Rentals have been an invaluable source of income for many homeowners. However, if a homeowner lives in a planned community, rules often restrict their ability to rent. Are HOA rentals allowed in your Texas community? Should they be? Let’s find out.
Are HOA Rentals Allowed In Texas?
It’s not uncommon to find rental properties in HOA communities. However, whether or not the HOA can prohibit homeowners from renting their property depends on state law and the governing documents.
Texas has no general restrictions on HOA rentals in both condominium and homeowners associations. Therefore, if an HOA wants to ban rentals, they must include it in the governing documents — specifically, the Declaration of Covenants, Conditions, and Restrictions (CC&Rs).
If an HOA’s CC&Rs contain a rental restriction, it is generally enforceable by the homeowners. The HOA has the right to issue violation letters and impose penalties on non-compliant members.
HOA Rental Laws In Texas
Despite no blanket restrictions on Texas rentals, the state has certain laws that govern HOA rentals. More specifically, the Texas Property Code Section 209.016(b) states that associations cannot adopt a rule that requires rental applicants or tenants to:
- Have their tenancy be subject to approval by the HOA
- Submit their consumer report, credit report, or rental application to the HOA
On the other hand, Section 209.016(e) does allow HOAs to request the following information about a rental applicant:
- Contact information such as the name, mailing address, phone number, and e-mail address of each person who will live in the residence under the rental agreement
- Term of the lease and its start date
Common Examples of HOA Rental Restrictions
The things homeowners can and cannot do with their HOA rental properties often depend on the HOA rental rules. What are some common restrictions on rental properties in the homeowners association community? Below are a few homeowners association rental restrictions you’ll commonly find in planned communities.
1. Short-Term Rental Restrictions
A rental property in HOA communities can have either a short or long-term agreement. What is the difference between short and long-term tenancies?
As the name suggests, the tenants of short-term rentals don’t stay for a long period. Generally, any rental agreement for less than one year falls under short-term rentals. Meanwhile, long-term rentals are often rented to a tenant with a lease term of at least 12 months.
Typically, many HOAs favor long-term rentals over short-term ones. This is because long-term tenants can assimilate into the community better. They are also often more mindful of the rules, considering they can be penalized for violations. Moreover, they are less of a security risk compared to short-term tenants.
Homeowners associations must be specific about their rules regarding short-term and long-term rentals. If an HOA chooses to ban short-term rentals altogether, the rules should specifically refer to short-term or vacation rentals. However, if the HOA wants to give some leeway for short-term rentals, they can also implement a minimum stay. Most HOAs require a 30-day minimum occupancy for tenants.
2. Rental Caps
A rental cap is a common HOA rental restriction. Essentially, it limits the number of homes rented out in the community. For example, a community of 100 homes may restrict the number of rentals to 10 or 20.
While homeowners may have complaints against rental caps, they are generally a good idea for HOAs. After all, if tenants overrun the neighborhood, there will no longer be a sense of community. The homeowners may not even be bothered to run for the board as they have no real stake in the community’s affairs except for rental restrictions.
In the long run, this can harm the community as HOAs without a board are generally dysfunctional and cannot operate. This is why rental caps are commonplace in residential homeowners associations.
3. Homeowner Rental Applications
While HOAs in Texas cannot screen tenants or rental applicants, they may be able to establish a rental application and approval process for homeowners who want to rent out their property. The HOA may provide a form and ask homeowners to submit it for approval.
Rental applications are often useful for HOAs with rental caps. They allow homeowners to “stand in line” and wait if the cap has already been met. The HOA can then approve their application once another homeowner’s lease agreement has expired.
4. Compliance With Community Rules
An HOA property for rent may be attractive to potential renters because HOAs usually come with amenities and utilities provided. However, with these conveniences also come obligations. A tenant is a resident of the community and, as such, must follow the community’s rules.
Homeowners associations can ensure compliance by requiring tenants to agree to understand the community’s rules. Owners should also know that they may be held accountable for their tenants’ actions and violations.
What Are Rental Restrictions For?
The restriction on HOA rentals may seem too strict for some homeowners. In fact, it’s often a source of conflict and frustration. However, rental restrictions aren’t just there to make homeowners’ lives more difficult. They exist for a reason.
One of the most important reasons is decreasing liability. Tenants are generally less careful when dealing with property as they don’t expect to live in the community long-term. As a result, the HOA may need to do more maintenance on common areas. It may also need to file more insurance claims, which might prompt the insurance company to increase liability insurance rates.
In addition, rental restrictions usually preserve property values. Renters are often more prone to violate the rules because they don’t have a personal stake in the HOA. When the rules are regularly violated, the community can fall into disarray and chaos. Its reputation eventually falls, and so do its property values.
Finally, rental restrictions may impact mortgage interest rates. This is because some banks compute mortgage rates based on the number of rentals rather than the number of units. Many lenders will charge higher rates if the community exceeds a 25% rental rate.
The Bottom Line
Homeowners associations can benefit greatly from restricting HOA rentals. It prevents the community from being overpopulated with tenants and preserves property values. However, striking a balance is key because prohibiting rentals altogether can upset homeowners. It’s important to consider both the homeowners’ wants and the community’s overall needs.
Do you need professional HOA management in Texas? 88 Doors offers premier management services to community associations. Call us at (512) 348-8821 or contact us now.
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