Thursday June 19, 2025
What are rental restrictions?
In New Jersey, rental restrictions are rules that limit an owner's ability to rent out their home within a community association. Common New Jersey rental restrictions include minimum lease terms, rental caps (such as limiting rentals to 20% of the community), and required board review of lease agreements. Some associations also restrict subleasing, regulate renewals, or require owners to live in the home for a set period before renting.New restrictions usually require a formal amendment process and may need a membership vote, depending on the bylaws. Board members should consult legal counsel, along with their community association management team, to confirm what’s allowed under their governing documents and New Jersey law before moving forward.
This article is not intended to and does not constitute legal advice or create an attorney-client relationship. Board members should consult their association’s attorney to discuss the legal implications of their decisions or actions prior to proceeding.
Pros and cons of allowing renters in an HOA or community association
Every community is different, but rental policies can have a real impact on your association’s financial management, operations, and day-to-day experience. Weighing the pros and cons can help your board shape a policy that reflects your goals and supports long-term stability.Pro: Gives owners flexibility
Allowing rentals gives owners options when life plans change. Whether they’re traveling, on a temporary work assignment, or caring for a loved one, rental flexibility can help owners stay connected to the community. This can be especially valuable in high-cost markets or during periods of transition. With the right policies in place, boards can offer that flexibility while still protecting the long-term stability of the association.Pro: Reduces vacant units
When units sit empty, the whole community can feel the impact. Allowing rentals can help keep units lived in and cared for, which supports building operations, safety, and overall curb appeal. This is especially important in seasonal or commuter communities, where owners may not always be onsite.vPro: Creates an opportunity to convert renters into buyers
Many renters are simply waiting for the right time to buy, and a positive experience in your community can help guide them toward that decision. Clear communication, helpful orientation, and positive everyday interactions with staff can turn short-term renters into long-term residents. When renters feel welcome and informed, they’re more likely to see the value of ownership. For boards, that’s an opportunity to support community stability and build a pipeline of future homeowners.Pro: New voices in the community
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.Con: Limiting mortgage and loan options
"The number of rentals in your community plays a huge role in prospective owners getting mortgages for units. Many people know that. Lesser known is that the percentage of your community that allows rentals can also negatively impact your association’s ability to get a loan. The bank looks at your accounts receivable, rate of delinquencies, and the number of renters living in your community."Additionally, the Federal Housing Administration (FHA), Freddie Mac, and Fannie Mae all consider the owner-occupancy ratio. No one making use of these federal lending programs may get a mortgage in a community with more than 50% rentals. That number fluctuates with the economy and market; in the wake of the subprime mortgage crisis of 2007 to 2010, it was reduced to 25% and has come back up as the market recovered. If the membership of your community isn’t planning to make use of those federal programs, having a rental cap may not matter to your association.
Bob Rogers, director of client relationship management for FirstService Residential
Con: Administrative impact on boards
Renters may create extra work for the board and management team in terms of paperwork, approvals, background checks, and getting owners to submit updated leases every year. That workload may be a factor to consider when deciding on rental restrictions in New Jersey community associations.Con: Absentee ownership
“Apathy is a real problem I see,” Rogers said. “Absentee owners and investors simply aren’t going to be as involved in the community and that worsens apathy. They are less likely to attend meetings or vote on issues.”Rogers also said that he has, in his years of property management, seen cases where renters don’t care as much about the building or following policy.
"They know we cannot bill them for damages or fine them for violations. We are required by law to bill the unit owner, who then has to recover that money from the tenant. It can create a lot of conflict and resentment in the community."
Bob Rogers, director of client relationship management for FirstService Residential
Short-term vs long-term New Jersey rental restrictions
Boards in New Jersey may have the authority to limit both short-term and long-term rentals, depending on applicable laws and what’s outlined in their governing documents. Short-term leases (usually under 30 days) tend to be more heavily restricted in cities and shore towns where local laws also apply. Many associations either ban them outright or set limits on frequency and duration.Long-term rentals (usually 30 days or more) are more commonly allowed but still subject to community-specific rental caps or approval processes. These restrictions are usually included in the declaration or bylaws and must be reasonable and consistently applied to all owners. Boards should always consult with qualified legal counsel familiar with New Jersey laws before adopting or revising rental restrictions.
Tenant rights
While associations can regulate rentals, they don’t govern landlord-tenant relationships. In New Jersey, renters are protected by state and federal law, and boards should be mindful of those protections when setting or enforcing policies.- Right to quiet enjoyment: Tenants are entitled to live in their unit without unnecessary interference from landlords, neighbors, or the association.
- Right to a habitable home: Units must meet health and safety standards, including proper heat, plumbing, and basic maintenance, as defined by New Jersey housing codes.
- Protection from unlawful eviction: Landlords must follow formal eviction procedures.
- Security deposit protection: Landlords must handle and return security deposits according to New Jersey’s security deposit laws, including proper notice and itemized deductions where applicable.
- Anti-discrimination protections: Tenants are protected under the federal Fair Housing Act and New Jersey Law Against Discrimination. That includes rights to reasonable accommodations for disabilities and protection from housing bias.