Even if a community has a valid reason to restrict short-term rentals, it still needs legal and/or contractual authority to support the restriction. Typically, the authority comes from an HOA's declaration, from state law, or a combination of the two. A declaration is a contract among property owners in a community. The owners jointly agree to accept certain obligations and restrictions on how properties in the community can be used. If everyone complies, the community as a whole will benefit—or at least that is the idea.
Read MoreRental restrictions undeniably limit the free-use of property. Nonetheless, courts throughout the country have consistently upheld such restrictions when rationally calculated to promote the development’s greater good. Even blanket rental prohibitions have been reluctantly upheld in some states, as long as the association has a legitimate purpose for the restriction. “Legitimate purposes” justifying rental restrictions typically involve maintenance of property values and promotion of community standards. Along with serving a legitimate purpose, to be enforceable a rental restriction must be a “reasonable” means of accomplishing the stated goal. Rental restrictions come in several forms, two of the most popular of which are caps and lease restrictions.
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