Why A Homeowners Association May Stop Your Rental

One of the most powerful entities in the successful negotiation of any residential real estate transaction is the Homeowners Association (HOA).  HOA’s have risen in prominence out of necessity.  A Homeowners Association appeals to many buyers because their rules are aimed at maintaining property values and serving the best interests of the community. It is prudent to be sure and identify what restrictions you may encounter before purchasing a property governed by an HOA.

One rule many are not aware of are the restrictions placed on owners for renting their homes. The following should be considered before turning a property, governed by a Homeowners Association, into a rental.   Otherwise, the HOA may tell you to stop renting your property.

Review the Documents

Every Homeowner Association is governed by a set of documents known commonly as Covenants, Conditions and Restrictions.  Before ever deciding to rent a property in an HOA, you must review these documents thoroughly.
Some HOA’s actually ban rentals entirely or limit the number of homes that can be rented.  There are some Associations that have added “hardship clauses”.  These allow exceptions to the rental restrictions when an owner is facing financial difficulties.  Be absolutely certain you are not going to run into a roadblock due to rental restrictions.

Why HOA’s Limit Rentals

There is a perception that rentals may bring into the community people who would not normally live in the area.   While many renters are great neighbors, there is suspicion that they will not take care of the property to the standards of other home owners or even disregard association rules.   The ultimate concern is that a community’s values will be decreased if too many rentals are allowed.

A high number of rentals can negatively affect a Homeowner Association.  Some lenders have guidelines as to how many homes can be rented in a HOA.  This is most commonly seen in condominium projects.  If it is exceeded, the lender will stop lending for new purchases until the percentage is within their allowable standards.  Sometimes liability insurance rates can also be higher.

In addition to these factors owner-occupants in a Homeowners Association are often concerned about:

  • maintenance issues
  • frequent move-ins and move-outs
  • lack of “community spirit” due to relatively short occupancy periods.

Keeping these concerns in mind is one of the most important things a rental owner can do when dealing with any other owner in a community.

Know Your Restrictions

If they exist, there are two basic types of Homeowner Association rental restrictions.

  1. Limits on the total number of leased residences within a development.
  2. A requirement that all new owners must live in the residence for a specified time before the residence can be rented.

If a rental restriction does not apply, an owner must understand the rules for any prospective tenant and lease to be approved by the HOA.

  • Does the Homeowners Association demand private tenant information such as phone numbers, emails, driver’s licenses?
  • Is the Homeowner Association requesting more information of a tenant than they do of purchasers?
  • If a tenant must be approved what is the amount of time the HOA may takel?  A lengthy HOA approval process will make it difficult to rent a home because applicants will not wait weeks to find out if they are approved.
  • Can the Homeowner Association evict your tenant and if so, for what reasons? Yes, there have been HOA’s found to have this particular power.

Owner Actions

The concept of tenants in communities originally designed for owner-occupants creates quite a stir among HOA’s.  Since it may be challenging to rent your property, here are some ideas to make the road smoother.


Make sure that every required owner maintenance item is continually covered…lawns mowed, landscaping trimmed, exterior light bulbs working, etc.  If you hire a property manager, give them a copy of the HOA covenant and restrictions so that the manager can make sure the property is maintained and does not stand out from other homes.   A potentially restrictive HOA, having seen a property maintained while vacant, may be easier to work with on many issues that will arise.

Tenants Following Rules

A lease with specific maintenance requirements for the tenant may also be appealing to the Homeowners Association.  Better yet, hire professionals to maintain the property and show the HOA that responsibility will not be left to the tenant.
Include in your lease a requirement that the tenant has to agree to follow all bylaws set forth by the HOA.  Be sure to specifically review and have your tenant initial their understanding of these rules on the lease.


Understand and respect sign restrictions.  You may not just be able to plop out a “For Rent” sign and if you do you may find huge resistance.

Tenant Approval Procedures

Some HOA’s are placing themselves in a position to actually screen the tenants that a non-occupant owner selects to rent.   In many cases, this is not a power originally vested to the HOA, but one they have created.  Ultimately the Homeowners Association has the power to make living in their community very difficult for a tenant.  It would be wise to follow their directive.  At the same time, there is a line that should be drawn about what information is appropriate for an HOA to have about a possible tenant-neighbor (usually these Boards are populated with other neighbors).   When told that the HOA wishes to approve a tenant, I have asked for the approval package for both tenants and owners.   A tenant should not have to submit to any more scrutiny for an approval than a new owner.

Pay Your Fees

When a property within an HOA is vacant, it may or may not mean the owner continues to pay their fees to the HOA.  Unfortunately, the original owner may be out of the picture, and the new owner is a bank or an investor.   In some cases, the original owner is still of record, but has moved on and is trying to convert the property to income property.

Whatever the status, make sure the fees are paid current.

Hire a Property Manager

HOA’s like property management.  Introducing the manager and explaining the additional scrutiny that and screening before any approvals, may be enough.

Times Are Changing

HOA’s have been forced to take a more pro-active role when it comes to non-owner occupied properties.   Very few original Declarations and Covenants prohibit or address rental of property in the Homeowner Association.  These rules have been created by the Boards over the years.

Today, Associations are reconsidering restrictive rental policies.  Allowing rentals may be better than having foreclosures and vacancies in the community. Associations have seen the effect of foreclosures and vacancies on property values.   Many Boards are balancing the interests of their owners who object to rentals with the pure economic realities that are tied to occupancy versus vacancy.

When an HOA takes an overly restrictive posture toward approving tenants, they actually can be hurting many of their members who are trying to sell their properties.  Word can get around to both potential owners and investors about the overly controlling and restrictive Homeowners Association and potential buyers may choose to go elsewhere.

Rental owners need to have the Homeowners Association as their ally.   Making sure the property is maintained is a big step toward that objective.  Be sure to find out the approval process before you actually have a tenant to be approved.   Most applicants won’t wait for a slow-moving HOA to approve their occupancy.

There is nothing wrong with a community having a rental policy.  The policy should be done fairly, judiciously, and with the intention of welcoming renters as contributing members.  If not, then the rental owner has three choices:

  • Work with the Association to improve policies and procedure.
  • Ensure your procedures and enforcement are adequate.
  • Sell your property or do not buy in the community.
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WILMOTH Group is headquartered in Indianapolis, Indiana. We focus on providing creative local solutions for a variety of residential real estate needs including, properties for sale, property management services in Central Indiana.