Short-Term Rental Restrictions In HOAs

If the Association's declaration prohibits rentals (short-term or long), the HOA can likely enforce the prohibition unless there is some other reason why the restriction is unenforceable.

What Seems Like a Deal…

Short-term rentals seem like a win-win situation. You can find a nice place to stay for a few nights, and it is frequently cheaper than booking a hotel. Just as importantly, vacation houses and condos rented out through Airbnb or VRBO are often more exciting places to stay, with the individual character and idiosyncrasies you do not get from a cookie-cutter hotel room. It can be a great deal for property owners, too.

In the right location, a property rented for short-term stays can bring in significantly more revenue than with a traditional year-to-year lease. Extra cash can improve the property, making it a more attractive destination that can command higher rates. Or it can provide supplemental income. Either way, the property owner is coming out ahead.

So far, short-term rentals sound like an excellent deal for all involved parties. Yet, there has been a growing trend to prohibit them in HOA communities.

Why Do HOAs Prohibit Short-Term Rentals?

When an HOA restricts homeowners' use of their properties, it needs some justification. With short-term rental restrictions, the purpose is generally to protect other members and preserve the community's character. A quiet, sleepy neighborhood that all-the-sudden has vacationers coming and going stands a good chance of losing its calm, peaceful nature.

Vacation renters tend to be messier and noisier, especially at night, than permanent residents. The commotion can become a nuisance for people who reside in the community year-round—specifically, other homeowners and their families. Short-term renters also tend to ignore HOA rules or not know what the rules are. In a community with common areas and facilities, vacationers can overtax the commons, preventing full-time residents from enjoying the benefits for which their assessments pay. Vacationers do not pay HOA fees and are less vested in the long-term condition of the community.

From a practical standpoint, short-term renters can increase a neighborhood's traffic and parking problems. And, if travelers regularly use common facilities like a pool or recreation center, the HOA's insurance rates are likely to increase, as further use of the facilities by more people inevitably leads to more damage and risk of premises liability claims.

Authority to Restrict Short-Term Rentals.

Even if a community has a valid reason to restrict short-term rentals, it still needs legal and contractual authority to support the restriction. Typically, the power comes from an HOA's declaration, state law, or a combination of the two.

A declaration is a contract among property owners in a community. If everyone complies, the community as a whole will benefit—or at least that is the idea.

The courts generally assume HOA restrictions are enforceable throughout the country as long as a condition promotes a legitimate purpose and is not forbidden by statute. Even broad regulations against all rentals have been upheld in some jurisdictions if the restriction is in the HOA's declaration, and the board can offer a legitimate justification for it. If the statement prohibits rentals (short-term or long), then the HOA can likely enforce the prohibition unless there is another reason why the restriction is unenforceable.

Contractual & Statutory Protections.

The most common state-law approach for protecting owners' vested property rights is through "grandfather" laws. A grandfathering provision lets an HOA enforce a newly adopted restriction prospectively but protects owners who previously relied on the restriction's absence.

Grandfathering statutes relating to rental restrictions recognize that a substantial portion of a property's value can consist of the owner's ability to generate revenue by renting it out. As such, owners who previously enjoyed that right should not be deprived of it in the future without their consent. In a nutshell, it is unfair to enforce a rental restriction against an owner who purchased a property when the rule was not in place.

Florida laws (Fla. Stat. §718.110(13)) prevent the enforcement of rental restrictions against owners if the limitation was not already in effect at the time of purchase and the owner did not vote to adopt the regulation.

Residential vs. Commercial Use.

Residential use restrictions are one of the most common restrictions included in HOA declarations, and they have been consistently upheld by reviewing courts throughout the country. Essentially, a declaration says that properties in the community are intended to be used as homes, not as businesses or farms. And, by accepting a deed to a property subject to the HOA, owners covenant that they will not use their properties for commercial (i.e., business-related) purposes.

It is similar to a single-family residential zoning ordinance adopted by an HOA instead of a local government. Some HOAs have tried to prohibit short-term rentals, relying on commercial-use restrictions. The argument is that if you are using your property as a short-term rental, you are effectively using it for a commercial purpose.

Before looking at this question further, it is worth emphasizing two points. First, state courts are not consistent in how they have interpreted the issue. Second, a short-term rental prohibition based on a residential-use covenant is distinct from an ordinary rental restriction. If an association can rely on an enforceable limitation prohibiting rentals, it does not need to argue that short-term rentals are commercial use. The argument generally comes up when an HOA wants to prevent short-term rentals but does not have a rental restriction—or it has a rental condition that it cannot enforce against a specific homeowner due to (for example) a grandfathering clause.

Unfortunately, the question as to whether a residential use provision provides adequate grounds to prohibit short-term rentals is inconsistent from state to state. Accordingly, the most sure-fire way for HOAs to prevent short-term rental of properties within the community is to amend their declarations to forbid short-term rentals unambiguously.