Home        Back      All Columns

Should condo complexes allow rentals?

Brett Slattery

Question: Our condo association is rapidly becoming an apartment complex. The Board refuses to amend the condo documents to adjust the ratio.  Please tell me your business view on condos with a ratio of 50/50 owners-to-renters. 

In the past, banks rejected loan applications for condos unless the condo association was occupied by more owners than renters. Has that requirement changed? 

Will the owner experience a delay when they try to sell their property? 

Answer: Yes. As in the past, it is still common to see lenders reject loan applications when the ratio of owner-occupied units to renter-occupied units within the condo association fails to meet a minimum threshold.

The required ratio can vary from lender to lender, but it is usually the underwriter who dictates the ratio for federally-unwritten loans. Those are loans backed by the FHA, Fannie Mae, and Freddie Mac. These ratios change over time. The current FHA guidelines require that 51 percent of the units be owner-occupied.

Note that “owner-occupied” doesn’t mean that the condo needs to be the principle residence of the owner. The condo can be a part-time, vacation home used by the owner and her family, for example. The key to qualification as owner-occupied is that it is not also used as a rental.

Because this ratio changes over time, and varies between lenders and their underwriters, you would need to contact various lenders to determine if your condo association qualifies at its current ratio. There are, of course, other variables lenders will consider such as the financial health of your association.

You also asked if your association’s high renters-to-owners ratio will create delays when you are ready to sell your condo. This is something we can quantify. The probability that this ratio will create problems for you is only 37 percent.

Why 37 percent? It’s because only 37 percent of all condo sales in Charlotte and Sarasota counties during the past 12 months involved lenders. The other 63 percent were cash deals. So, in most transactions, there were no lenders to muddy the gears.

Now let’s address your frustration with your association’s board (of directors). Having been elected to serve as a director and officer of the largest mandatory homeowner’s association in Florida over a three-year period, I have some insights to share with you.


Does your desire to control the owner-renter ratio within your association reflect the will of the majority. If yes, consider running for office.  But before you do, understand that you may be taking on a very time-consuming job with no compensation.

Also, have you engaged your directors in a cordial dialogue to ascertain why they oppose policies to control the occupancy ratio?

My experience as a director taught me that directors often acquire a much broader understanding of the issues because they are exposed to more information than the general membership.

Decisions they make must conform to state statutes, county restrictions, accounting requirements, the guidance of the association’s attorney, etc. In other words, as a director, you discover that many issues are much more complex than meets the eye.

And finally, I emphasize with your position. It’s not just condo associations that are wrestling with your issues. The character of many single-family neighborhoods is also being altered throughout the country by the growing popularity of Airbnb and “VRBO.com”.  

The flip side of this is that without the ability to rent their vacation homes when not in use, many of these owners could not afford them. Of course, you could then argue that would free up these homes for would-be homeowners who use them full-time, thus offsetting the nationwide shortage of homes. 

Then again, the recurring news stories detailing the legal battles between homeowners and organizations like Airbnb fighting municipalities and other entities trying to impose rental restrictions and taxation on them demonstrate how complicated this issue gets.

Here’s another twist. The nationwide, real estate meltdown that began locally in 2005, and was further fueled by the “great recession”, created massive waves of foreclosures. Some second-home owners were able to avoid foreclosure by renting their second homes year-round.

This helped all members of the homeowners’ association (HOA). That’s because owners of a foreclosed property typically also default on paying their HOA fees. It was not unusual to see homes in foreclosure for up to five years before the banks repossessed them. 

During that period, it was the remaining HOA members who were saddled with making up the difference in lost HOA revenues. And making matters worse, many lenders refused to finance any condo in the association once the percentage of units in foreclosure hit a certain threshold.

In these cases, the freedom to rent condos created big, unforeseen benefits to all members of those associations. So, as you can see, the deeper we delve into this subject, the more complex it becomes.

Brett Slattery is a Realtor and broker/owner of Brett Slattery Realty llc. Brett and his wife, Deb, specialize in residential home sales and listings. Reach him via (941) 468-1430, Brett@BrettSlattery.com, or www.BrettSlattery.com.

 Home       Back    All Columns


Note: Brett Slattery is owner/broker of Brett Slattery Realty llc.

© Copyright 2005 - 2019 Suncoast Media Group

To have Brett's weekly columns delivered to your door, subscribe to any of the following newspapers:

Englewood Sun, Charlotte Sun, North Port Sun, Punta Gorda Herald, The Aracadian