11:20 AM To Catch a Scofflaw: Owners Tout Units on Rental Websites #brighton #apartments | ||||
To Catch a Scofflaw: Owners Tout Units on Rental WebsitesThis article is part of an ongoing series in which we'll take your questions from the HOAleader.com discussion forum and get you the answers you need from experts who specialize in association management. If you have a question you need answered, post it on the message board . An HOAleader.com reader asks. "Our 93-unit condo here in Washington state has a rental cap and a minimum six-month leasing period. We have an owner who advertises on Airbnb with a minimum 30-day lease. How can we 'prove' his non-compliance? Or is his advertisement enough to levy fines for past and present infractions? The owner is off site." With the growth of websites allowing owners to rent units for short periods, this issue will befuddle more and more HOAs. Here we offer advice for rooting out violations, proving them, and appropriate fining. Now You See It, Now You Don't Our experts vary on how much they're seeing owners try to rent out units for the short term. "We're not seeing any greater number of people violating rental rules than we have in the past," says Bob Diamond. a partner at the law firm Reed Smith in Falls Church, Va. who helped write the Washington, D.C. condo act in 1976 and worked on the Uniform Condo Act. which 24 states have adopted. "You can't get away with it. You can in a single-family community where you may not know who your neighbors are. But if you're in a high-rise, people will need an entry pass and passes for any amenities, and the tenant will want that access, too. Often, they'll go to the manager to get that access, and the manager will say, 'Who are you?' You can't hide tenants." That's not the case in New Orleans or Washington state, however. "We run into this," says Randy Opotowsky, a partner at The Steeg Law Firm in New Orleans, who represents 15-20 associations at any given time. "The website I've seen at issue a lot is VRBO. The associations we represent keep a close eye on that. They don't usually turn a blind eye to short-term rentals." Kevin Britt is also running into this challenge in Washington state. "I've seen this more often," says Britt of The Law Office of Kevin L. Britt, who specializes in representing associations in Seattle. "I've had several recent cases where owners have been involved in this type of leasing. What's happening today is that as time goes on, as there've been holdups in selling units, there's increased incentive for owners to lease them for a short-term basis. The inventive is certainly more today, in my opinion." How to Police Short-Term Stints The number of associations imposing rental restrictions is growing. "We're seeing associations trying to impose limitations on rentals more than they used to," says Diamond. "Rental restrictions came about primarily as a result of two things. In the old, old days, cooperatives in New York tried to prohibit subleasing of a unit. They wanted the cooperator, who was paying the mortgage, to be occupying the unit because of the financial interdependence of co-op owners. "The second reason is because the Federal Housing Administration. Fannie Mae. and Freddie Mac all will not deal with financing of units if you have a greater-than-certain-percentage of units rented in your project," adds Diamond. "This has been instrumental in creating the requirement that associations limit rentals." In most associations, short-term rentals are among those expressly prohibited. "Most declarations and amendments I'm involved in drafting have a clause that says there's no short-term leasing," explains Britt. "That's something that's going to be on the books for most associations that have rental restrictions ." The problem is that finding an advertisement for a short-term rental of a unit in your association isn't typically a violation of your rules. But that doesn't mean you can't take action. "I think simply having a unit out for lease in advertising isn't a violation in itself," says Britt. "That's something I'd classify as evidence of an attempted violation. But I've had situations where a rental website will actually have feedback from people who've leased and even said the period of time they leased a unit. That's a different story. If you have an indication it has not just been advertised but also leased for short periods of time, I think that's all you need. "Regardless of whether it says that or not, the fact that owner is advertising for short-term leasing when not provided by the declaration would trigger at least a notice of violation," says Britt. "In Washington state, the board would give written notice it's considering a fine based on its knowledge there may be violation. The notice should indicate, 'We're considering a fine based on knowledge available to us.' That gives owners a chance to come in and rebut that, either say they're guilty or not. In other words, it allows owners to say their peace." Diamond agrees the advertising is at least cause for a conversation with owners. "If you see the ad, you can notify the owners immediately," he says. "You can say, 'Are you aware you can't rent unless…' If you know someone's about to violate the rules, it's perfectly OK to say, 'You're about to violate it.' But it's not OK to impose a penalty because they haven't violated anything yet." Make It Not Worth Owners' Effort Opotowsky heads this problem off with serious language in the governing documents. "In my own condo documents, I've incorporated a sort of draconian provision," he explains. "In essence, it says if you do short-term rentals whether that's through Airbnb or not, or for a weekend, overnight, or week and we find out, you're liable to disgorge everything [you received as payment for the rental], whether it's cash or in-kind payment, plus our fees to collect those amounts. "Lots of regimes don't have that provision," adds Opotowsky. "But the Louisiana condo act also has generic provisions stating if you violate your rules and regulations, after notice you can be fined." Opotowsky agrees with Diamond that it's hard for owners to get away with short-term rentals for very long. "In larger condo associations, they're a little more attuned to what's going on," he explains. "Unit owners will see the heavy foot traffic on different weekends, and they'll get management or me to send a notice to unit owners. "We had one 200-plus unit condo on St. Charles Street where owners were advertising their unit to tourists," explains Opotowsky. "For the most part, they must have been discreet because for a while you wouldn't have noticed it. But in one case, the renters rolled up with their suitcases and asked the guard--who sort of acts as the building concierge--some questions. We called the owners on the carpet, and they ended up getting fined. They didn't pay the amount they advertised, but that fine did stop their rentals. An association only needs to do that once or twice, and owners will decide the cost of fighting these isn't worth the rental income." The bigger challenge, Opotowsky admits, is overseeing units owned by corporations. "The more difficult thing, and much harder to prevent, is when there's a corporate owner of a unit who lets some of their employees or customers use their unit for the weekend," he says. "There's a difference in compensation and remuneration, and it's much more difficult to monitor and police. The people who look on a website, pay money, and get to use the unit are the ones you usually try to stop."
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