If you own a condominium or live in a homeowners’ association, you’re essentially in the residential property management business with your neighbors. What could go wrong?
Derived from compounded Latin, with “con” translating into “together with” and “dominium” meaning “right of ownership” the glitzy real estate term or even the cachet of being a homeowners’ association member quickly loses its luster when owners find out the hard way that their neighbor’s plummeting personal financial condition means they’ll ultimately be stuck with the bill when special assessments come due, for example.
When considering a would-be condo or community association homeowner, or leasing applicant, the trepidation is certainly warranted. Outside of the real estate world, if someone with a bad credit history applies for entry into any given risk pool, under most any other circumstances, that person is either denied or pays a financial penalty for being accepted.
Not so in the realm of state and federal fair housing law, which inherently seeks to mitigate mass homelessness by prohibiting subjective denials of a fundamental roof over one’s head regardless of race, color, national origin, religion, gender, familial status or disability.
As a general rule, if specific applicant approval requirements are not already listed in your association’s governing documents, making up new ones on the fly is a bad idea. For boards still throwing caution to the wind, it’s a crapshoot as to whether the denied applicant will sue or not. Why risk it?
Nevertheless, denials still happen, and boards still arbitrarily attempt to enforce criteria provisions–whether lawfully permitted or not–or to utilize such criteria as a “deterrent” in connection with a purchase or leasing application process.
Importantly, when considering an applicant, boards should review whatever requirements exist within the association’s governing documents collectively, so that no one single factor becomes the denial determinant. In that light, although Florida law is not entirely clear on the subject, an association’s approval or disapproval of a purchase or lease based solely on subjective criteria such as financial wherewithal likely wouldn’t pass judicial muster. Worse, it could lead to a claim of disparate impact, which is when unintentional discrimination occurs resulting from policies, practices or rules that appear to be neutral result in a disproportionate impact on a protected group.
So, requiring a certain credit score, for example, could lead to unintended discriminatory practice or impact, thus opening the association to liability. To ward it off, community associations must be especially careful that their “discretion” in this regard does not run afoul of federal fair housing laws.
Do community association boards have any rights at all as to whom they can approve to join them essentially as co-partners in their community’s property management “business?”
Generally speaking, even if a community association has applied the foresight to ensure its governing documents already require approval of prospective purchasers and/or tenants, condo or homeowners’ boards may only deny applicant approval for the following reasons:
(1) the applicant does not meet an inherent requirement in the constituent condominium documents (i.e., documents properly prohibit pets and applicant states that he/she intends to bring a pet into the community); or
(2) the applicant has previously demonstrated a propensity to violate the rules and regulations for that particular community (i.e., if a tenant within your community has a documented history of violating rules and regulations within the community, then and in such event the Association can probably deny the tenant for a renewal and/or purchase application); and
(3) denial is permissible when the applicant perjures himself/herself, or makes a material misrepresentation, in connection with the application process.
Boards can also amend their association’s Declaration to provide for certain requirements as a basis for approval/disapproval of a proposed purchase or lease, but typically this process does not happen within the time required to close a particular sale.
Regardless of whether they are pre-existing or later amended into the Declaration, requirements for approval must be specifically noted and should be based on detailed criteria so as to not permit arbitrary decisions by a board. The Declaration itself can provide broad authority to consider specific criteria, and the Board endowed with discretion in adopting specific criteria and considerations.
If an applicant has questionable finances, rather than seek to deny his or her application solely on that basis, or on any other single criteria considered independently or inconsistently, a board is better served if it defers to Florida law and avoids the risk associated with a potentially discriminatory denial. Due to the sensitive nature and liability involved with these decisions, associations should always seek the opinion of a community association attorney when determining the scope of the Association’s authority to deny an applicant.
Alessandra Stivelman, partner at Eisinger Law is a Board Certified Specialist in Condominium and Planned Development Law and AV Preeminent® rated. She focuses her practice on community association and real estate law and can be reached at (954) 894-8000 x 304 or firstname.lastname@example.org.
Eisinger Law is a multi-practice Florida law firm focused on community association law, real estate law, developer representation, civil/commercial litigation, insurance law, estate planning and probate. For more information, visit eisingerlaw.com or call 954-894-8000.