Protecting homeowners associations from STRs
With the exception of transit, perhaps no issue has been more hotly debated than short-term rentals and their impact upon residential neighborhoods.
While noise and lewd behavior complaints have received the lion’s share of coverage, the existence of STRs could have broader legal implications for the thousands of Tennesseans who live within a homeowner or condominium association.
Legal disputes between associations and STR owners have largely centered on two issues: whether the STR violates Association restrictions by operating as a business; and whether the renters of the property violate Association nuisance restrictions.
But, this approach has not been consistently successful.
There is hope however, and thanks to a recent law signed by Gov. Bill Haslam, homeowner and condominium associations may create express exclusions of STRs within their restrictive covenants.
So why is it important for HOAs to expressly ban STRs, instead of simply relying on community restrictions?
If an investor, or group of investors, buys a controlling number of homes or units within a homeowner or condominium association, the investor can outvote other owners, giving the investor free rein to enact policies that benefit his or her STRs and easily raise assessments.
Another problem can result if enough of the units in a condominium association become non-owner occupied and/ or investor owned, the entire condominium project could no longer meet Federal Housing Authority and Fannie Mae loan underwriting guidelines. This would result in current owners and potential purchasers having difficulty obtaining financing for condominium units.
Additionally, homeowner and condominium associations are subject to the provisions of the Federal Fair Housing Act versus the Americans with Disabilities Act.
If homes or units within a homeowner or condominium association are used as STRs, it could cause the Association’s amenities, such as pools and club houses, to transform from those which are reserved exclusively for Association member use, into amenities which are considered a “public accommodation” under the ADA.
This change would require the Association to spend tens-of-thousands to hundreds-of-thousands of dollars retrofitting its amenities to comply with ADA requirements.
Financing such retrofitting costs could leave the Association with no other option than to apply for loans or levy a special assessment against existing owners.
All of this can be avoided if homeowner and condominium association boards are proactive in amending their community restrictions to expressly ban short-term rentals. It is also imperative that they contact a legal professional who is familiar with community association law to ensure that any such amendments fully protect their Association against future grievances.
Scott Weiss is Tennessee’s first and only lawyer who has earned membership in the prestigious College of Community Association Lawyers. Weiss recently joined Ortale Kelley Law Firm.