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Shared spaces, occupancy, and moneyLesson 32 of 33

Academy/Common Rules & Restrictions

Leasing

Your declaration sets most leasing rules, but a badly worded one can cost every owner their mortgage options.

HOA leasing rules mostly come from the association's own governing documents, which can restrict or cap rentals as long as amendments were properly adopted. But provisions like mandatory rental pooling or occupancy blackout dates can also make the whole project ineligible for Fannie Mae backed mortgages, affecting every owner's ability to sell or refinance, not just the one who wants to rent.

01

Your governing documents set the baseline

There is no federal law that caps how many units in a community can be leased, or how long a lease must run. Leasing authority starts with the Declaration or CC&Rs, then the Bylaws, then board Rules, in that order. A board can generally require lease approval, minimum lease terms, or a waitlist if the declaration grants that power.

Whether the board can add a brand-new leasing restriction through a general amendment clause, without owners ever having been on notice such a restriction was possible, varies by state. Check your state's case law and your own amendment clause before assuming a simple majority vote is enough.

02

The financing trap: Fannie Mae eligibility

Leasing rules do not just affect the owner who wants to rent. Fannie Mae will not back a mortgage in a project whose governing documents push owners into forced rental arrangements or make the community function like a hotel.

"restrict the unit owner's ability to occupy the unit such as blackout dates and occupancy limits"

Source: Selling Guide B4-2.1-03, Ineligible Projects, Fannie Mae

Mandatory rental pooling, occupancy blackout dates, and hotel-like operation are the three qualitative triggers. There is no verified fixed percentage rental cap in Fannie Mae's rule, so do not treat any specific number as a safe harbor; a board weighing new leasing rules should have someone check the current Selling Guide, not just this page.

03

Leasing versus short-term rentals

A long-term lease and a short-term rental raise different questions. See Short-term rentals for the second. Some states stop cities and counties from banning short-term rentals outright, but that limits government power only; it does not, by itself, override the association's own recorded restrictions, which remain enforceable as a contract between the association and its owners. A homeowner cannot point to a state anti-preemption law as a defense to violating their own CC&Rs.

04

Changing the rules later

Boards often want to tighten leasing rules after the fact, adding a waitlist, a minimum lease term, or a cap. At least one state's supreme court has held that a general amendment power cannot be stretched to impose an entirely new category of restriction the original declaration gave no notice of; whether that same limit applies in your state, and how it is drawn, is unsettled and worth confirming with counsel before you enforce a new leasing cap.

Check yourself

Answer before you read the explanation, recalling it is what makes it stick.

The board wants to require every owner to enroll their unit in a professionally managed rental pool. What should the board weigh first?

A homeowner argues that because state law stops the city from banning short-term rentals, the HOA's rental ban does not apply to them. Are they right?

An association amends its declaration to add a leasing cap never mentioned in the original document. A homeowner objects that they had no notice such a restriction could ever be imposed. What's true?

Sources

Related elsewhere in the Academy

Common Rules & Restrictions

Writing or amending a leasing rule next? Read Short-term rentals before you draft it.

Whether a leasing cap can be added by a general amendment clause without prior notice, and whether a state's short-term-rental preemption law reaches private HOA restrictions at all, vary by state and by the exact wording of your governing documents.