Who Sets the Condo’s Percentage of Rental Units?

J.H. from New Haven County writes:

Dear Mister Condo,

Supposedly, the percentage of renters in a Connecticut condo association has been changed to allow up to 50% of the units to be rented. If this is correct, where can I find a copy of the law, and who sponsored it? The more renters allowed will increase our insurance costs, change the demographics of the community and discourage most people from buying units in the complex.

Mister Condo replies:

J.H., I am not aware of any law in our state that allows up to 50% of units in any condo association to be rented. Rental restrictions or rental caps are usually outlined in the condominium’s governing documents, if at all. Many associations refer to FHA guidelines (set by the federal government, not the states) so they can maintain or obtain FHA qualification for mortgages to be obtained by unit owners. If associations allow more rentals than the FHA guidelines call for, it becomes unlikely that unit owners will be able to get mortgages within the association as the association as a whole becomes ineligible in the eyes of the FHA, and, therefore, those banks that offer FHA-backed mortgages. All that being said, you need to look at your governance documents to see what, if anything, they say about limiting the percentage of rental units. If the documents are silent on the subject (many are), you might like to see what restrictions may have been placed on the units over the years. Keep in mind that the entire body of unit owners needs to vote on such restrictions. I agree with your assessment of what happens when communities become dominated with rentals However, there are many community associations where investors have purchased a majority of units with the only intention is to rent them out and eventually sell the units at a profit. If you live in such an association, rental restrictions would be hard to implement. Good luck!

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