Don’t Forget About the HOA When Buying a Short-Term Rental Property

If you're considering investing in an Airbnb short-term rental property, you should contemplate a variety of factors to ensure your investment is successful. One important consideration that is often overlooked is the role of Homeowners' Associations (HOAs) and Condominium Owners' Associations (COAs) in regulating short-term rentals. 

HOAs and COAs have the power to enforce rules and regulations that may impact your ability to rent out your property through Airbnb. Whether you're a seasoned real estate investor or a first-time buyer, understanding the role of HOAs and COAs in short-term rentals is essential for making informed and profitable investment decisions. 

What is an HOA or COA?

A Homeowners' Association (HOA) is a non-profit organization that manages and governs a residential community. HOAs are typically made up of homeowners within the community and are responsible for maintaining common areas, enforcing community rules and regulations, and managing the association's finances.

Similarly, a Condominium Owners' Association (COA) is responsible for managing and maintaining common areas within a condominium complex, such as elevators, lobbies, and swimming pools, as well as enforcing community rules and regulations.

Both HOAs and COAs are funded through membership dues paid by homeowners within the community, and the associations are typically governed by a board of directors elected by the membership. The board is responsible for making decisions on behalf of the association, including setting rules and regulations, enforcing these rules, and managing the association's expenses.

HOA and COA Covenants, Conditions, and Restrictions

Most HOAs and COAs have Covenants, Conditions, and Restrictions (CC&Rs) that set out the rules and guidelines that homeowners must follow within the community. These rules and guidelines typically cover a wide range of topics, including property use, maintenance, and modifications, as well as behavior and conduct within the community.

CC&Rs can limit a homeowner's ability to use their property in non-residential ways, such as renting the property out on Airbnb. In fact, it’s quite common for HOAs and COAs to prohibit rentals that last fewer than 30 days.

Violating the CC&Rs can result in penalties or fines, which can be enforced by the HOA or COA. These penalties are not something you should ignore when considering a potential rental property purchase. In extreme cases, homeowners may face legal action, such as a property lien or foreclosure, for violating the rules.

That’s why it’s crucial to carefully review the CC&Rs before purchasing a property within a managed community, particularly if you plan to use the property for non-residential purposes by listing it on Airbnb. 

By understanding the rules and regulations that apply within the community, you can ensure that you comply with the CC&Rs and can avoid potential conflicts with the HOA or COA. If a community does not allow short-term rentals, you can avoid making an investment that ultimately won’t pay off by investigating the rules ahead of time.

In addition to HOA and COA concerns, there are various other legal issues you should consider before purchasing a property to use as a short-term rental. For instance, a growing number of jurisdictions are passing laws restricting Airbnb operations and imposing new legal compliance requirements. For this reason, we suggest discussing the situation with a knowledgeable real estate lawyer before purchasing any investment properties you intend to list as an Airbnb.