Many condominium and townhome associations have in recent years adopted restrictions on leasing units governed by the association. Such restrictions range from complete prohibitions against leasing, to limitations on the percentage of units that may be leased at any time, to limitations on the terms of leases–e.g. no leases for terms of less than six months. While the restrictions tend to be clear, their application to some living situations is less clear. For example, if an owner has a roommate, does that violate a prohibition against leasing? If a corporation owns a unit, can an employee of the corporate owner occupy the unit without violating a prohibition against rentals?
The answers to such questions are not clear. Most associations seem to ignore the roommate situation. However, if the owner moves out leaving a roommate behind as the only occupant, we have seen some associations take action to try to compel the owner to terminate the “lease” to the roommate. Significant facts in such a dispute include whether the roommate pays for occupancy of the unit and whether the owner is away temporarily or permanently. Also, the behavior of the roommate can influence the association’s determination to evict the roommate. If the roommate is considerate of neighbors and takes good care of the unit, the association’s inclination to evict becomes reduced.
For a corporate owner, the most important factor is whether the occupant of the unit is paying rent. Often, the occupant is an officer or employee of the corporate owner, and such occupant usually does not pay rent directly. That is, occupancy of the unit is often part of the compensation package of the officer or employee. This is a very grey area, and most associations would not take action, at least as long as the occupant is respectful of neighbors.
Another common use for a corporate-owned unit is as a hospitality venue. Corporate owners sometimes use their residential condominium units to entertain guests, usually at dinners or cocktail parties. This may violate a “residential use only” covenant that is common in condominium declarations. In such a dispute, the corporate owner will argue that dining and consumption of cocktails are common activities conducted in a residential dwelling, and, consequently, do not violate any residential use requirements. The association, on the other hand, will focus on the purpose of the function, which is usually some business purpose rather than a purely social activity. While reported cases are few, my sense is that the corporate owner has the edge in this dispute, because dining and drinking seem to be essentially residential activities.
