Condo Renters: A Potential Asset
Question. We have been renting a condominium unit in a fairly large complex for the last several years, and our current plans are to stay here for several more years. For financial and other personal reasons, we do not want to buy. However, quite frankly we feel we are second class citizens in this condominium complex. We recognize we cannot serve on the Board of Directors. However, we want to get involved in various condominium activities, including the budget, grounds and maintenance, and a newsletter, but the Board is adamant against our involvement. We believe we can be more productive for the condominium than many of the owners, but are treated as if we do not exist. Is there any legal reason why we cannot get involved?
Answer. This is a very touchy and sensitive issue in the condominium community. Many condominium boards of directors have the attitude that owners are good and tenants are bad. And more significantly, FHA — which is the predominent lender on condominium units — for years has required that associations have at least 50 percent owner occupied units in order for a purchaser to get a mortgage loan or an owner to refinance.
Congress, in July, 2016, demanded that FHA either lower the occupancy rate to 35 percent or provide justification for keeping it higher. What did the FHA do? It agreed to lower the occupancy rate down to 35 percent, on the condition that reserves equal 20 percent of the annual budget. For years, FHA only required a 10 percent reserve requirement. Only time will tell if this will make FHA loans more available to condo owners.
But getting back to your question: people are people.
I have known many owners who not only do not cooperate with their Association, but indeed are downright destructive. I have known many tenants who take better care of their property than do their counterpart owners.
Unfortunately, there is a stigma attached to a tenant. The general philosophy is that “I bought into this complex, and accordingly I have a greater involvement in protecting my investment.”
However, getting these owners to serve on boards of directors, or to participate in the numerous condominium activities is often quite difficult. Apathy is rampant in most condominium associations. There have been many occasions where boards of directors have pleaded with owners to attend an Annual Meeting — or at least give a proxy — so a quorum could be reached.
Any legal question involving condominiums requires an evaluation of the “power source.” The highest authority in any jurisdiction is the applicable state condominium law. The condominium laws throughout the country are different, and everyone has to understand the law in which your condominium is located.
The second level of authority is the Declaration, which is recorded among the Land Records in the city or the county where the property is located. This, in effect, is a document that “declares” that a condominium is created, and outlines certain important aspects, including a legal description of the complex. In any condominium, there are three components: general common elements, limited common elements, and individual units. The Declaration attempts to define each of these components.
The third power source is the Bylaws of the Condominium. In some states these Bylaws are recorded among the Land Records, and in other states they are not. But whether or not they are recorded, the Bylaws spell out the basic operating guidelines under which the Association is to function. Bylaws always provide the requirements for the Board of Directors, and will spell out who can serve on the Board. Here is where the legal authority can be found as to whether or not you can serve on the Board if you are not an owner.
The Bylaws will also establish the types of committees that function in the Association. For example, one important committee is the architectural control committee. This committee determines whether a unit owner can make improvements or alterations to the exterior of their unit.
This architectural control committee serves an important function in many condominiums. Often, however, it becomes a bottleneck to legitimate and needed improvements within the complex. Indeed, the architectural control committee of many associations has been referred to as the “local KGB.”
Here is a suggestion. If the Bylaws do not require that only owners can serve on the architectural control committee, this might be a very good place for you to get involved. Because you are not an owner, you do not have any vested interests, nor do you have any ax to grind. The architectural control committee members should be objective and impartial, and it sounds to me as if you meet these tests.
Additionally, if you have any writing skills, you may be able to assist (or edit) the community association newsletter. Or if you have any accounting background, you should be able to serve on the finance committee.
Ask to meet with the Board of Directors. Convince them you are sincere, and truly want to participate in the affairs of the Association. Directors should be able to tap all the resources within the community — whether they are owners or tenants.
I cannot promise instant success, but a competent Board of Directors should be willing to jump at this opportunity to get able and interested volunteers.
Written by Benny L. Kass for www.RealtyTimes.com Copyright © 2016 Realty Times All Rights Reserved.