Leasing Restrictions

For both new and old community associations the issue sometimes arises as to whether the owners within a condominium development or housing addition may adopt an amendment to restrict or limit occupancy and/or leasing within the development. From a national perspective, the answer is that a majority of state appellate courts have approved of such covenant amendments, even retroactive application. For Oklahoma, the question is maybe, because Oklahoma appellate courts do not report a case specifically deciding the issue.

The crux of the issue arises when owners seek to adopt an amendment to their covenants that would, say, limit leasing within the development to 10% of the total units. The purposes generally cited for such an amendment are: owner occupied units are generally more well-kept than tenant occupied units; the secondary mortgage market underwriting guidelines will not allow a loan to fund on property within a development with a certain percentage of leased units; owners generally demonstrate more participation within an association than tenants; etc.

In one Florida case, the court approves of an amendment limiting leasing within the addition, even application of the leasing restriction to owners holding title to their units prior to the amendment's adoption. The court states: We note that the majority of courts in other jurisdictions have held that a duly adopted amendment restricting either occupancy or leasing is binding upon unit owners who purchased their units before the amendment was effective. The court goes on to state that owners are on notice when they purchase their units that the covenants may change, and that there is no vested right in the status quo ante (meaning one cannot rely on the covenants remaining the same forever). To read the Jahren case for yourself, you may find it here. To read an unofficial transcript of the oral arguments, click here.

Interestingly, the Florida legislature "overturned" the appellate court with a legislative enactment providing certain parameters on the adoption of leasing restrictions. See, Florida Condominium Act, Section 718.110.

Matthew L. Winton, Esq.