Can Condo Buyers Freely Work in, Sell, and Rent Their Condos?

A condo for sale? That’s an opportunity for a buyer to acquire a deed, start building equity…and maybe even attain financial freedom. Some first-timer buyers who want a foothold on the ownership ladder jump on a condo listing for precisely that reason.

To some, condo deeds represent long-term homes and investments. To others, condos are perfect for downsizing. In any case, questions arise for the condo shopper. Questions like: Can I use the condo itself to earn income?

Here, we break down this and related condo queries.

What’s the Deal With Condos and Restrictions?

A condo deed holder owns the inside of the unit. There’s reasonable leeway for the deed holder to do ordinary things like interior painting, appliance replacements, and minor renovations. Bigger things need to be signed off by the homeowners’ association (HOA) through its volunteer board.

The stewards of the condo property, then, are the associations. They ensure that unit owners adhere to the governing documents, including the HOA’s Declaration of Covenants, Conditions, and Restrictions (CC&Rs). Under state law, a condo developer files a declaration, which typically includes these restrictions. CC&Rs amount to a binding contract with the deed holder. They might say doors have to be a uniform shade of yellow, or that you can’t leave personal items on the patio, and so forth.

The board may issue fines for units out of compliance. Unpaid fines may be “lienable” — meaning the association can record a lien on a unit’s title. The HOA would then have a claim on its value, to the extent of recovering the unpaid funds.

All this is part of what a buyer signs up for. In return for everyone’s consent to a common set of binding guidelines, the community keeps a certain look and feel, and property values stay healthy. That’s the general idea, anyway. Know that a unit’s deed is only part of the story. Look up the subdivision covenants and deed restrictions. They’ll be on record with the county deeds recorder’s office.

I’m an Entrepreneur. Any Problem If I’m Running a Business From My Condo?

Some condo properties bar unit owners from running home businesses. These tend to be older communities. Their intent was to bar businesses that adversely impacted the community by drawing extra traffic and noise. Back in the day many condos were established, no one had heard of e-commerce.

So the answer is: maybe so. Before signing the purchase agreement, review the property’s governing documents. Look for the “use” provisions, like this:

No commercial use. No residential unit or other area of the development shall be used for business purposes, including storage, sales, vending, or other commercial functions. Home offices with no impact on the community are exempt from this prohibition.

That’s just enough to give you the idea. Your property’s documents could have all kinds of instructions for working unit owners. And sometimes there will be ambiguous words, like “vending” in the example above. Call the management office if anything is confusing. Ask for a written clarification, to avert an unwelcome surprise after your purchase.

That doesn’t mean buyers need to take everything the management office says at face value. Be on the lookout for provisions that clash with state and local laws. For instance, in California, a licensed childcare business is allowed, regardless of an association’s bar against home-based businesses.

HOAs Can Be Super Restrictive. Could They Ban Home Offices, Too?

A home office usually isn’t a nuisance to other unit owners. And it usually won’t put the association at risk of lawsuits.

But some associations’ governing documents prohibit any professional work — whether that work is running a business, or simply working for a company from home. Despite any such limiting language, working from home has become a new norm, at least since 2020.

If you have a home office that draws no traffic, will anyone notice — or would they care if they knew? Maybe you’re a tutor, and you’re creating flashcards at home. Technically, that’s a violation, subject to fines. But it wouldn’t make sense for the board members to go sniffing it out. HOAs are, instead, concerned about things that cost money or create liability.

The pandemic fundamentally disrupted business operations, and made lasting changes to our working lives. Aware of this, many condo associations are revising the “use” provisions in governing documents, updating them to fit our work-from-home era.

So, If the Restriction Is Absurd or Old-Fashioned, Unit Owners Don’t Have to Follow It?

If the restriction appears in the CC&Rs or bylaws, it does bind unit owners. But boards and management personnel must act reasonably and in the best interest of the community as a whole — meaning they do have some discretion. A board might not bother to enforce unnecessary limits. But if a community lets Person A do something, it has to extend that same leeway on a consistent basis.

If some of the rules are outdated, those who want them formally modernized may wish to serve on the board to help the community get up to speed. Changes to the property’s governing documents will ultimately need to be voted in by the community of unit owners. The ability of all unit owners to vote on a restriction helps ensure that the property is being managed reasonably.

Some condo properties’ bylaws prohibit business signage. Don’t condo owners have Constitutional rights? Yes, but a condo unit’s deed states that title is transferred subject to covenants. Thus, by the owners’ implicit consent, associations limit activities in ways the government couldn’t.

Once I Hold the Deed, Can I Sell, Share, or Rent Out a Condo?

Many condo associations impose “reasonable” limits on rentals and home-sharing. Remember, the association must take the whole community into account. Keeping traffic and disruptions to a minimum can, of course, be a reasonable exercise of the condo board’s authority.

Some associations might state that only a certain percentage of the units may be rentals. Some place time limits on rentals. The condo association might even be permitted to vet buyers and renters. That means condo shoppers themselves should “vet” the association before making an offer on a unit. Note that an association can’t establish rules and limitations that offend local, state, or federal laws.

What if a restriction offends a law such as the Fair Housing Act? Learn more about discriminatory deed restrictions.

So, to get back to the question, ask the association. Check the condo’s declaration and bylaws — and also study the state Condominium Act. Look up the local ordinances, too. Know the provisions that pertain to your own goals and plans. If you see potential tension, you might opt to look at other properties — or adjust your business plans. For example, you might decide to use a registered agent instead of your condo unit as your official business address.

Can I Get Unreasonable HOA Restrictions Deleted?

With minor issues, a condo board can decide to change its rules at a board meeting. But if the problem is in the governing documents — the condo property’s bylaws or CC&Rs — then the entire property would need to vote any changes into the language. And then the new language must be filed with the county’s recorder of deeds.

The board would typically consult with its condo law expert to review potential new language. Some states place further bureaucratic requirements on condo properties that set out to modify their rules and policies.

Concerns? Need to know if a condo’s rules and restrictions are valid? Consult a lawyer, admitted to practice in your state, who’s worked on condo issues.

Making a Condo Part of Your Business Profile? Know the Challenges.

A condo has specific traits that present challenges as an investment. There’s an extra element of risk, as the value of the deed relies on the owners, collectively. If one unit owner goes into default or neglects their condo, that impacts neighboring units’ property values.

And any condo unit can be physically impacted by activities of another owner who shares a wall, floor, or ceiling. Yes, condo properties do have shared walls, and even ordinary noises, vibrations and smells can penetrate walls. The togetherness of it all could cause distractions for the home-based business owner. And because of the noise and traffic restrictions, a condo unit isn’t optimal for on-site conferences or events.

Don’t forget, too, that a unit owner’s monthly costs can and do go up. How high could the HOA fees and assessments can go if some unexpected maintenance need crops up? A lot depends on how the board plans for, and deals with, insurance, maintenance, and upgrades.

On the other side of the coin…

Considering a Condo? It Just Might Suit Your Business Goals.

Condos tend to be less expensive than freestanding homes. This can make them easier to buy and sell.

For a small business or work-from-home situation, a condo has still more to offer. Streamlined costs. No need to handle the exterior maintenance.

But with a condo property, there will be limits to how you can put your unit to use. Generally, people who buy into the property’s deed restrictions know what they’re agreeing to. Be sure you do, too.

Supporting References

David McMillin for Bankrate.com: What Is a Condo? (Pros Versus Cons) (Jul. 20, 2022).

Deeds.com: Can a Homeowner Get Around a Deed Restriction? (Jul. 19, 2021).

Deeds.com: What Are Deed Restrictions?

And as linked.