Most, if not all, developers and landlords know the general restrictions imposed by the Fair Housing Act – it is against the law to discriminate based on race, color, national origin, religion, sex, family status, disability, and the presence of children. However, developers should account for other and perhaps more distinct restrictions. Alluding particularly to sale, lease, and use restrictions, developers need to be aware of the nuances, some of which can impact the building’s construction, the owners’ and tenants’ lifestyles, and the association’s fees. Time, effort, and money can be saved from a thorough analysis of what restrictions may impact the development. Here are some strategies that developers use by incorporating sale and lease restrictions to entice buyers and the implications of such strategies.
Age restricted developments (developments under the Housing for Older Persons Act (HOPA), a subsection of the Fair Housing Act, requires that 80% of occupants be at least 55 years old) offer developers a unique opportunity with lower competitive barriers of entry in an expanding market. As the baby boomer generation ages, states like Florida that offer an attractive climate with tax breaks become hotbeds for age restricted developments. Likewise, developers can build more affordably by avoiding certain impact fees, such as school board fees. Developers can also structure the community by owning and operating the amenities so as to receive additional profit streams. Comprehensive and scrupulously drafted restrictions must be in place as a prophylactic measure. Potential pitfalls should be carefully navigated so as to circumvent common issues like death, deed restrictions forcing the sale of the home, and provisions for amendments during changing market conditions.
Developers can also differentiate their products by incorporating certain practical restrictions or limitations into the governing documents such as pet restrictions, smoking restrictions, or leasing restrictions. While some developments attempt to differentiate their products by imposing pet restrictions (such as limiting the size or number of pets that can live in a home), these restrictions must accommodate the requirements of the Americans with Disabilities Act and the Fair Housing Amendments Act of 1988 which prohibit the discrimination of persons with disabilities. Importantly, federal discrimination laws do not differentiate between physical and mental disabilities when it comes to service animals. Developers must also be cognizant of pet restrictions imposed by local governments and those restrictions should be incorporated into the governing documents.
Given the health conscious lifestyles of both millennials and baby boomers, developers are differentiating themselves with “smoke-free” developments, which are permitted by the Florida Clean Indoor Air Act. However, with Florida becoming more lenient towards legalizing marijuana with the enactment of the Compassionate Medical Cannabis Act of 2014 (e.g., the medical marijuana law), the possibility of potential conflicts between a “smoke free” development and medical marijuana is plausible and the governing documents should contain language to give boards the flexibility to deal with this changing area of the law and how it impacts developments that are “smoke free”.
Further, rentership is increasing dramatically causing U.S. homeownership rate to be at its lowest percentage since 1990. Developers can capitalize on this trend by incorporating lenient leasing restrictions into the governing documents, but these lenient restrictions must be counterbalanced with making the project appear to be transient and thus limiting the market for end-users who do not want to live in a “rental” community. Some projects must be transient in nature, such as developers who are constructing buildings in Miami’s urban core under the zoning classification of “lodging units” to take advantage of greater density rights and limited parking requirements. The documents governing these projects must specifically incorporate the necessary zoning and land use restrictions to afford the board the ability to effectively and efficiently control the community.
Sale, lease, and use restrictions go beyond the omnipresent FHA laws and should be interposed as part of the condominium / HOA documents to protect and ensure the developer meets the end goal. Prudent and diligent planning from the inception of the entitlement phase through the completion of a development requires that these potential pitfalls be addressed in the governing documents.