Homeowner Associations and Leasing

on 17 May 2016
Atlanta Property Management Homeowner Associations and Leasing

A large number of mandatory homeowner associations (HOA) have policies that prohibit homeowners from leasing their properties.

The reason for this misplaced rationale is the belief that rental properties tend to bring the neighborhood’s home values down. While that may be the case in some rare instances, it is generally not a correct conclusion. The truth is that such a policy could be far more detrimental to the homeowners than the renting itself.

When people buy real estate, they acquire what is referred to as a bundle-of-rights.  Included in this bundle is the right to sell or lease the property. But an HOA can stop a homeowner from leasing by either influencing a change in the protective covenants and restrictions, or by simply enforcing what’s already in them.  Often times, HOAs lose sight of the fact that both of these are not mandates. They are simply options, available for management of the association.

When your HOA tells your neighbor that she cannot lease her property, they leave her little choice but to either continue living in it or sell it. If she cannot live in it, for whatever reason, and she cannot sell it, and the HOA won’t let her lease it, then they leave her with no choice but to give it back to the bank.  When she gives it back to the bank, her neighbors will likely experience a real decrease in the value of their properties. When banks fire-sell their properties, which they usually do, those sales become legitimate comparables for appraisers in future property assessments. In fact, a certified appraiser cannot ignore these recent low-priced sales. This is why these sales directly, adversely affect the value of every neighbor’s property.

It is far more sensible to allow a property owner the option of leasing the property, so that she can continue to pay the mortgage. Leasing does not have as dramatic of an impact on neighboring properties as bank sales do and, often times, leasing has no adverse affect at all.  And if an HOA wants to better protect itself from the possibility of poorly self-managed properties, which admittedly can become an eyesore over time, it might consider demanding that a homeowner employ a professional property management company to oversee the lease. This is probably an unnecessary restriction, but it might make the association feel better about it, while, at the same time, it does not slam the door on a viable option for the homeowner—one which would truly be in the best interest of the rest of the neighborhood as well as the homeowner. And after all, shouldn’t that be the objective of the HOA?

Daniel R. Wilhelm
Managing Broker
3 Options Realty, LLC.