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Ely
Ely, Counselor at Law
Category: Real Estate Law
Satisfied Customers: 100052
Experience:  Qualified attorney in private practice including business, family, criminal, and real estate issues.
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I am on the HOA Board of a 54 unit condo property in Dallas,

Customer Question

I am on the HOA Board of a 54 unit condo property in Dallas, Texas. Our covenants restrict rental properties to no more than 20% of the units. We are currently at 22%. We are aware that if we were to get to 30% it would be very difficult for a homeowner to sell their unit as most mortgage companies would not finance a unit in a property with such a high rental percent. Here are my questions.
One, can we legally restrict HO's from renting or hold the rentals to 20%?
Two, if we were to ever let the percentage get above 30% and a HO was unable to sell as a buyer could not obtain financing would the HOA Board be legally liable for HO's inability to sell as their buyer could not obtain mortgage financing?
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  Ely replied 1 year ago.
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I am sorry to hear about this situation.
One, can we legally restrict HO's from renting or hold the rentals to 20%?
Of course. While it may be problematic to break tenancies that already have been signed and the HOA looked the other way, future tenancies that would force the percentage past 20% can simply be denied and the HO explained that per the covenants, the HOA has no choice. If they press why the HOA has allowed others but not them, the HOA can explain that it has made the decision to strictly enforce covenants going forward.
Two, if we were to ever let the percentage get above 30% and a HO was unable to sell as a buyer could not obtain financing would the HOA Board be legally liable for HO's inability to sell as their buyer could not obtain mortgage financing?
Not likely. This is a stretch. At best, ***** ***** can be claimed to have been negligent. The elements of a negligence cause of action are (1) The defendant owed a legal duty to the plaintiff, (2) The defendant breached that duty, and (3) The breach was a proximate cause of the plaintiff's personal injury or property damages. D. Houston, Inc. v. Love, 92 S.W.3d 450, 454 (Tex.2002).
They may be liability if the HO can show that they protested and tried everything possible to get the HOA to act and enforce the covenants, but it did not. IF SO, then there may be some liability, but even then it is up to the jury and this would be a very hard case to proof.
If they simply stood by and let this happen without protest, then their case would be even more weaker, arguably.
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