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It’s the economy, stupid – that decade-old statement could have been written about what apartment and condo associations are facing today. With too many associations trying to deal with record numbers of owner foreclosures, association boards are desperate for a solution. That may mean relaxing standards that in the past were meant to protect property values.

 Most apartment associations have rules that prohibit or limit greatly the ability of owners to rent their units. The strong argument has always been that the unknown variable – the tenant – could be a detriment to the value of the property as many unit owners in the past have been reluctant to live in a mixed-use community. However, with so many empty units and so much financial strain on both apartment associations and homeowners, flexibility is the new buzz word of the industry.

 For starters, new buyers may balk at purchasing a unit with rigid ownership terms. In a stagnant real estate market, smart associations will adopt more flexible rules regarding what unit owners can do with their properties. Allowing long-term rentals and taking part in the tenant vetting process can give associations some control over the rental while giving the unit owners the flexibility necessary to avoid foreclosure.

 Associations should limit how many people can occupy the unit. Also, setting a consistent rental rate and conducting background screenings on all rental applicants can help associations maintain property integrity and ease the concerns of existing owners. Those owners wanting to rent their units should be required to file all leases with the association and pay all association fees and any administration costs.

 If your apartment association is considering allowing rentals, check with your association insurance broker to understand how these changes could affect your coverage. Remember that any change to the association rules should be run past your broker to avoid any gaps in coverage.

 Flickr photo credit:  interpunct