Rental Caps and Hardship Exceptions

With the economic crisis continuing and foreclosure rates still increasing, I have heard a lot of talk recently regarding rental cap hardship exceptions.  Many condominium and homeowner association boards of directors whose associations have rental ceilings are feeling the pinch between following their CC&Rs and facing unprecedented levels of claims of hardship.

A typical rental ceiling Hardship Exception leaves much discretion to the board:

Hardship Exception. Where, on written application from a homeowner, the Board determines that a hardship exists whereby, due to circumstances beyond the control of the owner, that owner would suffer serious harm by virtue of the limitation on renting contained in this Section 4.6, and where the Board further determines that a variance from the policies contained therein would not detrimentally affect the other homeowners or secondary mortgage market financing, lender approval or VA or FHA approval, the Board may, in its discretion, grant an owner a waiver of the Rental Ceiling for a temporary period not to exceed twelve (12) months.

So what can/should a board do in these trying economic trying times when balancing an individual owner’s financial difficulty with the interests of the remaining homeowners?  Although each association should be considered on a case-by-case basis, I would not be averse to recommending boards exercise a bit more leeway by exercising a fairly liberal approach to granting rental cap hardship exceptions.

Perhaps granting a six-month lease, in lieu of a full year, may be the most appropriate compromise for boards whose associations have reached their rental caps, yet have owners who are experiencing severe financial strain.

If a board decides to grant a hardship exception, it should ensure it documents the basis with specific grounds, to make sure it does not open itself to claims by other homeowners of selective enforcement.

For more details on rental restrictions, rental caps or hardship exceptions, do not hesitate to contact Barker Martin, P.S. by selecting the “Contact” tab at the top of this blog page.

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