Leasing Restriction Brouhaha in HOAs   2 comments

There have always been difficulties swirling around having leasing restrictions in homeowners associations. Now there are some new wrinkles for Georgia homeowners associations to watch.

Unfolding right now, Walker v. Charter Club on the River Home Owners Association, Inc., Superior Court of Gwinnett County Case No. 08-A-08345-10 (Order filed March 26, 2009) brings into question the enforceability of some existing leasing restrictions, but not all.

The case turns on a novel interpretation of O.C.G.A. Section 44-5-60(d)(4). O.C.G.A. Section 44-5-60 contains the infamous 20 year limitation on covenants, which often provides problems for owners, especially in neighborhoods where the folks involved in development did not realize their covenants would terminate, by law, after twenty years. There are a lot of strange quirks to the application of this law, not the least of which are the later changes to the statute that allow for some degree of renewal of the covenants does not have retroactive application . . . but the details of those quirks are a subject for another day.

In the subdivision where this case arose, the association adopted a leasing restriction that prohibited leasing except when grandfathered (applicable only to existing leases) or when the owner was granted a hardship permit. Owners of a lot (the Walkers) had been leasing their home for two years already at the time of the amendment. When they replaced the tenant that existed at the time of the leasing amendment, the association took action to enforce the near-absolute restriction on leasing.

The narrow concept on which the Walker case is not whether there was a hardship for which the Walkers should have been granted an exception, or how the grandfather clause should have worked, or even if the amendment was adopted properly. It was instead whether O.C.G.A. Section 44-5-60(d)(4) could be construed to prevent the creation of a “greater restriction” on the owner’s use of their property, despite following the amendment provisions contained in the declaration of covenants.

The judge ruled that indeed, the creation of this restriction was a greater restriction on the owner’s use of the property under the terms of the statute and, therefore, the leasing amendment could not be applied against an owner who did not consent to it.

What is interesting about this case is the questions it raises about the enforceability of leasing restrictions and other restriction changes adopted by amendment. The analysis and ruling are limited to this specific fact pattern and do not provide a magic bullet for overturning all leasing restrictions.

However, the ruling may open the door to arguments using O.C.G.A. Section 44-5-60(d)(4) to overturn other types of amendments that seek to change (and expand) the covenants currently in place in a subdivision. It will be interesting to watch this issue unfold over time, but in the short term it is an issue for associations to be aware of when deciding to adopt changes to create leasing restrictions or other covenants that are “greater” than what already exists.

Of course, given the detail and specificity of the arguments made, it is best to contact an attorney with questions and concerns about adopting amendments, especially leasing restrictions, or disputing their validity.

By: Amy H. Bray, a partner in our Commercial Real Estate department.

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 Amy H. Bray is a Georgia attorney, focusing her practice in community association and real estate law matters. 

 Her firm, Andersen, Tate & Carr, P.C., works with all manner of clients in business and personal matters, providing “big firm” sophistication with suburban law firm attention and service.

Website: www.atclawfirm.com

Blog: www.andersentatecarr.wordpress.com

 Copyright © 2009 & 2010, Amy H. Bray & Andersen, Tate & Carr, P.C.


2 responses to “Leasing Restriction Brouhaha in HOAs

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  1. Does the law only apply to homeowner associations who enact covenants or does it also apply to a developer (declarent) of the property?

    Have there been any other adjudications in Georgia?

    What is considered a mpore “restrictive” covenant?

  2. It sounds like you have a specific situation that you are trying to resolve and I think that it would be best for you to hire a Georgia-licensed attorney with experience with this aspect of the law to sit down and go through your concerns with you. There are too many nuances to go into on a bulletin board and I would hate for you to have only a limited view of the situation or your options to reach your goals.

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