Understanding HOA rental restrictions

What are HOA rental restrictions?

HOA rental restrictions are rules that set limits or requirements for homeowners who want to rent out their property. Depending on the community, they may address how many homes can be rented, how long leases must last, whether short-term rentals are allowed, and what information owners need to provide before a tenant moves in.
 

Can an HOA restrict rentals?

Yes, an HOA may be able to restrict rentals when its governing documents and applicable laws give it that authority. The association also needs to follow the required process when adopting or changing a rental rule.

In general, these rules must be clearly documented in the declaration (also called CC&Rs) and adopted through the required process outlined in the governing documents.
 

Common HOA rental restrictions and rules

Common HOA rental restrictions may include:

• Rental caps: Limit how many homes or units can be rented at one time.
   
• Minimum lease terms: Require a lease to last for a set amount of time, such as six months or one year.
   
• Short-term rental restrictions: Limit or prohibit short stays through services such as Airbnb or Vrbo.
   
• Waiting periods: Require an owner to live in the home for a certain amount of time before renting it, where permitted.
   
• Lease registration: Require owners to provide the association with a copy of the lease or basic tenant information.
   
• Tenant rules: Require renters to follow the same HOA policies that apply to homeowners.
   
• Occupancy requirements: Set limits or standards for how a property may be occupied, subject to applicable law.
   
• Rental bans: Some communities may prohibit certain types of rentals if their governing documents and applicable law allow it.
  
  For example, Jeremy DiFlaminies, regional director in our East region, says:

  "My building does not allow short-term rentals or Airbnb rentals. This is stated in our governing documents."

Before adopting or changing HOA rental restrictions, boards should review their governing documents and work with qualified local legal counsel. State, provincial, and local laws can limit what an association may regulate.
 

How to enforce rental restrictions

HOAs enforce rental restrictions by incorporating them into their governing documents and applying them consistently. Most enforcement is directed at the owner, not the tenant.

To enforce HOA rental restrictions effectively:

1. Amend the declaration or CC&Rs with clear, enforceable language
    
2. Communicate the change to all homeowners with sufficient notice
    
3. Set up systems for lease tracking and rental ratio monitoring
    
4. Apply penalties or restrictions as permitted by the documents

Enforcement must follow the procedures outlined in the governing documents and applicable state law. Boards should also document violations and responses to avoid the appearance of selective enforcement.

DiFlaminies adds,

"I'm in the process of amending the master deed in my community, via a special vote of owners (67% yes needed for approval), to restrict lease assignments. This amendment will further strengthen our position on rental restrictions. This is primarily because lease assignment is essentially a loophole.

I’m sure that you have heard of subletting. Well, our governing documents state that renters cannot sublet… Lease assignments are an agreement between the owner and the tenant whereby the owner permits the tenant to assign the lease to someone else."

Can my HOA screen tenants?

Some HOAs may be able to review prospective tenants, but the rules vary by jurisdiction. If allowed, the process may require homeowners to submit information for review by the association's board.

Because tenant screening can raise fair housing and discrimination concerns, boards should speak with legal counsel before creating or using a screening process.
 

Potential pros and cons of implementing rental restrictions

Rental restrictions offer several potential benefits, but they also come with trade-offs.
 

Pros:

• Protect property values: The main purpose behind implementing rental restrictions is to safeguard property values. Renters are more likely to violate the community’s rules because they don’t have a vested interest in the association.
   
• Lower mortgage interest rates: Many banks tie mortgage rates to the ratio of rentals to the total available units in the association. For many lenders, a rental rate of 20–25% is the maximum they’ll consider before charging higher interest rates for new residents who wish to buy a unit in that community. By keeping the ratio below this threshold, you can make it easier for new buyers to join your association.
   
• Reduce liability insurance rates: If a homeowners association permits rentals, its insurance company might increase the rates for liability insurance. Renters typically introduce additional liability to the association, prompting insurance providers to take steps to mitigate potential risks.

Cons:

• Reduced buyer interest: Rental restrictions can limit the pool of prospective buyers, especially investors or buyers who want flexibility. This may affect resale value and lead to longer listing times, particularly in markets where rental income is a common consideration.
   
• Legal and enforcement challenges: Poorly written or improperly adopted rental restrictions can lead to legal disputes. Boards may face lawsuits from owners claiming the rules are unreasonable or improperly enforced, which can be costly, time-consuming, and divert focus from other priorities.
   
• Administrative burden: Tracking leases, exemptions, and compliance adds ongoing work for board members or management. Some communities may need to invest in software or staff time to handle the additional oversight, which increases costs and operational complexity.

Creating an appropriate HOA rental policy

A good rental policy finds a way to weave renters into the fabric of your association. If, for instance, your policy goes beyond mandating a restrictive threshold and also requires that renters attend an orientation, then it’s a great way to include them and welcome them to the neighborhood.

Many communities see renters as potential buyers. Though they may not be in the position to purchase a home at that precise moment, they may be enticed to purchase at a later date if they’re made to feel at home.

DiFlaminies notes,

"The most successful boards are the ones that take time to educate homeowners about why restrictions are being proposed. When people understand the reasoning, compliance and cooperation tend to follow."

Upholding rental policies can be a touchy subject, but if carried out fairly, judiciously, and with the intention of welcoming renters as contributing members, it can lead to a more positive view. Oftentimes, an experienced property management company can help with this.
 

Frequently asked questions

Why do HOAs implement rental restrictions?

Communities may adopt HOA rental restrictions to manage concerns related to resident turnover, common area use, community rules, or the number of homes being used as rentals. Rental policies can also help a board create a consistent process for owners who want to lease their homes. The right approach will depend on the needs of the community and the authority provided by its governing documents.
 

Where do I find rental restrictions?

Start with your association’s governing documents. HOA rental restrictions typically appear in the declaration (also known as CC&Rs). If the rule is unclear, homeowners can ask the board or management team where the current rental policy is located. Boards should also know which document gives the association authority to apply the restriction.
 

What happens if someone violates rental restrictions?

The next step depends on the association’s governing documents and applicable law. A homeowner may first receive notice explaining the violation and what needs to change. If the issue continues, the association may have additional enforcement options, such as a hearing, HOA fines, or other remedies allowed by its governing documents.

Boards should follow the required process when enforcing HOA rental restrictions and apply that process consistently.
 

How can I appeal an HOA rental decision?

Start by reviewing the association’s governing documents and the notice you received. They may explain whether there is a hearing, appeal, or other process available to challenge the decision. Then, contact the board or management team with your question and any information that may affect the decision.
 

State-specific regulations affecting rental restrictions

Learn more about state-specific information regarding rental restrictions in our local articles below.

• HOA rental restrictions in Maryland
   
• Rhode Island rental restrictions
   
• Rental restrictions in West Virginia
   
• Massachusetts rental restrictions

To learn more about how FirstService Residential can support your community, contact a member of our team.

This information is provided for general informational purposes only and is not intended to constitute, and should not be relied upon as, legal, regulatory, financial, or operational advice, or as a representation or guarantee of any specific services, capabilities, or outcomes. Property management needs, regulatory requirements, market conditions, and available services vary by jurisdiction, property type, and community. FirstService Residential provides services through locally based affiliates and associates, and services and results may vary by community, region, contractual terms, and applicable law.