Yes, Owners of a Restricted Lot Can Be Fined for THEIR TENANT’S Violations of Covenants!

With the appreciating residential real estate market, rental homes are becoming an increasingly common feature in residential neighborhoods subject to restrictive covenants.  Restrictive covenants will typically have a few main types of provisions that lot owners opt into when purchasing their restricted lots—architectural standards, obligations to pay assessments to a homeowners’ association, provisions outlining the common area/amenities- but also some regulations that relate to conduct of individuals who reside on a lot.  Sometimes the practice of leasing will even be prohibited or limited in the restrictive covenants of a community, or even provide that the HOA can screen prospective tenants.

Unfortunately, residential landlords sometimes do not thoughtfully consider the applicability of these restrictive covenants when preparing a lease agreement for their tenants to sign.  Common lease provisions will regulate the some of the conduct of tenants (such as keeping of pets, smoking inside a dwelling, keeping the grass trimmed), but these lease provisions may not be entirely consistent with the regulations contained in restrictive covenants that relate to the landlord’s lot.  Restrictive covenants can provide some common regulations of conduct that are less commonly addressed in a one-size-fits-all residential lease, including but not limited to:

  • the parking of inoperable vehicles
  • placing signs on a lot
  • keeping of livestock and/or household pets
  • use of common facilities
  • holiday decorations
  • making architectural or landscaping changes
  • maintenance of the lot
  • noise/nuisance prohibitions
  • restrictions on use of a residential property for business purposes

Recently, many common form leases have added provisions to addresses these concerns.  Such terms allow for the drafter to make specific reference to the applicable restrictive covenants (which are publicly recorded with the county register of deeds).  These provisions are helpful, as they “incorporate” the restrictive covenants, and put tenants on notice that there are additional sets of rules that they are agreeing to comply with.  Without such lease clauses, there is a distinct possibility that a tenant could violate the restrictive covenants and the landlord would be powerless to force their tenant to comply with the covenants that apply to the lot.  These tenant violations then could end up triggering the association’s enforcement actions against the owner of the lot due to violations of the owner’s tenant.  This is because the lot owner has the contractual relationship with the association, not the tenant. In communities subject to the Planned Community Act, Chapter 47F of the North Carolina General Statutes, or the Condominium Act, Chapter 47C of the North Carolina General Statutes, the association can directly fine the owner for violations, but cannot directly pursue any recovery from a tenant. For landlords with tenants who frequently violate the rules, the fines can quickly add up.

Landlords need to make the tenant join in on the contractual obligation and also agree to abide by the terms of the governing documents.  That will allow the owner to potentially terminate their lease if a tenant violates the governing documents and subjects the owner to liability for those violations.

There are also steps that both associations and landlord owners can take to avoid tenant violations and resultant fines. Associations can:

  • Clearly define rental policies and rules in the governing documents or rules of the association, if appropriate.
  • To the extent authorized, require that leases allow for termination for violations of the association’s governing documents.
  • Provide owners with access to up to date governing documents and any rules and regulations of the association.
  • Clearly- and repeatedly- communicate any new rules and regulations.
  • Make sure that violation notices are sent to any away address to avoid lack of owner knowledge of violations, and stress the need to communicate with tenants about corrective action. A yearly request for an updated address from all owners as part of any mailing can be helpful here.

To protect themselves, lot owners can and should:

  • Understand the covenants when drafting their leases.
  • Allow lease termination for violations of the governing documents.
  • Include a current copy of the restrictive covenants, rules and regulations, and any amendments as an attachment to the residential lease with the tenant.
  • Clearly define who is responsible for maintenance of any leased property, and make sure that maintenance is performed.
  • Take immediate legal action to correct any violations noted by the association.

HOAs and landlord lot owners have similar interests in ensuring that the restrictive covenants are complied with and ideally should work together in properly laying out a contractual scheme which ensures that compliance.

If you have questions about any community association (HOA or condo) issue, please contact a Law Firm Carolinas attorney at any of our six offices for assistance.