Amendment to Establish Minimum Owner Occupancy
Summary
If the owner occupancy rate of the building drops below 51%, it is impossible for buyers to obtain conventional (fixed-rate, ARM, interest-only), long-term (e.g. 30 years) government-backed mortgages. Likewise, it is impossible for all owners to refinance their existing loans with conventional financing methods. This makes it impossible for owners to sell, and because owners could not obtain financing for special assessments needed for major repairs, could cause a downward spiral in building maintenance and a reduction in property values for all owners.
This amendment prohibits any owner from taking any action which will cause the owner occupancy rate to drop below 51%, and requires the Association to take legal action against such an owner if s/he violates the Amendment by leasing her/his Apartment.
This amendment carefully grandfathers in existing landlords and tenants.
Finally, the amendment provides a mechanism that will automatically raise the owner occupancy rate if units that are currently rented become owner occupied (e.g. if Lisa Holley and Randy Olesen sold their units to their existing tenants, the owner occupancy rate for the building would rise from the current 58.83% to 73.53%. In this case, the minimum owner occupancy rate would rise from 51% to 65%).
Text of the Amendment
1. Minimum Owner Occupancy. No Apartment owner may, by deliberate action, cause the owner-occupancy rate of the Association to drop or remain below the threshold established in Section Two (2) of this amendment, unless the Apartment owner has vacated his unit while remodeling or actively attempting to sell said unit, or the unit is vacant due to foreclosure.
2. Owner-Occupancy Threshold.
2.1 The minimum owner occupancy rate of the Assocation is 51%.
2.2 The minimum owner occupancy rate shall be permanently raised as the actual owner occupancy rate reaches the following thresholds:
- If at any time owner occupancy rises to 65% or above, the minimum owner occupancy rate shall be permanently increased to 55%.
- If at any time owner occupancy rises to 70% or above, the minimum owner occupancy rate shall be permanently increased to 60%.
- If at any time owner occupancy rises to 75% or above, the minimum owner occupancy rate shall be permanently increased to 65%.
- If at any time owner occupancy rises to 80% or above, the minimum owner occupancy rate shall be permanently increased to 70%.
2.3 If at any time the Federal National Mortgage Association (a.k.a. Fannie Mae) or its successor announces it will raise the minimum occupancy rate required for it to purchase and securitize mortgages, a simple majority vote of the Board of Directors shall suffice to raise the minimum owner occupancy rate of the Association to Fannie Mae's (or its successor's) new rate, provided the Association’s new owner occupancy rates does not take effect prior to the effective date of Fannie Mae’s or its successor’s new rate.
2.4 The Board of Directors must send notice to all Apartment owners documenting the minimum owner occupancy rate any time that an Apartment owner signs a new lease, and at least once per year.
2.5 Amending the Declarations to allow an owner occupancy threshold below 51% shall require a 100% vote of the ownership. Amending the Declarations to reverse an automatic threshold increase or lower the owner occupancy threshold below 60% shall require a 75% vote of the ownership.
3. Remediation.
3.1. Action in case of rental. Within thirty (30) days of an Apartment owner causing the owner-occupancy rate to drop or remain below the threshold established in Section 2 of this Amendment by leasing his unit to a new tenant, the Board of Directors and Officers must initiate legal action against that Apartment owner to invalidate the lease, evict the tenant, recover legal fees, and obtain a court order prohibiting the Apartment owner from entering into new leases until such time as the owner occupancy rate exceeds the threshold. The Associations may not reach an out-of-court settlement if it would result in the owner occupancy rate remaining below Fannie Mae’s or its successor’s minimum owner-occupancy rate. Until such time that the tenant is evicted, the Apartment owner shall pay as a fine each month 100% of rent collected from any and all units in the Association that the Apartment owner is currently leasing, and 100% of monthly HOA dues assessed to any and all units in the Association the Apartment owner owns (on top of normal HOA dues). If the Association lacks sufficient funds to complete legal action against the Apartment owner, the Board of Directors and Officers must levy a special assessment, due immediately, that is sufficient to pay for said legal action.
3.2 Action in case of vacancy. Within sixty (60) days of an Apartment owner causing the owner-occupancy rate to drop below the threshold established in Section 2 of this Amendment by vacating his unit, the Board of Directors and Officers must determine the cause of the vacancy. If the Apartment owner has retained a real estate agent and has listed his apartment for sale using industry standard listing procedures, then the Board of Directors and Officers shall take no action until such time as the Board of Directors and Officers has affirmatively determined that the Apartment owner is not making a good faith effort to sell his unit. If the Apartment owner has left his unit vacant with no intent to sell, that unit shall pay as a fine each month 100% of monthly HOA dues until such time as the unit is sold or returns to owner occupancy. If the Apartment owner has left his unit vacant for remodeling, either prior to sale or with the intent to re-occupy the unit once remodeling is complete, the Board of Directors and Officers shall take no action, provided the remodeling takes less than six (6) months. If the unit is vacant for more than six (6) months for remodeling, the Board of Directors may elect to require the Apartment owner to pay as a fine each month 100% of the Apartment owner's monthly HOA dues until such time as the unit is sold or returns to owner occupancy. If the Apartment owner has left his unit vacant because he has declared his Apartment to be a secondary residence and the owner occupancy rate is below Fannie Mae’s or its successor’s minimum owner-occupancy rate, then that unit shall pay as a fine each month 100% of monthly HOA dues until such time as the unit is sold, the owner occupancy rate is above Fannie Mae’s or its successor’s minimum owner-occupancy rate, or the owner declares his Apartment to be his primary residence.
3.3 Future Consequences. Any Apartment owner that causes the owner occupancy rate to drop below the threshold established in Section 2 of this Amendment by leasing his Apartment is banned from leasing any and all Apartments in the Association that he owns for five years, regardless of owner occupancy rate. Any Apartment owner that causes the owner occupancy rate to drop below the threshold established in Section 2 of this Amendment while delinquent in payment of common expenses and assessments, or who becomes delinquent in payment of common expenses while the owner occupancy rate is below the threshold established in Section 2 of this Amendment, shall be permanently banned from leasing any and all Apartments he owns. Upon sale of any apartment that is banned from leasing under this Section, the contract of sale will require that the new Apartment owner not lease their unit for a period of twelve (12) months from date of purchase if the purchase is made by individuals, and thirty-six (36) months from date of purchase if the purchase is made by a corporation or other similar legal entity.
3.4 Any apartment owner who is banned from leasing his units under Section 3.3 of this amendment shall, if he leases any of his units in the Association, pay as a fine each month 100% of rent collected from any and all units the Apartment owner is currently leasing in the Association, and 100% of monthly HOA dues assessed to any and all units the Apartment owner owns in the Association (on top of normal HOA dues).
3.5 Any fines collected under this section shall not preclude the Association from any other remediation action.
3.6 All fines enumerated in this Amendment shall be governed by Addendum Item 2 to the 20 May 2009 Amendments.
