How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Tina Your Own Question
Tina
Tina, Lawyer
Category: Real Estate Law
Satisfied Customers: 5436
Experience:  17 years of legal experience including real estate law.
4460311
Type Your Real Estate Law Question Here...
Tina is online now
A new question is answered every 9 seconds

I own a condo and the board is concerned with me renting my

Customer Question

I own a condo and the board is concerned with me renting my unit out such that the complex would become non-owner occupied and Non-warrantable for loan purposes. I don't agree this is a issue.
Many of the homes are 2nd homes whereby either owners rent it out a few weeks a year to help reduce their expenses and use it part of the year and the rest of the time it is not occupied by anyone(but could be by the owner if he elects to come and therefore there is no rental contract in place).
Submitted: 1 year ago.
Category: Real Estate Law
Customer: replied 1 year ago.
Other 2nd home owners don't rent out their unit at all but they may only use it part time or full time. Others rent out their unit as much as possible but since it is considered a vacation type property they would unlikely be able to rent it out more than 50% of the year.
Expert:  P. Simmons replied 1 year ago.

My name is***** have over 16 years experience in the law. Should you like to chat on the phone I am happy to for a nominal cost. Let me know at any time during our question and answer session if you are interested I am happy to give you more details.

I am sorry for this dilemma. However, I'm not sure I understand your specific question; are you asking if the board can prevent you from renting your property?

Customer: replied 1 year ago.
1. Do they count the actual of days to determine the definition? For example, if a owner rents his unit out for a 10% of a year, he uses it himself for 30% of the year and the remainder of the year he doesn't use his 2nd home(condo), is it considered owner occupied?2. If the owner stays in his 2nd home(condo) for 30% of the year and the rest of the year he does not use it, is it considered owner occupied?3. If owner rents out the condo for 40% per year, he uses it 5% of the year, and the rest of the time it is not rented or not occupied by the owner, is it still considered owner occupied since he could have used it another 55% percent of the time because there was no rental contract for that other 55% percent of the year?Kind Regards,
Harold
Expert:  P. Simmons replied 1 year ago.

This depends entirely on the bylaws. Do you have a copy of the bylaws handy?

Customer: replied 1 year ago.
I have sent you the bylaws and proposed amendments. They allow 7 night rentals which is no problem for this vacation beachfront property during the summer time. However, it is almost impossible to due at other times of the year so I want it changed to a minimum of 3 nights during the offseason.Harold
Expert:  P. Simmons replied 1 year ago.

Thank you Harold. But now I am not sure I understand the question...are you asking the process to change the bylaws. If not what is your specific question?

Customer: replied 1 year ago.
Sounds like you are not able to help since I tried to be specific questions 1, 2, 3 above and providing you the bylaws you requested. Sounds like you only want to talk of the phone for added charges.
Expert:  P. Simmons replied 1 year ago.

Sir, I offered the phone call since some folks appreciate the ability to share info in that way. There is no obligation you accept that.

As for your questions, the original questions (the 3 you reference) deal with the bylaws...but in your latest submission you are asking about the ability to change the rules...I was simply trying to narrow down what, exactly, you are looking for...

Expert:  P. Simmons replied 1 year ago.

I will opt out...perhaps someone else can assist you. I wish you the best of luck

Customer: replied 1 year ago.
I am trying to understand the definition of non-owner occupied definition for Fannie Mae loans(Warranty Issues) so I tried to give you different examples to find out the definition of those.
Expert:  NathanEsq replied 1 year ago.

This is actually a more common problem than most realize. Fanne Mae and Freddie Mac have guidelines with respect to lending in condo developments. The concern is that a high percentage of non-owner occupied units can lead to sudden devaluation when the market turns. It also can mean that the development will not be kept up as well as it would otherwise. Your question as I understand it is, how does the lender determine the number of "non-owner" units. Which of course leads to the question of "what is a non-owner unit". The answer is actually fairly simple. When a mortgage is taken out, the deed of trust gets recorded. A "non-owner" unit typically has a rider attached to the Deed of Trust, which states that it is a "non-owner" unit. Therefore, the number of non-owner properties is a matter of public record. Typically, a "condo certificate" is requested by the new lender, which reflects certain data, among which is the number of recorded non-owner riders. This system is not perfect as you can imagine. Many people acquire a condo, and then later rent it out. In that circumstance, the public records would incorrectly reflect the unit as owner-occupied, when in fact it is not. The issue your association is now dealing with is they are on the bubble with respect to the number of units that are non-owner. Once this line is crossed, other owners will have difficulty getting loans, which will drastically affect the ability to sell the units, thereby lowering the values of all units. Hopefully this answers your question. I am happy to follow up with you though if I missed anything.

Customer: replied 1 year ago.
Thanks Nathan, I think the issue is for secondary owners who also rent out their units but for a limited time frame. The demand for these vacation properties preclude for likely even being able to rent for more than half the year. I have listed some scenarios in attempt to understand it better. So these let's say are considered owner-occupied in the public records BUT1. Do they count the actual of days to determine the definition? For example, if a owner rents his unit out for a 10% of a year, he uses it himself for 30% of the year and the remainder of the year he doesn't use his 2nd home(condo), is it considered owner occupied?2. If the owner stays in his 2nd home(condo) for 30% of the year and the rest of the year he does not use it, is it considered owner occupied?3. If owner rents out the condo for 40% per year, he uses it 5% of the year, and the rest of the time it is not rented or not occupied by the owner, is it still considered owner occupied since he could have used it another 55% percent of the time because there was no rental contract for that other 55% percent of the year?
Expert:  NathanEsq replied 1 year ago.

Great question. The distinction between primary residence / second home / investment property, are not always clear cut. Each lender can define these terms as they see fit, but here are the generally accepted distinctions as reflected on most deeds of trusts and their riders. A primary residence cannot be rented and is used by the owner as their primary place of abode. This one is fairly straightforward. A second home is one that a person only lives in during part of the year. HOWEVER, during the parts of the year that it is not in use, the property must be exclusively available to the owner. This generally precludes renting the property out for any length of time. So, if the condo association has owners who rent out their condo for 1/2 the year, or 3 months, etc., those properties would likely properly be deemed investment properties.

Freddie Mac has established guidelines (which also mirror Fannie Mae). These guidelines provide that a condo association must not have more than 50% investment units in order to be eligible for financing through them. So, in your situation, if there are more than 50% of the units who rent out their unit, even if only for part of the year, the association would likely not be eligible for Freddie Mac or Fannie Mae. As mentioned, this can be ascertained by the publicly recorded deeds, or, in some cases, the board of directors may provide the data associated with a condo certificate. I suspect this is why they are concerned in your situation. As to their ability to restrict you from renting your unit, this would have to be addressed in the CCRs. I think it would be inappropriate for them to unilaterally tell you that you are not able to rent your unit because of the percentage of investors.

Related Real Estate Law Questions