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Some condo associations move to block Super Bowl rentals

Dan Heilman//May 16, 2016//

Some condo associations move to block Super Bowl rentals

Dan Heilman//May 16, 2016//

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Not that anybody’s counting, but the Super Bowl will be played at U.S. Bank Stadium in one year, eight months, two weeks and five days. And while the big game and the events leading up to it will amount to a giant cash grab for various commercial and municipal enterprises, some entities are trying to avoid an end run by members of their own teams.

Several condo associations have forbidden unit owners from soliciting their condos for rent during the buildup to Super Bowl LII. Some have asked owners to take down online notices advertising their units for rent during Super Bowl week, in some cases for thousands of dollars in rent. 5th Avenue Lofts, located in the North Loop area of downtown Minneapolis, sent owners a memo in April threatening a fine of up to $5,000 for condo owners who tried to list their units for lease on such websites as VRBO and Airbnb.

Can the owner of an individual condominium be forbidden from offering it for short-term rental? Attorneys who work with condo associations say yes, under certain circumstances.

“Generally speaking, they have the right to do it,” said Nancy T. Polomis, an attorney with Hellmuth & Johnson in Minneapolis. “But their documents have say so — they can’t just pass an ad hoc rule that says owners can’t rent. It would have to be in their declaration.”

FHA funding at risk

All condo associations have restrictive covenants that spell out what owners can and can’t do. Those covenants exist for the purpose of making the shared space of a condo development as peaceful and safe as possible — and so that the association stays on the right side of the law.

Minnesota’s Common-Interest Ownership Act (chapter 515B of Minnesota statute) doesn’t specifically forbid condo owners from leasing their units. But in 2013, the Federal Housing Administration started requiring all borrowers to sign a HUD form at closing providing that no portion of the housing shall be used for hotel or transient purposes; that generally refers to any rental for less than 30 days.

For some condo associations, the threat of losing FHA funding is enough to put the kibosh on individual units being made available for rent. Some condo associations draw the line at seven days instead of 30, and some say no unit can be occupied by someone other than the owner for any amount of time.

“Minnesota statute sets out the framework for governing, operating and maintaining condominium associations,” said Anthony T. Smith, an attorney with Roeder Smith Jadin in Bloomington. “It generally grants pretty broad power to associations to govern themselves, as long as they don’t conflict with state or federal laws, such as the Fair Housing Act or the Minnesota Human Rights Act.”

A big reason for most prohibitions like the Super Bowl-related ones is the safety and comfort of the condo association members — and the potential for liability if a nonresident staying in a condo gets hurt or hurts someone else.

“If you’re going to rent out your unit in a secure building, you’re going to have to give the renter a key or some way to access the building,” said Polomis. “Once they’re in, they have access to everything in the building.”

“The perception is that people who rent units don’t care for the property in the same way the owner would,” added Smith. “That’s probably heightened when you talk about short-term leases.”

‘Over my dead body’

But if it doesn’t mind jeopardizing future FHA help, a condo association is free to allow owners to lease their units if the association votes to grant them that right. Gretchen S. Schellhas, an attorney with Chestnut Cambronne in Minneapolis, says she knows of one association (which she doesn’t represent) that’s discussing amending their document to undo that restriction.

“There are several people on that board who want to lease their condos,” said Schellhas. “But then you have other board members and residents saying, ‘Over my dead body.’”

The association she mentioned has incurred thousands of dollars in attorney fees trying to resolve the issue — meaning that if their idea fails, all the members have to help pay the lawyers. And if it succeeds, not everyone will share in that revenue, only the members who decide to lease their units.

“It can get tricky, because most condo owners want to get along with their neighbors,” said Schellhas.

Even once the Super Bowl circus has packed up and left town, the issue of leasing condo space might not go away. A dearth of affordable housing, and a slowdown in new condo construction, means that individual owners might increase the pressure to let them lease their units.

“We’re already seeing apartments being removed from the rental pool so they can be leased on Airbnb,” said Schellhas.

Correction: A previous version of this story misspelled the name of the law firm of Roeder Smith Jadin.

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