Tennis courts, event spaces and private swimming pools are practically standard issue when it comes to suburban homeowners associations and condominium communities. While the residents who enjoy these amenities as part of their ownership generally use them solo or in the company of friends and family, some associations occasionally make their facilities available to rent for private events, such as a wedding reception or a work meeting. Renting out a clubhouse or other community amenity can be a useful source of revenue for HOAs looking to make some extra money, but it also raises issues of access and liability.
Coverage is Crucial
Whether a community cashes in—or cashes out [see sidebar]—by renting out its amenities or other facilities for a fee largely depends on the size of the association, the types of amenities involved, and how those amenities are defined and operated. When condo developers promote boat basins or an in-house spa as homeowner perks, those facilities are generally operated by an outside company completely independent of the homeowners’ association itself, and thus not at a board's disposal as revenue generating entities.
By contrast, something like a clubhouse or community room is a standard amenity for most HOAs, and associations usually have full control of these areas and may exercise options when it comes to how they're used. For the most part, HOAs tend to maintain these amenities for resident use only. Bernie Gitlin, president of Massachusetts-based Global Insurance Network explains why associations may opt out of renting their common facilities.
"I have seen some communities rent out to the general public,” he says, “but this could get a condo association into the rental hall business, which opens up a lot of other issues," like serving alcohol on the premises, for example, and the liability considerations that raises. Gitlin stresses that it's vital to consult with your insurance carrier before letting any outside people use your HOA's facilities for any purpose.
For any community considering renting their clubhouse or other amenities, legal professionals stress the importance of having an attorney review the association's governing documents to make sure renting is even allowed, and also making certain that the proper insurance is in place before any rental agreements are made. An HOA's insurance company will routinely supply coverage for the association's fitness center, pools and function spaces, but sometimes, when parties, classes or other events are held in a common area, outside vendors take on the responsibility, with their own insurance, licensing or permits. For example, Gitlin cites a community where yoga classes were offered in the clubhouse, "And the instructor had her own insurance that covered her classes wherever they were held.”