Section 1-A(5) - Leasing Limitations (to suppress purchase by investors)

Country Place is blessed to have a 91% owner-occupancy rate. Even better, of the 9% homes that are not owner-occupied, a significant number are owned by Country Place residents. It is generally agreed that high owner-occupancy rates mean higher property values. Section 1-A(5) provides that upon acquiring an ownership interest, an Owner may not lease the residence until 6 months from the date of closing (or recording, whichever is earlier). This has the effect of discouraging investors who want to buy property for the sole purpose of leasing it. The provision is clear, unambiguous, enforceable, and has an identifiable purpose that is generally supported by the industry (i.e. higher owner-occupancy is better). It is also limited in nature, as such restrictions that limit a property owner's right to convey an interest in their land should be. Nothing prohibits an investor from purchasing a property in Country Place to lease, it just raises the cost of entry. If a deed restriction restraining alienability is going to be implemented, this is the way to do it. All neighbors may not agree with even this limited restraint, but at least they can all agree on what it does and doesn't do.

Section 8, however, gives the Board the power to permit exceptions to the Leasing Restrictions, including this investor limitation. While it may seem like a good idea to allow some fluidity to a leasing ban, there are many arguments as to why allowing the board of directors to determine what facts and circumstances will allow some investors to be exempted from this provision and others not to be is not a good idea. The most obvious reason is that the board will be put in a position of being lobbied by friends and neighbors seeking a hardship exception. Along with the authority to make such a decision comes the pressure of being asked to do it. There are no standards set forth in Section 1-A(8), only examples. How will directors decide who will be entitled to an exception and who will not? How will they compare one investor's needs to another? How will that evaluation vary from board to board? And is that really what our board should be spending its time doing?

Unfortunately a provision like this opens the door to issues like inconsistent enforcement, selective enforcement, and favoritism. Boards are often advised to either state clear, specific, and limited circumstances under which a hardship exception can be granted or eliminate all exceptions to avoid these types of issues.