Past failures to enforce leasing restrictions isn’t a good excuse

Q. I was recently elected vice president of our association. I found that our management company is not enforcing the rental cap of 25 percent as specifically stated in our covenants.

The result is that we now have rentals of 40 percent of the total number of residences and that number is climbing.

In response to our request to enforce our covenants, the management company arranged a question and answer session with an attorney at our last meeting.

The attorney informed us that even though the rentals took place without the required association approval, current rentals must be grandfathered in before the association can take steps to reduce the rentals that were created in violation of the covenants because the builder and management company did not prevent them.

The only remedy is for the association to notify the homeowners that if their rental properties are sold or if they move into their properties, they will be ineligible to rent them again. Is the advice true and is that the only option available to us in reducing our rentals back to the 25 percent cap level?

A. In responding to the reader's question, it is important to note that the reader did not send me a complete copy of her governing documents, only the one section pertaining to percentage limitations.

Having made that statement, there are a number of issues that I would raise with the attorney's opinion.

If we extend the attorney's opinion, does that mean if any previous board or management company did not enforce other provisions and restrictions within the governing documents that the association can now not enforce them?

There is a Nevada Supreme Court decision that basically states that the right to enforce governing documents is not negated because of the inconsistency of enforcement from previous boards.

Any new owner who bought a unit within this community should have received a copy of the governing documents as required by state law.

It is the responsibility of the buyer to review these documents to ascertain if there are any restrictions that would prevent the buyer from completing their purchase of the unit.

Upon reviewing the restrictions, the buyer should have contacted the association to find out if the rental cap had been reached.

It should also be noted that most associations do not even know that a unit has been leased until after the fact and then the enforcement issue becomes a conflict with the new owner or even an existing owner.

Yes, the association could have included this information in the resale package, but NRS 116.4109 subsection 3 states that the association within 10 days after receipt of written request by the unit owner or his or her authorized agent to furnish a copy of the declaration, bylaws and rules and regulations.

It does not state that the association has to list specific restrictions, such as a rental cap or the prohibition of street parking or no RVs or no pets over the size of 15 pounds.

There are many different restrictions within any set of governing documents that would influence a buyer not to purchase a home within that community.

Buyers need to take responsibility; too many boards are faced with enforcement problems simply because a new owner did not know that there were regulations that would negatively impact their lifestyle.

Obviously, there are practical and legal issues with the leased units within this community. The association could send notices to all of the owners within their community.

The notices should be sent both certified mail, return receipt requested and by certificate of mail to each owner informing them that no new rentals will be allowed within the community since the association is over its 25 percent rental cap.

In addition, the notice should state that owners must first contact the association prior to the leasing of their homes in order to obtain approval per the rental cap restriction. If owners violate these restrictions, the association would take the appropriate legal action against them.

As to the owners who leased the units after the 25 percent rental cap had been reached, if the association has direct knowledge of the time frame of the leased unit as it relates to the 25 percent cap, the association could notice these owners that they would not be able to renew any leases or to lease to a new tenant upon the vacating of the current tenant.

It is easier to write this response to the reader than for the association to take this course of action.

First, how much money does the association want to fund in lawsuits to remedy the specific enforcement problems as well as defending its 25 percent rental cap provision.

As mentioned in previous articles in this column, there is one Nevada State Supreme Court case which found that a rental cap provision in one association's governing documents was not enforceable due to specific language that was found in the covenants as to the amendment process when the rental cap provision was first approved by the membership.

Second, there is a major housing issue in Nevada -- foreclosures. There will be lending institutions that will foreclose upon homes where the lending institutions may want to lease those homes until the marketplace changes.

What is more damaging: To lease a vacant home or to leave the home vacant? It is a toss-up for associations. Nothing is more dangerous within a community than to have multiple vacant homes that attract vandalism and transients.

Too many vacant homes owned by lending institutions are not even being properly maintained, causing additional problems for association management.

For some of the reader's membership, owners within the association may have no alternative but to lease their homes in order to avoid foreclosure.

The association needs to get a handle on the current problems that they are finding with their tenant-residents.

There appears to be multiple violations as to domestic disputes and street fighting, which disrupts the quiet and peaceful enjoyment of the community.

The association needs to send strong letters to the owners and begin the enforcement/fining process against the owners who are responsible for the action of their tenants and the guest of their tenants.

Pressure and legal action can be initiated to force an owner to evict tenants who are constantly violating the covenants. (It is not necessarily an easy or quick remedy but it can be a viable action for an association). Face-to-face hearings with both the owners and tenants need to be initiated.

Even if the association were to find a new management company, it will not be an easy task to remedy their enforcement issue for either the board or community manager.

Barbara Holland, certified property manager, is president and owner of H&L Realty and Management Co. She is a member of the Institute of Real Estate Management. Questions may be sent to Association Q. & A., P.O. Box 7440, Las Vegas, NV 89125. Her fax number is 385-3759. Questions may be shortened and are subject to editing.