Many associations unfortunately have to deal with owners who have leased their units to tenants that are disruptive or do not comply with the association’’ s governing documents. Although the association may be able to fine the owner, what is the association’s recourse against the tenant? Additionally, what if the owner fails to pay his assessments while the tenant is paying the owner rent? The best way to regulate the owners and their tenants before they become a nuisance to the community is to pass a leasing amendment.
A leasing amendment requires tenants to comply with the association’’ s governing documents and holds them accountable for their actions as an owner would be held. A leasing amendment provides authority for the association to act as an attorney-in-fact to evict a nuisance tenant if the owner fails to evict the tenant. Another important function of the leasing amendment is that it includes an assignment of rent provision. If an owner fails to pay his assessments and becomes delinquent, the assignment of rent permits the association to collect the rent directly from the tenant without becoming the tenant’’ s landlord. The owner remains responsible for all the duties of a landlord, even though he does not collect the rent. However, once the owner is no longer delinquent, the owner resumes collecting the rent and any money that the Association collected in excess of the debt is returned to the owner.
Due to the economic downturn, the number of delinquent units is devastating to many associations. These associations pursue collections against a delinquent owner who may have a tenant in his or her unit. Such associations can try to obtain a quitclaim deed or an assignment of rent agreement directly with the delinquent owner. However, the owner at that point is unlikely to agree to assign the rent or provide a quitclaim deed because the owner is making money through the tenant. The association may also seek a court-appointed rent receiver or receiver in aid of execution, which incurs more attorneys’’ fees. After taking actions to collect on a judgment but finding no sufficient assets, the association may even file a motion to permit sale of real property. Regardless of which option the association pursues, the end result is the same: collect rent from a tenant to recoup the association’’ s expenses and debt and collect its ongoing maintenance fees. However, if the association had a leasing amendment, such collection efforts would be unnecessary when the delinquent owner has a tenant in his unit. The leasing amendment’’ s rental assignment enables the association to collect rent without having to go to court, which saves the association from collection costs.
A leasing amendment essentially pays for itself over time with the rent that is collected from tenants due to its assignment of rent provision. On one hand, this amendment saves the association collection costs from pursuing a delinquent owner who has a tenant in his unit. On the other hand, this same amendment also provides the association with a remedy against a nuisance tenant. Therefore, you may want to consider adopting a leasing amendment if your association does not already have one.