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Homeowners association could prohibit owners from renting their homes

A homeowners association in a development could prohibit homeowners from leasing their homes, says the Indiana Supreme Court. In this case the homeowners association sued an owner for renting her house, which violated the terms of her deed. (The homeowner had broken her hip and moved to a nursing home, and wanted to rent her house to help pay her nursing home costs.)

The homeowner argued that the “no-lease” provision in the deed was illegal. She said it violated the federal fair housing laws because it discriminated against racial minorities, who were statistically more likely than whites to rent a home rather than buy one. But the court said that even if this were true, the “no-lease” rule was still valid.

There was no evidence that the association adopted the rule to keep out minorities, the court said. Further, even if the rule did have a disproportionate effect on minorities, it was justified because it helped maintain property values. (The court noted that people who live in their homes are more likely than tenants to keep them up and make improvements, and property values increase when other, nearby homes are well-maintained.)

In this case, the homeowner couldn’t come up with any alternative to the no-lease rule that would have the same effect of increasing property values.

In an unrelated case – but one that also shows the power of homeowners associations – an association succeeded in stopping the residents of a home from broadcasting their sexual activities on the Internet for a fee.

The association’s covenants said that all homes had to be used as residences, and prohibited conducting a business from a home. Although the porn “actors” were residents of the property, broadcasting their activities for a fee amounted to running a business from the home, a Florida appeals court decided.

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