Condo Association vs Rate of Rentals

[turtleface]

What is the name of your state (only U.S. law)?

I live in Chicago, IL where I'd bought a residence in a 180 unit building over 4 years ago. The association has no restriction on the rate of rentals.

The association has brought it to the owner's attention that some sales of property have fallen through because of the lack of restriction on rentals. The rate of rentals in the building is at 37%. Some financial institutions are questioning the value of the property from such a high rate of rentals and are not providing financing due to such questions. The current financial situation has caused banks to be more "protective" of their funds and take fewer risks. Fannie Mae (a government backed institution) will not make loans where the rate of rentals is over 49%.

If unit owners are unable to sell their place then they will either have to rent the unit, which will make it more difficult for other owners to sell (as this will increase the rate of rentals) or they will have to foreclose on their property (which will drop the value of units in the building).

The association is wanting to place a 39% cap on the rate of rentals. To do this they need to get 75% of unit owners to sign the document. So far the association has roughly 30% of the unit owner's signatures, but they have been working on this for about 6 months and there is no more action on the signature signing.

Having a 39% cap still provides some room for more rentals in the building and still shy's away from Fannie Mae limit. Although, it is higher than some financial institutions permit.

The association also wants to be able to place restrictions on future buyers in the building (since this action does not need to be voted on by 75% of the current owners). Some of the restrictions are making the rate of rentals cap at 20%, placing higher move-in and out fees on renters (which I don't think is legal), creating a rotating rental agreement, a cap on length of rental terms, etc.

Owners and investors bought with the intent to have growth in their investment. If owners are unable to sell then the value of their property drops to a "sellable" value. If the owner owes more on their property than what they can sell it for then the owner runs the chance of walking away from the investment (foreclosing).

I've been trying to search the net to find answers to all these questions and all I'm finding are issues on protecting owner's rights to rent. Where can more information on an association's legal rights to protecting each unit owners' investment be found? What are some actions that the association can take? What terms should be used to search the net and find better information?What is the name of your state (only U.S. law)?

[HomeGuru]

Originally Posted by turtleface

What is the name of your state (only U.S. law)?

I live in Chicago, IL where I'd bought a residence in a 180 unit building over 4 years ago. The association has no restriction on the rate of rentals.

The association has brought it to the owner's attention that some sales of property have fallen through because of the lack of restriction on rentals. The rate of rentals in the building is at 37%. Some financial institutions are questioning the value of the property from such a high rate of rentals and are not providing financing due to such questions. The current financial situation has caused banks to be more "protective" of their funds and take fewer risks. Fannie Mae (a government backed institution) will not make loans where the rate of rentals is over 49%.

If unit owners are unable to sell their place then they will either have to rent the unit, which will make it more difficult for other owners to sell (as this will increase the rate of rentals) or they will have to foreclose on their property (which will drop the value of units in the building).

The association is wanting to place a 39% cap on the rate of rentals. To do this they need to get 75% of unit owners to sign the document. So far the association has roughly 30% of the unit owner's signatures, but they have been working on this for about 6 months and there is no more action on the signature signing.

Having a 39% cap still provides some room for more rentals in the building and still shy's away from Fannie Mae limit. Although, it is higher than some financial institutions permit.

The association also wants to be able to place restrictions on future buyers in the building (since this action does not need to be voted on by 75% of the current owners). Some of the restrictions are making the rate of rentals cap at 20%, placing higher move-in and out fees on renters (which I don't think is legal), creating a rotating rental agreement, a cap on length of rental terms, etc.

Owners and investors bought with the intent to have growth in their investment. If owners are unable to sell then the value of their property drops to a "sellable" value. If the owner owes more on their property than what they can sell it for then the owner runs the chance of walking away from the investment (foreclosing).

I've been trying to search the net to find answers to all these questions and all I'm finding are issues on protecting owner's rights to rent. Where can more information on an association's legal rights to protecting each unit owners' investment be found? What are some actions that the association can take? What terms should be used to search the net and find better information?What is the name of your state (only U.S. law)?

**A: the HOA needs a legal opinion from their attorney.

[turtleface]

Originally Posted by HomeGuru

**A: the HOA needs a legal opinion from their attorney.

Um, this site is supposed to be FREE HELP for people with legal questions. That said, it is understood that the association has to FINALIZE things with the attorney. But, going to the attorney with a question and paying the attorney to work on a bunch of different topics before the association even really knows what it wants to do or what direction to go in does not make sense. Because that is throwing money down the tubes. We all know that we want our association to spend efficiently... so that is why the association is trying to figure things out before going to the attorney. It is known that attorney's charge by the hour... and we want to keep those hours to a minimum.

So, is there anyone that has some useful help on this topic?

[HomeGuru]

Originally Posted by turtleface

Um, this site is supposed to be FREE HELP for people with legal questions. That said, it is understood that the association has to FINALIZE things with the attorney. But, going to the attorney with a question and paying the attorney to work on a bunch of different topics before the association even really knows what it wants to do or what direction to go in does not make sense. Because that is throwing money down the tubes. We all know that we want our association to spend efficiently... so that is why the association is trying to figure things out before going to the attorney. It is known that attorney's charge by the hour... and we want to keep those hours to a minimum.

So, is there anyone that has some useful help on this topic?

**A: you got things totally wrong here. No attorney or non attorney is capable of giving you legal advice without first reviewing all your HOA documents ie. By-Laws, Declaration, House Rules, passed resolutions etc.
Every HOA should have their own attorney and this is one example of why one is specifically needed. There is no boilerplate CC&R's just the same as there is no typical HOA. If you are a HOA Board member, it is your fiduciary duty to hire the attorney. The free help on this website is based on the terms and conditions contained in the disclaimer at the bottom of the page. Please read it.