Delaware HOA Rental Bans Need an 80 Percent Vote

Delaware splits the question into two tracks, and which track your association is on decides everything. A restriction written into the recorded declaration runs through 25 Del. C. § 81-217. A restriction the board adopts by itself runs through § 81-320, and that route is far narrower.

On the declaration track, § 81-217(a) sets the baseline: the declaration, including plats and plans, may be amended only by vote or agreement of owners of units holding at least 67 percent of the votes in the association, unless the declaration itself specifies a different percentage for all amendments or for specific subjects. Subsection (f) then raises the bar for the category a rental ban falls into. An amendment that may "prohibit or materially restrict the permitted uses of or behavior in a unit or the number or other qualifications of persons who may occupy units" requires at least 80 percent of the association's votes, or any larger percentage the declaration specifies. A prohibition on leasing, a cap on the share of units that may be rented, and a minimum lease term all restrict a permitted use of a unit, so 80 percent is the operative number in a Delaware community formed under DUCIOA.

The grandfathering language sits in the same subsection and is short: the amendment "must provide reasonable protection for a use or occupancy permitted at the time the amendment was adopted." Delaware does not define reasonable protection, does not set a minimum grandfather period, and does not say whether the protection runs with the unit or ends when the current owner sells. That means the shape of the protection is drafted into the amendment itself and then tested against the statutory standard if an owner sues. An amendment that offers existing landlords nothing, or that terminates their exemption on a date so near that it is protection in name only, is the amendment most exposed under this clause.

Timing and recording matter as much as the vote. Section 81-217(c) makes an amendment effective only upon recordation and requires it to be recorded in every county in which any portion of the common interest community is located. Delaware has just three counties, New Castle, Kent and Sussex, so a community straddling a county line has two recordings to make. Section 81-217(b) then closes the window: no action to challenge the validity of an amendment adopted under the section may be brought more than 1 year after the amendment is recorded. An owner who believes the association never reached 80 percent has twelve months from recording, not from the day the association starts enforcing.

The board-rule track is the one most associations actually try, and Delaware constrains it tightly. Section 81-320(d) provides that unless otherwise permitted by the declaration or the chapter, an association may only adopt rules affecting the use of or behavior in units that may be used for residential purposes for four listed purposes. The only one touching leasing is paragraph (d)(4), which allows rules that "[r]estrict the leasing of residential units to the extent those rules are reasonably designed to meet underwriting requirements of institutional lenders who regularly lend money secured by first mortgages on units in common interest communities or regularly purchase those mortgages." That ties a Delaware board's rental rule to something objective and external, the owner-occupancy ratios secondary-market and mortgage insurers apply to condominium and planned community lending. A cap adopted because the board prefers owner-occupants, with no lender requirement behind it, is outside paragraph (d)(4). Note the opening qualifier: a declaration that expressly grants the board broader authority over leasing changes the analysis, which is why the recorded declaration is the first document to read.

Process applies on the rule track too. Section 81-320(a) requires the executive board, before adopting or substantially amending any rule, to notify all unit owners of its intention to adopt the proposed rule and of a date on which the board will convene a meeting to receive comments. Section 81-320(e) requires that all rules be reasonable, and § 81-320(f) requires the board to keep a complete statement of all rules current for reference by unit owners' tenants.

Where Delaware is unusually demanding is on the owner who does rent. Section 81-320(g) obliges the unit owner to obtain the current rules from the executive board and deliver or otherwise make them available to each tenant at the time the lease is executed, or when the tenancy begins if there is no written lease, and to pass along additions and revisions as the board adopts and notices them. Section 81-320(h) binds the tenant to the noticed rules and requires the owner to take all lawful action against a tenant who materially violates them. Section 81-320(i) goes further: by entering into a lease, the owner irrevocably appoints the executive board as attorney-in-fact coupled with an interest to enforce the noticed rules against that tenant if the owner fails to act within a reasonable time after written demand, and the enforcement action may include a summary action for possession at law or a petition for injunctive relief in equity. The tenant has no defense based on lack of contractual privity with the board.

Finally, check the age of the community. Section 81-119 lists the DUCIOA sections that apply to common interest communities created before the September 30, 2009 effective date fixed by § 81-116(b). It includes only § 81-217(i) from the amendment section, and it omits § 81-320 entirely. An older Delaware community therefore amends its declaration by whatever procedure its own instruments prescribe, with no statutory 80 percent floor and no statutory grandfathering clause, though § 81-121 lets it amend its instruments to achieve any result DUCIOA permits. Sections 81-118 and 81-120 pull further communities out: a planned community or preexisting cooperative of 20 units or fewer, or one whose average annual residential common expense liability stays under the adjusted $500 ceiling, is subject only to §§ 81-105, 81-106 and 81-107.

Delaware gives the association ordinary DUCIOA enforcement against an owner who leases in breach of a valid restriction. Under § 81-302(a)(11) the association may levy reasonable fines for violations of the declaration, bylaws and rules, but only after notice and an opportunity to be heard, and it may suspend privileges or services only for non-payment of assessments, never the owner's vote. Section 81-316(a) then gives the association a statutory lien on the unit for fines imposed against the owner and provides that fines, late charges and interest under § 81-302(a)(10), (11) and (12), plus court costs and reasonable attorneys' fees incurred in collection, are enforceable in the same manner as unpaid assessments, with interest at the lesser of 18 percent per year or the highest rate permitted by law unless the declaration sets another rate.

The sharper remedy is aimed past the owner at the tenant. Section 81-320(i) makes the executive board the owner's attorney-in-fact to enforce noticed rules against a tenant in material violation once the owner has failed to act within a reasonable time after written demand, and lets the board bring a summary action for possession or seek an injunction directly. An owner who ignores a board demand letter can find the association litigating against their tenant in their name.

The owner's own remedy is § 81-417(a): any person or class of persons adversely affected by a failure to comply with the chapter, the declaration or the bylaws has a claim for appropriate relief, and the court in an appropriate case may award court costs and reasonable attorneys' fees. That is the vehicle for arguing that an amendment fell short of 80 percent, offered no reasonable protection for an existing rental, or that a board rule has no institutional lender underwriting requirement behind it. Bring it inside the one-year window in § 81-217(b) if the target is a recorded amendment. Section 81-417(b) allows the parties to agree to binding or nonbinding alternative dispute resolution, but a binding agreement must be in writing signed by the parties.