Rentals at the Condo

(Part Two)

Or, how to bring possible chaos, calamity and concern to your Association.

“An empty house is better than a bad tenant.” - Irish Proverb

One of the latest movements in landlord/tenant relationships is the rise in the use of a home, including a condominium, for the non-traditional tenant such as someone who only wants to rent for a day or two, perhaps a guest speaker at a local college, or a tourist who wants a place to stay that is slightly above the quality of a hostel, but below the industrial similarity of a hotel room. Others want to stay longer and use more than a room, wishing to vacation in the area for a week or two and wish to bring their spouse, significant other, and perhaps kids for a 2-3 week stay. There are several businesses that have been created to service this desire.

Airbnb, for instance, allows an Owner to rent a room in the house (sometimes the whole house, but usually not) for a night or two or more, but nowhere near long enough to be considered a typical rental period such as six months. VRBOs (Vacation Rental by Owner) are common as well. Slowly these types of rentals have become more common in condominium associations, and that's probably not the best idea for condominiums.

The Internet is filled both horror stories about tenants who have trashed the home, stayed longer than allowed, bothered neighbors, and more. Clearly these are the exception, but they do exist, and they pose more of a problem in a condominium association than in single-family homes. If, for instance, there is damage to the Common Area, then a Master Insurance Policy claim has to be made, potentially creating an insurance premium increase the next year, not to mention the cost in time and money, such as the deductible, to repair the damage. This is, of course, in addition to the potential inconvenience to the other Owners at the Association.

What if the person renting is a convicted thief? Or a child molester? Or assaults someone at the Association? Many of such rental sites have no background checking protocol, a situation that can lead to real problems at the Association … and then the person then disappears.

On the other hand there are concerns for the tenant/customer as well. Most Associations are not designed to act as hotels and, depending upon the layout of the Association, may not have safety features such as a hard-wired fire alarm system and/or an evacuation plan, leading both to liability and serious injury, or more, to the guest(s).

So if your Association wishes to ban such rentals, how can you go about doing so? In some instances, Associations have tried to rely on the typical language found in most Associations that limits the use of the property for “residential purposes.” Since the Owner is renting and making money off of the enterprise, Boards have found people in violation of the documents, essentially claiming they are running a business and making money off of this and converting what was a residential place into a commercial place.

The problem with this position is, of course, that it is still being used as a residence, much as if a tenant were in there for simply a longer period of time than the typical Airbnb-type person.

Courts, too, have found problems with enforcing such restrictions interpreting the rental of a residential Unit as a commercial enterprise. In August of this year, for instance, a court in Colorado found that using a condominium for rental income does not convert it from residential use to commercial use.

The best way to prohibit such activities then is to amend the documents to prevent such home sharing situations by limiting any such rentals to no less than six months. This gets away from the problem where there is no Lease (as there usually is not in such home sharing situations), requiring the home to be rented in its entirety (may such home sharing agreements allow only the use of certain rooms, unlike with a roommate) and prohibiting any temporary rentals of less than six months or a year.

Or the Association can simply choose not to get involved in this issue and hope the renters don't commit too many crimes at the Association. It's all balance in Condo World, and on balance, there are likely better places for short-term rentals than at a condominium association.