Indiana HOA Rental Bans: Allowed, but Only Homestead Owners May Vote for One

Start with what Indiana does not do. There is no statute capping the share of homes an association may bar from leasing, no statutory floor on lease length, no requirement that a rental amendment exempt owners who were already renting when it passed, and no notice period an association must give a sitting landlord before a new restriction bites. An Indiana association that amends its declaration to prohibit leasing outright can enforce that prohibition against an existing landlord unless the amendment itself says otherwise. What the legislature regulated is the vote that produces the restriction.

IC 32-25.5-3-11(d), added through HEA 1210-2026, restricts the electorate. Only members of the homeowners association who use their property as a homestead, as that term is defined in IC 6-1.1-12-37, may cast a vote on a matter regarding a prohibition or restriction of an owner of privately owned residential property from using the property as a rental property, or a prohibition or restriction regarding the use of property as a rental property. The code prints the rule as beginning after the effective date of the subsection; under Indiana's default effective date rule at IC 1-1-3-3(b), a SECTION of an act passed at a regular session takes effect on July 1 next following its enactment unless the SECTION says otherwise.

The homestead definition is doing the heavy lifting and it is stricter than most owners expect. IC 6-1.1-12-37(a)(2) defines a homestead as an individual's principal place of residence located in Indiana that the individual owns, is buying under a recorded contract obligating conveyance on completion, occupies as a tenant stockholder of a cooperative housing corporation under 26 U.S.C. 216, or holds through a qualifying trust under IC 6-1.1-12-17.9, and that consists of a dwelling plus up to one acre of surrounding land. Subdivision (a)(3) defines principal place of residence as the individual's true, fixed, permanent home to which the individual intends to return after an absence. Critically, the definition excludes property owned by a corporation, partnership, limited liability company or other entity. The practical effect at an Indiana association meeting is that a lot held in an LLC, a second home, and an investor's rented out house all carry no vote on the rental question, while the owner occupant next door does.

One carve out protects the builder. IC 32-25.5-3-11(e) says a developer is not subject to subsection (d) while the developer maintains ownership of lots within the association, and defines developer as a person or entity engaged in the business of acquiring land in order to improve it, including subdividing land to build a residential building or structure on a lot, and selling or leasing that building or structure to another person. A developer still holding inventory therefore votes on a rental amendment even though its lots are not homesteads.

The second limit is the amendment threshold itself. IC 32-25.5-3-9(a) requires the governing documents to contain a provision letting owners amend at any time, and caps what the documents may demand: they may not require the consent of more than two-thirds of the owners. The same cap applies to first mortgage holder consent where the documents require it, and a mortgage holder that does not respond to a written request within thirty days is treated as having consented. A declarant may be given a consent right only while it still owns at least one unit and only for seven years after the original governing documents were first recorded. IC 32-25.5-3-9(b) makes the point enforceable by barring the association or the board from enforcing any provision of the governing documents that conflicts with the section. A 1990s declaration requiring 80% or unanimous consent to amend is, in Indiana, capped at two-thirds.

Applicability is the part readers get wrong. Most of IC 32-25.5 reaches only homeowners associations established after June 30, 2009 that may impose mandatory dues, with older associations covered only if their members vote to be governed by the article. IC 32-25.5-1-1(b) carves out a short list of provisions that apply to every Indiana homeowners association regardless, and both of the sections that matter here are on it: subdivision (3) names IC 32-25.5-3-9 and subdivision (5) names IC 32-25.5-3-11. A 1974 subdivision that never opted into the article is still bound by the two-thirds amendment cap and by the homestead only rental vote.

Two neighboring rules shape the same meeting. IC 32-25.5-3-7 stops an association from suspending a member's voting rights for nonpayment of assessments unless the governing documents provide for suspension and the assessments are more than six months delinquent, so a board cannot silence opposition by pointing at a small arrearage. IC 32-25.5-3-10 governs the proxies that usually decide these votes: a proxy is void unless it names and gives the address of the member, names the individual empowered to exercise it, is dated, states the date of the meeting it is given for, carries the member's signature by hand or electronically, and includes an affirmation under the penalties for perjury that the signer has authority to grant it. A proxy may cover the named meeting and any continuation, and may not state an expiration more than one hundred eighty days after it is given.

There is no fine or civil penalty attached to a bad rental vote, so a member who believes an amendment was adopted by ineligible voters challenges its validity rather than reporting it. 5-4-2 caps the civil penalty at five hundred dollars per action; a proxy defect at a rental vote is the one theory in that list that reaches this subject. 5-1-1(b)(8) applies to every Indiana homeowners association. 5-5-10 requires a written notice of claim setting out the nature of the claim with date, time, location and persons involved, the governing document provision at issue, the relief wanted, the respondent's right to request a meeting within ten business days, and the contact for that request.

5-5-11. 5-5-12 to demand mediation or binding arbitration, paying the mediator or arbitrator itself. 5-5-13 permit suit. 5-3-12 for renting in violation of a covenant is expressly not exempt.