Condo buyers hit with surprise rental restrictions

Was board's last-minute amendment legal?

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Oct. 2, 2012

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Was board's last-minute amendment legal?

Benny Kass
Inman News®

DEAR BENNY: My husband and I own a condo in a seven-unit condo association. We have owned the unit since 2005. Recently, one of the unit owners asked us if we were interested in buying his unit. We made an offer and he accepted it. After the sale and purchase agreement was signed, the seller of that unit sent an email to everyone in our association that he was happy to announce that we are buying another unit in the building.

Six days later, we received a notice for a special meeting in a great rush. Three units out of seven voted against rental restrictions, but since the two townhouses owned by mother and daughter are each worth 30.5 percent nominal interest, we lost the battle.

The trustees changed the bylaws two days later, stating that no unit shall be rented for more than two years out of five, and the owner needs to live in his or her unit for three years out of five. We tried to get out of our deal, but the seller told us he would retain our 10 percent deposit. We closed on the condo and are stuck with the new bylaw.

Do you think we have a case? --Sarah

DEAR SARAH: There is a universal rule in community association law that states that owners are bound by the association documents as they currently exist and as they are legally amended from time to time.

This rule applies equally to condominiums, cooperative housing and homeowners associations.

Note that I emphasize the word "legally." If the bylaw in your association was legally enacted by the membership, then I must tell you that you are bound by that amendment.

I have not reviewed your association's legal documents, so I can provide only general advice. However, just from the facts you gave me, I have some questions.

1. Typically, it takes a supermajority to amend legal documents such as bylaws. And that requirement usually is 66 2/3 or even 75 percent. From what you wrote, the amendment received only 61 percent. Accordingly, you must confirm the vote and make sure it was enacted by the requisite supermajority spelled out in your legal documents;

2. Typically, most legal documents require advance notice before a bylaw can be amended. Again, I don't know what notice is required in your documents, but clearly you did not get sufficient notice;

3. There are some court cases that suggest that in order to impose rental restrictions on condo owners, the declaration -- and not just the bylaws -- must be amended. The declaration has a higher priority in the hierarchy of condominium law.

4. Finally, you might have an argument that the board of directors (in your case, the trustees), by rushing to enact the amendment, were involved in tortious interference with your sales contract. This is a stretch, and your attorney should give you specific legal advice.

Bottom line: Talk with an attorney who understands and practices community association law. There may have been defects in the way that the amendment was enacted.

You should also understand that communities throughout the nation are imposing restrictions on the number of rentals that can exist in associations. Why? Because FHA, the predominant lender for condo units, has imposed stiff restrictions, and condos are attempting to comply with these FHA requirements by amending the legal documents.

DEAR BENNY: I read your article on the laws regarding a neighbor's tree falling on one's property. Do you know of any laws regarding a neighbor's property with eroding beach bluffs affecting one's own property?

I live along the Lake Michigan shore on a high bluff. Taking care of the bluff is a responsibility of all lakefront owners. Planting vegetation, blanketing the bluff with erosion control mats, and installing drain systems are among some of the techniques.

With sandy dunes, clay underneath throughout and invisible water channels, when there are extreme amounts of rain, sometimes with all the methods one does to protect his bluff, Mother Nature will sometimes take over, in the form of a bluff blowout -- the bluff actually falls away leaving a gaping hole.

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