Today I received an inquiry about leasing restrictions, particularly placing a cap on the number/percentage of units that can be leased. It was unclear to me as to whether she was inquiring about how this applied to an FHA or VA condominium project approval, but I answered it as best I could.
“Dear Eric, I have been trying to pin down in the internet a rental cap restriction of 10 to 30%. We are now over the 30% cap and found that homeowners are not happy any longer stating that this was an old rule from the past when the crisis of mortgages collapse.
Can you enlighten me about this? I am currently the HOA board president and have not found “facts” about keeping this rule in our rules and CC&Rs. But the board and management would like to keep it to secure a happy and stable community. In 2013 we made amendments and our rule of 30% passed from the majority of the homeowners but they say now that is not the case due to the market. That is scaring lenders and investors from buying because they can no longer rent after theCivil Code §4740. Limitation on Rental Restrictions.
What do think would be my best approach and what Q&As or facts can I provide to my homeowners to keep this 30% rental restriction cap without abolishing or removing it.
Can you assist me?
My response to her was:
If you are asking from the perspective of working to obtain an FHA or VA condominium project approval or from Fannie Mae’s standpoint, then I can say this:
1. FHA allows a maximum investor (tenant) concentration of 50%
2. The VA has no restriction on the maximum investor concentration
3. Fannie Mae restricts the maximum investor concentration to 49% EXCEPT in the case of purchase loans for primary residences and second homes.
In addition, FHA and the VA will NOT allow leasing restrictions that impede a unit owner’s right to lease his/her unit. This includes a requirement to live in the unit for any period of time or one that requires Board (or other third-party) approval of a tenant.
As far as what is allowed per California state law, that is a question for an attorney. Every state has its own condominium laws and while they are similar in many regards, there are certainly nuances.
When you do contact an attorney who is knowledgeable in the condominium laws of California, you should ask if California state law allows for such capping of rentals and, if so, what is the minimum percentage.
If your CC&Rs are in accordance with the state laws, inquire as to what can be done to uphold the current CC&Rs in order to prevent additional rentals and to enforce these regulations against current investors. It may be difficult to determine which investors rented after the rental cap was reached.
I hope that this helps you. Please let me know if you have any further questions.
I am not an attorney and can only speak to what condominium legal language is allowed by FHA, the VA and Fannie Mae. If you have specific questions about what is allowed by law in your state, you should contact an attorney who specializes in condominium or common interest community law in your state.
I will be happy to answer any questions as they relate to FHA, VA and Fannie Mae condominium project approvals.
For the remainder of the year, ReadySetLoan Condo Team LLC is offering free processing for VA condo approvals for all condominium clients who retain us for an FHA condo approval. If you have questions about VA or FHA condo approvals, please contact us for a free consultation.
Q&A image courtesy of Stuart Miles/freedigitalphotos.net
The Condominium Project Approval Team at ReadySetLoan is dedicated to helping condominium projects across the nation to obtain their approvals with FHA and the VA or become recertified with FHA. We have assisted nearly 200 condominiums and we can help your association.
ReadySetLoan is an active member of the Connecticut and New England chapters of the Community Associations Institute (CAI) and is a frequent contributor to Common Interest Magazine as an expert in FHA/VA condominium project approvals.
Please contact us with any questions regarding FHA or VA condominium project approvals. You can email me at firstname.lastname@example.org or call me at 404-433-4565. I will be happy to answer any of your questions.
FHA/VA Condo Approval Specialist
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Check out our article in Common Interest magazine on page 19!