associaton matters
For Rent By Owner…
A Growing Challenge For Associations
By Daniel H. Craven
Many changes have occurred in the condominium market in the last few years. One significant change is the shift of rental properties from the traditional rental companies to owners handling their own rentals and advertising on the Internet through Vacation Rentals By Owner® (VRBO). There are many similar websites, but VRBO seems to be the 800-pound gorilla of the market. The purpose of this article is not to reflect negatively on any particular paradigm shift in the market but this phenomenon has brought about new issues for condominium associations in managing its daily affairs.Because of the current state of the economy, many owners, especially those struggling to cover the expenses of their condominium along with their mortgage payments, have severed their ties with traditional rental companies to save the 20 to 33 percent fee so that they might add these sums to the bottom line. The rental companies, which are usually more schooled on condominium rules and regulations, have provided a buffer for the condominium associations in the enforcement and regulation of the guests who stay in these condominiums. Since this layer of protection is now removed, the associations are frequently dealing with guests who show up with no conception of what is and what is not acceptable behavior at a condominium. Therefore, condominium associations and their staffs are finding themselves taking a more active role in enforcement of rules and regulations. In many cases, the owner, who only cares about the bottom line, is unsympathetic in assisting the association in regulating their guests' activities. Since associations typically in the past have enforced violations of rules and regulations only against the owner, associations now must put into place new rules and regulations and/or amendments to their Declaration of Condominium and By-Laws so that the association has the authority to proceed to evict non-compliant guests.
One area that this is manifesting itself in is with regard to pet policies. Most associations on the northern gulf coast allow owners to have pets, within certain guidelines, but do not allow renters and/or guests to have pets. It is becoming more frequent that renters will show up to check into a condominium with one or more pets not knowing that renters and/or guests are not allowed to have pets. They become rather indignant because the unit they are renting is advertised on VRBO, or like media, as pet friendly. This creates quite a problem, obviously, for the association. In most cases where I have dealt with this issue, the owner is struggling financially and is doing whatever they can to get anyone in the unit to rent it. I have been forced on behalf of associations to file for injunctions with the court to stop this practice as well as order the owner to cease and desist from advertising on VRBO that the unit is "pet friendly."
Another area of concern is the minimal rent period. Many associations, especially those that typically deal with longer-termed rentals, such as those not directly on the beach or those in back bay areas, usually have minimum rental periods from three days to as much as six days. The unfortunate reality is that the shorter the stay, the more likely the guest will abuse the condominium unit and/or the common areas. I have seen many examples of owners advertising on VRBO in which they advertise rental periods shorter than what is allowed in the association's condominium documents. Once again, this creates a situation where the association is put in a contentious struggle with the owner of the unit to comply with the rules and regulations.
An additional area of concern is that when owners become delinquent in payment of their condominium dues, the ability of the association to collect delinquent funds is, at least, partially impaired because the unit owner, rather than the rental company, is the manager of all the funds throughout the rental process. Typically, an association will sue a delinquent owner if payments are not forthcoming and will be able to attach rental income from the rental company for payment of the delinquent sums. If the unit owner is now his/her own rental company, then steps to attach rental income are unattachable. This forces the association to have to take further steps personally against the unit owner.
In conclusion, if the rental market continues to fragment and more and more owners continue to use the power of the Internet, such as VRBO and other similar media, condominium associations will be further challenged to deal with these issues. Condominium associations should take a hard look at strengthening their governing documents with regard to collections and enforcement as they continue to deal with the new challenges that lie ahead.
Daniel H. Craven is an attorney practicing in Gulf Shores, Ala., who currently represents more than 125 condominium associations in the Gulf Shores and Orange Beach area. In addition to holding a Juris Doctorate in Law, he holds a Master's Degree in Business Administration, a Bachelor of Science in Engineering, and is a registered professional engineer in the State of Alabama.