Holland & Knight, Partner
The client’s tale. I have represented a particular 650-unit residential condo since it opened. No issue I’ve dealt with has compared to the problem of unit-owners using their units like hotel rooms, even before Airbnb became a household word. What started as a trickle turned into a flood, particularly during the 2008–2010 recession, when owners could not sell their units. At an explosive annual meeting, the unit-owners were up in arms that their building was now a hotel. A loud group of unit-owners who bought their units for investment were equally outraged that anyone wanted them to stop renting their units when the board attempted to amend the bylaws to give it the ability to deal with the issue. Even those unit-owners who wanted the board to act were strongly opposed to anything that would, as they yelled, “turn the condo into a co-op and reduce the value of [their] units.”
The board needed a strategy to deal with the problem without imposing itself on unit-owners who wanted to lease their units according to the rules. The mandate the board was given was loud and clear: “Do something about the problem of short-term leases, but do not do anything that will reduce the values of our units or impose any restrictions on us” – in other words, do something and do nothing. The board and I had to find a solution to address the bed-and-breakfast issue. We wrote a policy with the following components:
1. No one would be admitted into the building without a written request signed by a unit-owner, called a Permission to Enter (PTE), which contained the name of a specific person.
2. No one would be admitted without a valid photo ID, a copy of which was kept by the concierge, so the occupant could reenter without a problem.
3. If there was no PTE, the unit-owner had to walk the guest from the concierge to the apartment.
4. On entering the building, potential occupants were given a form to complete that was similar to a hotel register; it contained a request for information that seemed normal to the guest but could be used as evidence that the guest was really a short-term subtenant.
5. Significant fines were imposed against unit-owners who violated the policy.
6. To discover all the units being offered for short-term use, the property manager would check various apartment-rental websites and then apply to rent the units in the building.
7. The concierge could not give keys to anyone except with the written approval of the unit-owner.
Within six months, all short-term rentals in the building disappeared. Several unit-owners who had relocated learned that the agents who were supposed to be finding buyers for the units were using them for short-term rentals without the unit-owners’ permission. By the next annual meeting, that issue had disappeared, too. The board was able to solve the problem without amending the bylaws or turning the condo into a co-op.
The lawyer’s take. The unit-owners were right. This was a very serious problem that affected their quality of life and security, but changing the declaration of condo to eliminate the problem would only have had an adverse impact on the value of their units and the way in which the building operated. The board and I had to find a creative solution to the problem without antagonizing the unit-owners who wanted to be protected and those who wanted to be left alone to rent their units.
Although the “do something, do nothing” concept would have seemed to be a nonstarter, it helped us find a solution that would do something to solve the problem and do nothing that would affect values. Naturally, a minority of unit-owners felt that the PTE rules were too intrusive, but those rules proved an effective method of dealing with the problem. In addition, litigation, which some board members felt might be needed, became unnecessary, so we were also able to solve the problem with virtually no expense, although the fines in the first few months certainly helped the board balance its budget.
Case closed. Nearly every problem can be solved with creativity and practical application of rules without changing the basic way in which the building operates.