Leasing Restrictions – Can Your Condominium Association Impose Them?

February 27th, 2021 | Community Association Law Blog

By Eric F. Frizzell.

For various reasons, condominium association boards sometimes want to impose restrictions or limitations on the leasing of units, such as requiring the owner to use a form lease rider or limiting the total number of units that can be leased in the community at any one time. But before a board enacts a resolution implementing such measures, it should confirm with the association’s attorney that it possesses the power to do so. Here’s why. The New Jersey Condominium Act states that “the master deed shall set forth, or contain exhibits setting forth … restrictions or limitations upon the use, occupancy, transfer, leasing or other disposition of any unit… .” Therefore, unless an association’s master deed authorizes its board to implement the desired restriction or limitation, the board’s resolution may be legally invalid and unenforceable, and could result in legal action against the association.

In addition, New Jersey courts have issued various decisions striking down board action that violated the rights of investor owners, such as regulations that imposed an excessive rental review fee, increased the minimal rental period, and discriminated against such owners.

In Thanasoulis v. Winston Towers 200 Association, 110 N.J. 650 (1988), the New Jersey Supreme Court ruled that a regulation adopted by a condominium association’s board that charged non-resident unit owners a higher monthly parking fee than resident owners was legally unenforceable. One of the numerous grounds for the Court’s decision was that that the regulation constituted a “change in a unit” that could not be implemented under the Condominium Act without the affected unit owner’s consent. The Court noted that although the Condominium Act did not define the phrase “change in a unit”, the Court assumed “that the legislative intent was that a unit owner should retain essentially the same property rights originally deeded to him for as long as he owns his unit, unless he affirmatively consents to their being altered.”

In another case, In the Matter of 560 Ocean Club, 133 B.R. 310 (D.N.J. 1991), an investor owner of units in the Ocean Club Condominium challenged the legality of a regulation enacted by the association’s board that required leases to be for a minimum period of 90 days during the summer months and 30 days in the winter months. The court struck down the regulation, stating that the board’s action in curtailing short-term rentals without the consent of the affected unit owner effectively confiscated a portion of the property interest acquired by the owner when it purchased its units, and was invalid as a “change” in the owner’s units, in contravention of the Condominium Act. The court also found that even though the master deed authorized the board to approve or disapprove leases, that power did not allow the board to limit the length of rentals.

So if your association is considering imposing leasing restrictions, proceed carefully to assure your board has the power to do so.

As always, please contact us if you have any questions about this topic.

This bulletin is for informational purposes only and does not constitute legal advice.