If you are shopping for a rental house to buy, it is important that you know if the house is subject to an HOA and whether the HOA permits leasing. The majority of houses built in Metro Atlanta since the mid 1990s are located in subdivisions that have an HOA. The last thing you need is to buy a house to rent out just to discover that renting is not permitted. In 1994 Georgia adopted the Property Owner’s Association (POA) Act. One of the important aspects of this Act is that, if an HOA decides to become subject to this Act, any of the covenants passed by the HOA are enforceable against ALL of the property owners within the community. This would include any restrictions or limitations of property owners to lease their property. However if the HOA is not subject to the POA Act, then O.C.G.A. 44-5-60 (d)4 is likely to apply. This law basically says that changes in the HOA covenants only apply to those property owners that voted in favor of those covenants. While the listings in the MLS will indicate whether the house is in a community with an HOA, neither the listing agent nor the owner may know whether leasing is permitted and under what circumstances. Often the HOA Board or their management company can tell you incorrectly also. The answer is in the Docs – the HOA covenants as recorded. You can visit www.GSCCCA.org
, create a user name and password, and search the deed records for most of the counties in Georgia including the recorded covenants of the HOA. Often HOAs are not subject to the POA Act when the HOA is first created by the neighborhood’s developer. Once the management of the HOA reverts from the developer to the homeowners, it is common that the homeowners will then file an amendment to the covenants making the HOA subject to the POA Act so that any covenants are applicable to all property owners. So you would need to look for any amendments to the HOA’s covenants in addition to the original documents. Upon examining the HOA covenants, if the HOA is subject to the POA Act, and if there are any restrictions to leasing, you need to understand that the HOA has the power to enforce those restrictions. Depending on how the covenants are drafted, the HOA may have the power to compel your tenant to pay the rent to the HOA or the HOA may evict your tenant if the lease was not properly authorized by the HOA. Do your research before making the purchase. Since these covenants are recorded documents, trying to use the excuse “I didn’t know” later is not likely to help. This is just one more step in performing your due diligence. Invest wisely and profitably. Excalibur Homes is an investment real estate firm who specializes in the management of single-family rental homes. Click here to view our Leasing & Management Services.