Idaho Land Law

A Blog Discussing Current Issues of Land Use, Real Estate, and Construction Law in the State of Idaho.

Filtering by Tag: Homeowners Associations

Oh no… The Idaho Supreme Court may have killed Airbnb in most neighborhoods

@depositphotos_11884489_

@depositphotos_11884489_

With the growing popularity of short-term rental sites such as Airbnb and VRBO it was inevitable that we would see a court case on whether or not a homeowners’ association (“HOA”) could prohibit the short-term rental of real property.  I knew this would eventually be decided due to the numerous calls we receive from HOA boards and members concerning rental units.  Whether these HOA rental concerns are fair or unfair is a question for another article, but regardless it is safe to say that HOA boards and members have real concerns about renters.

For years, the question in Idaho has been whether or not an HOA could prohibit the rental of real property?  We now know, at least for short-term rentals, the answer is… Yes.

In Virgil Adams v. Kimberly One Townhouse Owner’s Association, Inc., the Idaho Supreme Court upheld an Ada County District Court’s decision that an HOA could prohibit the rental of property for periods of less than six months.  The Kimberly One case concerns a property owner, Virgil Adams, who had been renting his subdivision unit to short-term renters as a vacation property.  The Kimberly One HOA had objections to such use and in response amended its conditions, covenants and restrictions (“CCRs”) to prohibit short-term rentals.  Mr. Adams filed suit alleging that such amendment was an unreasonable restriction on the use of his property and that the amendment was not in keeping with the original CCRs.

The Idaho Supreme Court examined the District Court’s ruling and held that because the original CCRs clearly provided for their amendment, that the HOA had the right to amend the CCRs and prohibit short-term rentals.  The Court found this despite the fact that the original CCRs allowed for leasing or renting a subdivision property. The Court basically examined this issue as a freedom to contract argument and held Mr. Adams to a sort of caveat emptor standard in regards to what could possibly be restricted in HOA subdivisions.

So what are the practical implications of this case?  The obvious implication is that an HOA can restrict short-term rentals. This of course could have a dramatic impact on property owners earning income and paying debt service by using Airbnb or other online sites such as VRBO.  The other thing we have learned is that in the future a court may uphold a complete restriction on rentals in HOA controlled subdivisions.  We do not know if the Court would uphold such a restriction but given this holding, individuals looking to purchase investment rental property should know this is a distinct possibility.   

One final thought on this case.  The Court did say that, “There is doubtless a point when a party has changed his or her position in reliance upon the covenants in effect to a degree that enforcement of an amendment would be precluded.”  We do not know where this “point” lies but a potential purchaser of investment rental property could request a written statement from the current HOA board approving the property as a rental.  This document could later be offered as evidence of reliance on the CCRs and potentially used to defeat an amendment restricting rentals.  Just a thought and there are probably other methods to document this reliance in hopes that a Court would negate an amendment restricting long-term rentals.  

New Prohibited Conduct by Homeowners’ Associations

Laws change.  It’s that simple.  Recent changes to Idaho law concerning homeowners’ associations (“HOA”) and the impact such law may have on an HOA’s ability to levy fines for violations of its CCRs is the subject of our latest blog post.

As you may be aware, Governor Otter recently signed a new law that prohibits certain actions by HOAs.  The new law (I.C. § 55-115) prohibits the imposition of a fine by an HOA on its members unless such authority is clearly stated within the subdivision’s CCRs.  The new law becomes effective July 1, 2014. 

An excerpt of the new law states:

(2) No fine may be imposed for a violation of the covenants and restrictions pursuant to the rules or regulations of the homeowner's association unless the authority to impose a fine is clearly set forth in the covenants and restrictions and:

(a) A majority vote by the board shall be required prior to imposing any fine on a member for a violation of any covenants and restrictions pursuant to the rules and regulations of the homeowner's association.

(b) Written notice by personal service or certified mail of the meeting during which such vote is to be taken shall be made to the member at least thirty (30) days prior to the meeting.

(c) In the event the member begins resolving the violation prior to the meeting, no fine shall be imposed so long as the member continues to address the violation in good faith until fully resolved.

(d) No portion of any fine may be used to increase the remuneration of any board member or agent of the board.

Why is understanding this new law important for developers and HOAs? 

In short, one of the key tools for maintaining the character of a neighborhood and preserving property values is the power of an HOA to levy fines against property owners who violate the subdivision’s CCRs. Without authority to levy fines, an HOA does not have the proper tools to address violations of its CCRs and must turn to the courts to protect the property values of its members.  This can be time consuming and costly for HOA boards and members.

Given this new legislation, all developers and HOAs should review their CCRs to confirm that specific language empowering the HOA to impose fines on property owners for CCR violations is included.  If such authority is not clearly spelled out in the CCRs, then the developer or HOA should amend the CCRs to provide for the imposition of fines. In addition, HOA boards should adopt policies and procedures to make certain they are complying with new law’s requirements for notice and service to violating members.   


Subscribe to The Blog - Idaho Land Law by Email