South Philly Review

Share this Story:

Owners fear it would force sales, losses in soft market

Benny Kass
Inman News

DEAR BENNY: I own a rental townhouse in a local community. The board of directors of the homeowners association has put to a vote of homeowners a proposal that would forbid any owner from renting his or her unit once the current lease expires, thus forcing owners to sell the property in what is not only a depressed market but is in competition with many other properties for sale. Can this possibly be legal? --Doris

DEAR DORIS: Unfortunately, if the legal process is followed correctly, it will be legal. This issue has been litigated in many states, and to my knowledge, all the court cases have held that community associations have the right to limit -- or even prohibit -- the number of renters in those associations.

What owners within condominiums and homeowner associations do not understand is that they are bound by the legal documents and the rules and regulations of their association -- as they currently exist and as they may be properly amended from time to time.

In a condominium, your legal documents are generally called (1) the declaration and (2) the bylaws. In a homeowner association, those documents are called covenants, conditions and restrictions (or CC&Rs).

A board of directors has the right to enact reasonable rules and regulations, so long as those policies do not directly conflict with the legal documents. For example, if the bylaws allow pets, the board can enact a rule requiring pets to be on a leash while walking on common grounds.

However, if the bylaws prohibit pets, there is nothing the board can do to change this. It would take an amendment to the legal documents to make this change.

In order to amend legal documents, it usually takes a supermajority vote of all of the owners. Sometimes this is a 66 2/3 vote and sometimes it is as high as 75 percent. Why? The reason is because you and all the other owners bought into the association based on the existing documents -- and only you and a supermajority of owners can make any changes.

In the area involving restrictions on renters, the courts have held that a board cannot make the change merely by a rule enacted by the board. It takes a bylaw amendment to do this.

If your association is following the rules regarding amending your legal documents, and if that vote is positive, you and the other owners are legally bound by those changes.

I tend to agree that a blanket prohibition on leasing makes no sense -- especially in today's marketplace. If an owner loses his or her job and can't make the mortgage payment and the association fee, why force that owner to sell, especially in a depressed market? Or, if an owner is temporarily transferred to a job in another city, that owner should be permitted to lease -- at least for the duration of the temporary job.

So, you should mount a good old-fashioned political campaign. Talk to your neighbors, get the names and addresses of all current absentee owners, and try to convince them to vote against the pending proposal.

Hint: Boards are properly reluctant to provide owners with the names and addresses of the absentee owners. Prepare a talking paper explaining why this proposal is not in the best interests of your association. Accordingly, tell the board that you will pay for the postage if the board will send your paper to all owners. In my opinion, the board has to comply with your request.

DEAR BENNY: I am writing to you because I am confused about the homeowner tax credit. I bought my house in September 2007, before ... the incentive for the first-time buyer program, and now it looks like we don't qualify for the new "longtime resident" credit. So what happens for people like us who don't qualify for either? --Melyssa

DEAR MELYSSA: That's a fair question and unfortunately there is no answer -- and no assistance -- for "people like you." You bought a couple of years too early to qualify for the $8,000 first-time buyer tax credit, and you have not owned your home long enough to qualify for the $6,500 tax credit for existing homeowners who purchase a new primary residence. In order to qualify for the latter, a buyer must have owned and used the same home as a principal residence for at least five consecutive years during the eight-year period ending on the purchase date for the replacement principal residence.

Congress and the Obama administration created these tax credits for the primary purpose of stimulating the real estate economy. Although you are not able to take advantage of either credit, hopefully the stimulus that the credits have already created may assist in keeping the market value of your house from declining.

DEAR BENNY: My wife and I have been happily married for almost 40 years. Over the last five-plus years my wife has owned the house where we both live. Her name is the only one on the deed.

If we jointly buy a residence in the new law time frame, can my wife claim the $6,500 existing homeowner tax credit and can I claim the $8,000 first-time homebuyer tax credit? My name has not been on any deed for the past three years. We normally file joint tax returns, but might have to file separately? --Don