The Condo Glut & The Rental Market

I have received many phone calls and emails over the last year and more importantly after the real estate bubble popped concerning renting in a condo community. As developers try to finish their final phases of the condo communities they are faced with a surplus of units that either will not move because of lack of buyers or buyers that cannot finance the condo due to the credit crunch. However, there is a large contingent of vulture investors or value investors that usually circle every market collapse who are happy to purchase condo's at discounted prices.

These so-called vulture investors or value investors purchase condo's not as their own personal residence but as an investment. They are more than happy to turn the condo into a rental unit and capitalize on the falling prices of these units.

The problem becomes one where the condo community in which they just purchased has rental restrictions in their community. Many communities have some type of rental restriction in their governing documents, which either limit the percentage of units that can be rented at any given time or list fees or requirements that the renter must comply with while living in the community.

The dilemma for the communities and the board's facing the proposition of enforcing the governing documents and restricting rentals is that the community may already face massive foreclosures in the condo community and there may be large percentages of units already sitting idle starting to create an eye sore in the community with their multiple listing signs, overgrown lawns, and overloaded mailboxes.

I talked to a board member the other day in San Diego county that was facing with and trying to deal with a 35% foreclosure rate in their community. They offered assessment payment plans for their community and have tried working with everyone that they could but unfortunately the loss continues.

To compound the problem the community had a very restrictive rental requirements in their governing documents. So restrictive that many investors that were willing to purchase the idle property only to rent it out balked at purchasing the property because they knew that they would have difficulty with the property management company and the board.

So many communities must make the decision to either allow more rentals within their community or learn to deal with the mounting foreclosures and empty units.

Homeowners Association (HOA) Attorney
Note: The information contained is not legal advice and does not establish an attorney-client relationship. Contact us via email Ryan.McClure.Esq@gmail.com, website: http://www.rpmcclurelaw.com/, or call us at 951.818.0687