HOA Rental Restrictions – Are They Valid?

Idaho’s law has changed significantly since this blog post was first published. Please see [Idaho Legislature Acts on Rental Restrictions]  for more information.

An ever-increasing percentage of us live in neighborhoods, subdivisions, and PUDs¹ that are subject to covenants (also known as “CC&Rs”) that put some restrictions on permitted uses of the homes and properties in the development. Rental restrictions are a growing topic of debate with homeowners associations (“HOAs”) in recent years. The development of websites such as VRBO.com and AirBnB.com have made it easier for homeowners to rent out their homes, or even just spare bedrooms, to travelers for short-term, or even nightly, stays. This has resulted in an increase in the number of homes being used in this manner, which has brought with it conflict among homeowners and their HOAs.

Many HOAs have reacted by instituting or strengthening restrictions on rentals. This has, predictably, led to further conflict and litigation.

So, can your HOA prevent you from renting out your house on a nightly, short-term, or long-term basis?

As with many questions in the law, the answer is, “It depends.”

The answer depends on three primary factors: 1) do the current covenants have any rental restrictions; 2) what do the covenants say about amendments; and, 3) where is your house located?  As with most of the news and knowledge base articles produced by Fennemore, we will focus on Washington and Idaho in answering this question, since those are the states in which Fennemore attorneys are licensed to practice.

1) Do the current covenants have any rental restrictions?

First of all, it is important to know that properly adopted covenants are enforceable restrictions on the rights of property owners. If the covenants clearly restrict the type of rental you are wanting to do, and that rental restriction was in the covenants at the time you bought your home, then the HOA can most likely prevent you from renting. Examples include common terms prohibiting tenancies of less than six months or a year, or prohibiting leasing for a term of less than 30 days.

However, if the covenants simply say that the homes are to be used for “single-family residential” purposes, neither Washington nor Idaho courts would say the covenants prevent even nightly rentals. Using a house for rental purposes is considered “residential” even if the owner of the home is making money on the rentals, which is a commercial enterprise. The courts look at how the occupants of the house are using it.

The conflicts tend to arise where the HOA attempts to amend the covenants to try to reign in rentals that are perceived by some to be beyond the intent of the covenants – but not actually restricted by the covenants.

2) What do the covenants say about amendments?

In the unlikely event your HOA’s covenants specify that an amendment may add new restrictions on the use of the houses in the development, the answer will be pretty clear that the HOA may enact new restrictions on rentals by whatever percentage vote is specified in the covenants. However, few covenants are so explicit.

Instead, covenants commonly have language like this regarding the right of the HOA to amend the covenants: “These Covenants may be amended, in whole or in part, by an instrument signed by not less than [two-thirds, 75%, or some other number] of the Lot Owners.” Note that no mention is made of adding new restrictions. This general language has been applied differently in Idaho than it has in Washington.

3) Where is your house located?

The covenant language quoted above the same language interpreted by the Idaho Supreme Court in its 2015 Adams v. Kimberley One Townhouse decision (discussed in this real estate news article).  Extremely similar language was recently interpreted by the Washington Supreme Court in its 2014 Wilkinson v. Chiwawa Communities Association decision.  The courts came to opposite decisions.

In the Adams case, the Idaho Supreme Court held that a new restriction on short-term rentals was valid. In the Wilkinson case, the Washington Supreme Court held that a new restriction on short-term rentals was not valid.  These opposing conclusions were the result of the two courts’ differing interpretations of what it means to “amend” covenants. The Washington court held that there is a difference between an amendment and an addition to the restrictions in the covenants. Since the short-term rental restrictions were new, they were not validly adopted using the method designated for amending the covenants. The Idaho court, on the other hand, held that the power to amend the covenants included the power to add new restrictions.²

Conclusion

With an ever-growing number of people living in communities subject to covenants, questions like this will continue to arise. HOA covenants have a very long life, and society can change significantly over a period of a few decades. Even clearly drafted covenants may not adequately address issues that arise from technological development or demographic changes two or three decades later. When conflicts do arise, legal counsel experienced with HOA governance and covenant drafting can help the parties navigate the landscape of potential resolutions short of litigation.

¹This article will not address rental restrictions in condominiums. Since condominium HOAs are much more tightly regulated by statute than non-condominium HOAs, the analysis is significantly different.

²These opposing results are interesting because Idaho adheres to the older rule that all doubts regarding the meaning of covenants are to be resolved in favor of free use of land, while Washington has adopted a more modern rule requiring the court to attempt to ascertain and give effect to the purposes intended by the covenants, placing special emphasis on arriving at an interpretation that protects the homeowners’ collective interests.