How Many HOA Units Can Owners Own?
How Many HOA Units Can Owners Own?
With investors emerging as major players in the recovering real estate market, some boards have wondered whether it's wise to let someone own more than one unit in their association.
But is it possible to restrict the number of the HOA's units any single owner can own? What are the pros and cons? Here we address those questions.
Can You Restrict Ownership?
You know the drill. Your first steps on this issue should be to review your state law and your governing documents.
If they're silent on the issue, could you amend your governing documents to include such a restriction? "Probably," says Matthew Zifrony, who advises homeowners and condo associations at Tripp Scott, a Ft. Lauderdale law firm, and who's also served as the president of a 3,000home association. "But that's not really been an issue that's needed my attention, especially with the real estate market being what it's been the last few years. In this economy, people want to not limit owners' ability to sell. If there's a maximum number of units a buyer can own, that'll serve as a limitation."
That may be why Shanne Ho, senior director of property management at Seabreeze Management Co. in Aliso Viejo, Calif., which oversees more than 100 associations, has never seen such a restriction. "I don't think that in the 19 years I've been doing this I've seen restrictions on how many units each owner can own," she explains. "I have seen governing documents say you don't even need to be a member of the association to run for the board, so you don't even need to be a unit owner. Why you'd want to be on a board for an association in which you don't live, in which you don't own a unit, and in which you have no interest at all is beyond me. But we do have governing documents that indicate that."
One HOA Board Seat, Please
OK, a oneunitperowner provision is virtually unheard of, most likely because owners would object to rules that curb their ability to sell their unit. But our experts have seen other provisions that restrict the participation of owners of multiple units.
"Where I've seen issues come up hasn't been so much in how many units people can own but in how many votes they get and board seats they can have," says Zifrony. "Some governing documents say that regardless of the number of units you own, only one family member can serve on the board. So I can't serve as the owner of one unit while my wife also serves as the owner of another unit."
The concern? Too much power concentrated in the hands of a few people. "If a husband and wife own two units and there's a threemember board, they can effectively control the board," says Zifrony.
That's exactly the situation that became a problem for a California association. "I remember some time ago managing a commercial condo association, and it had a board of three," explains Lori Burger, CPM, CCAM, CAM, senior vice president and director of Eugene Burger Management Corp., a Rohnert Park, Calif.based company that manages about 20,000 condo and HOA units; Burger is also the 2013 secretary/treasurer of the Institute of Real Estate Management, a professional organization of property managers. "One couple owned 7 of the 12 units, and both the husband and wife served on the board.
"That was a disaster," adds Burger. "The husband was crazy. The landscaper came to me and told me he'd been fired by the husband because he wouldn't continue to do work at the guy's house for free, which I had no idea about. Those owners wouldn't get off the board, and eventually the association went into courtappointed receivership because there were so many problems. It can be unfortunate if the documents are written to allow more than one family member to serve if they own multiple units, especially if the board is small."
The flip side, however, is that you may lose the help of qualified people owners would be perfectly willing to accept as board members. "In theory, if residents elect people from the same family, it's their choice," says Zifrony. "They'd be saying they don't have a problem with both being on the board. I had one situation where a board couldn't find someone to fill board seats. The wife of a board member volunteered to run, and I had to tell her she couldn't because the documents didn't allow it. In that case, the rule was preventing something the residents would have probably approved and the association needed. So I'm not sure the rule has much of a benefit."