57-8a-209. Rental restrictions

 

Note that subsections (1) through (5) do not apply to an association that is formed before May 12, 2009, unless, on or after May 12, 2015, the association adopts a rental restriction or prohibition, or amends an existing rental restriction or prohibition. See subsection (6) for more detail.

Legislation affecting this Section:  House Bill 82 (2021).  Effective October 1, 2021, subsection (10) and (11) shall read:

(10) Notwithstanding Subsection (1)(a), an association may not restrict or prohibit the rental of an internal accessory dwelling unit, as defined in Section 10-9a-530, constructed within a lot owner's residential lot, if the internal accessory dwelling unit complies with all applicable:
      (a) land use ordinances;
      (b) building codes;
      (c) health codes; and
      (d) fire codes.

(11) The provisions of Subsections (8) through (10) apply to an association regardless of when the association is created.

(1) (a) Subject to Subsections (1)(b), (5), and (6), an association may:
            (i) create restrictions on the number and termfn1 of rentalsfn2 in an association; or
            (ii) prohibit rentals in the association.
      (b) An association that creates a rental restriction or prohibition in accordance with Subsection (1)(a) shall create the rental restriction or prohibition in a recorded declaration of covenants, conditions, and restrictions, or by amending the recorded declaration of covenants, conditions, and restrictions.fn3

(2) If an association prohibits or imposes restrictions on the number and term of rentals, the restrictions shall include:
      (a) a provision that requires the association to exempt from the rental restrictions the following lot owner and the lot owner's lot:
            (i) a lot owner in the military for the period of the lot owner's deployment;
            (ii) a lot occupied by a lot owner's parent, child, or sibling;
            (iii) a lot owner whose employer has relocated the lot owner for two years or less;
            (iv) a lot owned by an entity that is occupied by an individual who:
                  (A) has voting rights under the entity's organizing documents; and
                  (B) has a 25% or greater share of ownership, control, and right to profits and losses of the entity; or
            (v) a lot owned by a trust or other entity created for estate planning purposes if the trust or other estate planning entity was created for:
                  (A) the estate of a current resident of the lot; or
                  (B) the parent, child, or sibling of the current resident of the lot;
     (b) a provision that allows a lot owner who has a rental in the association before the time the rental restriction described in Subsection (1)(a) is recorded with the county recorder of the county in which the association is located to continue renting until:
            (i) the lot owner occupies the lot;
            (ii) an officer, owner, member, trustee, beneficiary, director, or person holding a similar position of ownership or control of an entity or trust that holds an ownership interest in the lot, occupies the lot; or
            (iii) the lot is transferred; and
     (c) a requirement that the association create, by rule or resolution, procedures to:
            (i) determine and track the number of rentals and lots in the association subject to the provisions described in Subsections (2)(a) and (b); and
            (ii) ensure consistent administration and enforcement of the rental restrictions.

(3) For purposes of Subsection (2)(b)(iii), a transfer occurs when one or more of the following occur:
      (a) the conveyance, sale, or other transfer of a lot by deed;
      (b) the granting of a life estate in the lot; or
      (c) if the lot is owned by a limited liability company, corporation, partnership, or other business entity, the sale or transfer of more than 75% of the business entity's share, stock, membership interests, or partnership interests in a 12-month period.

(4) This section does not limit or affect residency age requirements for an association that complies with the requirements of the Housing for Older Persons Act, 42 U.S.C. Sec. 3607.

(5) A declaration of covenants, conditions, and restrictions or amendments to the declaration of covenants, conditions, and restrictions recorded prior to the transfer of the first lot from the initial declarant may prohibit or restrict rentals without providing for the exceptions, provisions, and procedures required under Subsection (2)(a).

(6)(a) Subsections (1) through (5) do not apply to:
            (i) an association that contains a time period unit as defined in Section 57-8-3;
            (ii) any other form of timeshare interest as defined in Section 57-19-2; or
            (iii) subject to Subsection (6)(b), an association that is formed before May 12, 2009, unless, on or after May 12, 2015, the association: 
                  (A) adopts a rental restriction or prohibition; or
                  (B) amends an existing rental restriction or prohibition.
      (b) An association that adopts a rental restriction or amends an existing rental restriction or prohibition before May 9, 2017, is not required to include the exemption described in Subsection (2)(a)(iv).

(7) Notwithstanding this section, an association may restrict or prohibit rentals without an exception described in Subsection (2) if:
      (a) the restriction or prohibition receives unanimous approval by all lot owners; and
      (b) when the restriction or prohibition requires an amendment to the association's recorded declaration of covenants, conditions, and restrictions, the association fulfills all other requirements for amending the recorded declaration of covenants, conditions, and restrictions described in the association's governing documents.

(8) Except as provided in Subsection (9), an association may not require a lot owner who owns a rental lot to:
      (a) obtain the association's approval of a prospective renter;
      (b) give the association:
            (i) a copy of a rental application;
            (ii) a copy of a renter's or prospective renter's credit information or credit report;
            (iii) a copy of a renter's or prospective renter's background check; or
            (iv) documentation to verify the renter's age; or
      (c) pay an additional assessment, fine, or fee because the lot is a rental lot.

(9) (a) A lot owner who owns a rental lot shall give an association the documents described in Subsection (8)(b) if the lot owner is required to provide the documents by court order or as part of discovery under the Utah Rules of Civil Procedure.
      (b) If an association's declaration of covenants, conditions, and restrictions lawfully prohibits or restricts occupancy of the lots by a certain class of individuals,fn4 the association may require a lot owner who owns a rental lot to give the association the information described in Subsection (8)(b), if:
            (i) the information helps the association determine whether the renter's occupancy of the lot complies with the association's declaration of covenants, conditions, and restrictions; and
            (ii) the association uses the information to determine whether the renter's occupancy of the lot complies with the association's declaration of covenants, conditions, and restrictions.

(10) The provisions of Subsections (8) and (9) apply to an association regardless of when the association is created.


Enacted 2009, ch. 178.  Amended: 2014, ch. 397, eff. May 13, 2014;  2015, ch.'s 22 and 258, eff. May 12, 2015;  2017, ch. 131, eff. May 9, 2017;  2018, ch. 395, eff. May 8, 2018; 2021, ch. 102, eff. October 1, 2021.


FN 1.   It is important to note that Subsections (1) and (2) of this statute are not nearly as broad as they may appear to be if the two important qualifying words, "number" and "term," are ignored.  Only restrictions on the "number and term" of rentals, and prohibitions of rentals, are dealt with in those subsections.

FN 2.  Contrast the definition of "rentals" with the definition of "lease" in Section 57-8a-102 "Definitions".  The definition of "lease" is not applicable or relevant in this Section 57-8a-209, only "rentals" are (as defined) (but see footnote 3 as to the use of the term "lease" in Section 57-8a-218).

FN 3.  Despite Subsection (1)'s requirement that a restriction on the number or term of rentals or a prohibition of rentals be in a declaration, a separate statute authorizes an association to require a minimum lease term in a rule, as opposed to in the recorded declaration.  ("Unless contrary to a declaration, a rule may require a minimum lease term."  Section 57-8a-218(8)).  The defined term "lease" is used in Section 218, as opposed to the more broadly-defined term "rental" used in this Section 209.  The reason for the distinction between the two terms, and the apparent contradiction between Sections 209 and 218, is not clear on its face. 

Thus, Section 209 must be broken down to determine the effect of this distinction and apparent contradiction.  Section 209 applies when an association restricts the term of “rentals,” that is, when an association restricts the term of: (1) lots that are not owned by an entity or trust and are occupied by an individual while the lot owner is not occupying the lot as the lot owner's primary residence; or (2) occupied lots owned by entities or trusts, regardless of who occupies the lots.  (See definition of "rental").

The word "term" means (in relevant part):

2 a: a limited or definite extent of time
especially : the time for which something lasts : DURATION, TENURE
// term of office
// lost money in the short term
b : the whole period for which an estate is granted
also : the estate or interest held by one for a term.

(Merriam-webster.com/dictionary/term).

The Act appears to contradict itself, on one hand requiring a rental term restriction to be in recorded CC&Rs with mandated exceptions, and one the other hand authorizing a minimum lease term in the rules without exceptions.  The contradiction appears to exist despite the use of the differently-defined terms "lease" and "rental" because a "lease" will inherently always be a "rental" (although not vice-versa), thus to require a minimum lease term is to restrict the term of certain rentals (essentially, those rentals where rent is paid), which should trigger Section 209’s requirement that it be in the recorded CC&Rs and be subject to required exceptions.

Accordingly, the only logical interpretation and result is that when an association restricts the length of time that a lot may be: (1) occupied but not by the owner, if the lot is not owned by an entity, regardless of whether the owner receives rent, or (2) occupied and owned by an entity, regardless of whether the owner receives rent, the association must do so in the recorded CC&Rs and must grant exceptions.  But, when an association requires a minimum length of time that a lot may be rented in the typical sense of the word, that is, occupied but not by the owner and for which the owner receives rent, the association can do so in the rules (or presumably in the recorded CC&Rs) and without any exceptions.

As a collateral matter, a person might argue that the use of the word “term” includes the plural “terms,” (as in “an association may create restrictions on the terms of rentals,” rather than “on the term of rentals”) so that “term” actually means “provisions that determine the nature and scope of an agreement” (such as a lease), which is the definition of “terms” and is a very different definition than that of “term.”

The Utah Code states that, unless the construction would be inconsistent with the manifest intent of the Legislature or repugnant to the context of the statute, the singular includes the plural, and the plural includes the singular. Utah Code Section 68-3-12(1)(a) and (b).  But, “terms” is a completely different word and has a completely different definition than “term.” Because the law of statutory construction requires that we assume each term is used deliberately and advisedly by the Legislature, it would be both inconsistent with the manifest intent of the Legislature and repugnant to the context of the statute to attribute an entirely different meaning to a word chosen and used by the Legislature.  Clearly the singular “term” does not include the plural “terms” for the purposes of Section 209.

FN 4.  For instance, a declaration that restricts occupancy of lots by people under 55 in a "55 & Older" community under the Housing for Older Persons Act.


General Comments

See also Subsections 57-8a-218(1), (2) and (8) for provisions regarding restrictions on rentals and leases, as well as Subsection 57-8a-212(1) ("An initial declaration recorded on or after May 10, 2011 shall contain: . . . (i) any restriction on the alienation of a lot, including a restriction on leasing").


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Questions and Answers   

kaayo
# Abandonment / selective enforcement of rental restrictions?kaayo 2020-06-12 13:42
A hypothetical case where an HOA has the typical rental restriction where a new owner must occupy his lot for 12 months before renting.
An investor has bought, never occupied his lot, yet has rented (let's say for a few years), and the HOA has failed to enforce the rental restriction with the daily fine or other measures.

1. CAN the HOA begin enforcing now with that owner, after years of non-enforcement?
2. MUST the HOA begin enforcing now with that owner, even after years of non-enforcement?
3. If the HOA does not begin enforcing with that owner, can they still enforce on future investors, who buy a different lot? (Or would that be considered selective enforcement?)
Curtis G. Kimble, esq.
# RE: Abandonment / selective enforcement of rental restrictions?Curtis G. Kimble, esq. 2020-06-12 18:25
I must preface my comments with the caution that this particular topic (selective enforcement and similar issues) is very fact dependent. That means what's right in one situation may be wrong in another and vice versa. So, I advise against trying to apply general information and advice to a specific situation without the aid of a qualified attorney.

1. As a general matter, yes, unless the association has taken actions that would prevent it from doing so, such as if the HOA had sent a letter to the owner indicating that it would refrain from enforcing (see Index, estoppel (https://counselourhoa.com/index/e/estoppel). Or, if it would be arbitrary and capricious to do so. An association is obligated to treat members fairly and impartially. It cannot act arbitrarily or on an unreasonable whim (without good reasons—capriciously). This means that if a board decides to take an action or decides not to take an action, under a specific set of circumstances, then the association should generally take, or not take, similar action in the future in the same manner under the same set of circumstances, or else it may be acting arbitrarily and capriciously. But the association is not obligated to take, or not take, similar action in the future if the facts or circumstances are different or if the association has good reason. See also, Index, enforcement, subheading "Precedent," and Index, defenses to enforcement.

2. The HOA is not necessarily required to begin enforcing now with that owner. But, if I were on the board, I would review the reasons for the nonenforcement and if anything has changed, I would be sure the board documented why enforcement isn't occurring now. As provided in Section 57-8a-213, a board may use its "reasonable judgment" to determine how and whether to enforce. Particularly, if after fair review and acting in good faith and without conflict of interest, the board determines that under the particular circumstances it is not in the association's best interests to pursue enforcement based on some reasonable criteria. Note that 57-8a-213(2) specifically states that after such a review and decision not to enforce, "the association is not prevented from later taking enforcement action."

3. The very next subsection of 57-8a-213 provides that a board may not be arbitrary, capricious, or act against public policy in taking or not taking enforcement action. This means in order to enforce the restriction against others, the board should enforce, or have a reason not to enforce, against the first owner. The board should be consistent and fair. Every situation has unique facts and circumstances so that it's possible a board may be able to enforce in different ways and to different levels, again as long as the board is consistent and fair.

Overall, the reasons for prior nonenforcement are important. Ideally, the board should have a documented rationale for each non-enforcement decision. Making an informed decision that enforcement is not appropriate in a particular situation, and documenting the basis for the decision, will go a long way and usually even defeat a selective enforcement argument.

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