead to various consequences, including:

Fines & penalties
Legal action
Loss of amenities
Strained community relationships

If you have restrictive HOA rules, instead of attempting to get around HOA restrictions, you should address any concerns or conflicts through the proper channels. We recommend:

Educating yourself with the CC&R to enable yourself to speak knowledgeably about your intentions and address any concerns raised by the HOA
Seek clarification from the HOA on any ambiguous or unclear rules related to rentals
Proactively address concerns that the HOA may have about your STR and develop mitigation strategies to address these concerns to demonstrate your commitment to being a responsible property owner and neighbor
Prepare necessary documentation to support your proposal, such as a written summary of your plans, including details about how you intend to manage the rental property and address any potential concerns (e.g., screening process, measures to adhere to compliance, etc.)
Request a formal meeting with the appropriate individuals within the HOA to demonstrate your commitment to open communication and focus the discussion on relevant issues - during the meeting listen actively and take the time to understand their perspective and demonstrate your willingness to address their concerns and work collaboratively to find a mutual solution
Follow up via email after the meeting to summarize the key points discussed, any agreements reached, and any action items to ensure clarity and provide a written record of the conversation for future reference

We recommend starting with the above and if that doesn’t work, you could attend future HOA meetings, propose amendments to existing rules, and/or seek legal advice. Ultimately, respecting HOA regulations is crucial for maintaining harmony within the community.

Our Thoughts

Hopefully you don’t live in an HOA community that has excessively strict rental regulations, and you’re still able to rent out your place. Before committing to renting out your place, we strongly recommend reviewing your HOA documents to avoid any potential future obstacles.

Remember, HOAs exist to maintain the residential character and quality of life within a community. We suggest fostering a strong relationship with your HOA, as we wouldn’t want you to invest time and effort into establishing your rental business (e.g., setting up your business, publishing your listing, furnishing your home), only to face the chance of it being shut down later on.

If you found this helpful - subscribe below and follow along as we share digestible steps to set up your rental, highlight tips & tricks that worked for us, and feature new trends & information to keep you up to date.