Protect Your HOA by Requiring Lease Addendums When Owners Lease Their Separate Interest

Has your board experienced delinquent homeowners who collect rent from their tenant but don’t pay their share of association dues? Has your board experienced problem tenants who don’t follow the HOA’s rules? These are common scenarios that are encountered by association boards of directors when the owners of a separate interest that is part of a common interest development have leased their separate interest to a third-party tenant. An effective way of dealing with problems like these that involve tenants is to implement a policy that mandates the use of a lease addendum that has been prepared by the homeowners association when the lease is entered into between the owner and the proposed tenant.

Procedurally, the homeowners association adopts a policy that requires all owners who lease their separate interest to incorporate into their lease, an addendum that has been prepared by the homeowners association. The addendum contains terms that are designed to protect the homeowners association and which must be agreed to by both the landlord and the proposed tenant(s) in order to obtain the association’s consent to the proposed lease. When the policy to require the addendum is adopted, it is important to confirm that the terms of the addendum are consistent with any applicable state laws concerning the leasing of separate interests and the association’s governing documents. Generally, reasonable restrictions that are not prohibited by applicable laws, are not discriminatory, and are uniformly applied will be upheld in court challenges. When the owner provides the proposed lease agreement to the prospective tenant, he/she/it also provides a copy of the association’s lease addendum along with a copy of the association’s governing documents that the tenant is responsible for complying with under the terms of the lease addendum. The lease addendum makes the homeowners association a party to the terms contained in the addendum so as to confer enforcement rights against both the owner/landlord and the tenant on the homeowners association. After execution of the lease and the lease addendum by the owner/landlord and the proposed tenant, the documents are then provided to the homeowners association for approval and execution of the lease addendum.

The lease addendum will typically contain provisions which include terms such as the following:

• The proposed lease must be for the entire separate interest of the owner;
• The tenant does not have the right to assign his or her interest in the lease to another person;
• The tenant does not have the right to sublease any portion of the separate interest;
• The lease be for a minimum of one year (this may vary in jurisdictions where seasonal rentals are permitted);
• The tenant specifically agrees to comply with the association’s governing documents and to be subject to the association’s disciplinary procedures for violations;
• The owner of the separate interest being leased assigns the rents to be paid under the terms of the lease to the association in the event the owner is delinquent in the payment of amounts owed to the association;
• The tenant agrees to pay a delinquent owner’s assessments directly to the association upon demand by the association.

The lease addendum is an effective way to hold both the homeowner and his/her/its tenant accountable to the homeowners association since they are both parties to the agreement (the terms agreed to in the addendum) with the association. By utilizing the addendum, if the owner does not pay sums that are owed to the association for dues and assessments, the association may make demand on the tenant for the payment of the rent owed under the terms of the lease with the owner, directly to the association. Additionally, if a tenant does not comply with the homeowners association’s rules, the association can take action against both the owner of the separate interest and the tenant. Such action might include the imposition of fines, internal dispute resolution, and the filing of appropriate court actions, including eviction proceedings.

If your association has experienced problems involving issues with tenants under leases with homeowners or with owners not paying their dues and assessments when they have tenants who are paying them rent, a properly drafted and enforced lease addendum could facilitate a resolution of those problems. A sample of a lease addendum may be accessed via the below link. Associations that elect to implement a policy that mandates the use of a lease addendum should confirm that the proposed policy and the terms in the addendum that they desire to implement are permissible under the terms of their association’s governing documents and applicable state and federal laws that must be complied with.

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