For the second consecutive month, rental property owner Bill Carter returned to a Hot Springs Village Board Meeting to lodge a complaint about a recently enacted policy. Carter’s wife, Janette Carter, and rental property owner Lisbett Christensen also expressed their opinions. This policy concerns the registration of rental properties, which requires owners of village rentals to acquire a permit for a fee of $50 per year per property or $4.16 a month. Because this was the second month in a row that Mr. Carter voiced objection to this policy at a Board meeting, I decided to delve deeper into the subject.
Why a $50 fee to register rental properties?
This permit fee helps cover staff administrative costs. In an interview with Ginger George, the head of the program, she emphasized, “’The $50 is an administration fee. The development of this program has taken manpower and time, including the development of a database. This program was not enacted as a way for the POA to generate money. The fee is only to cover set up and ongoing administrative costs. No money is being made.’”
The Rental Policy, in effect January 1, 2024, was instituted to streamline communications between rental owners and POA staff, including Community Support Officers (formerly Compliance), George, and the Village Police Department, which are sometimes needed to assist with problems at rental properties. March 31, 2024, is the deadline to register rental properties.
In the past, the POA and Police/Fire authorities have sometimes found it difficult to contact rental owners when the tenants/guests violated POA rules and regulations or were involved with illegal activity. The problem arises when the property owner cannot be contacted. According to POA Governing Documents, property owners are responsible for their guests’ behavior, including landlords, who are responsible for their tenants. Not having valid contact information for rental owners leaves the POA somewhat in a quandary, making it cumbersome and time-consuming to enforce accountability when bad behavior occurs.
Bill Carter’s argument
During the February 21, 2024, Board Meeting, Carter said the new rental policy affects him because: “Between my family and me, we have fourteen properties in the Village, so we have a lot at stake, and we are very interested in how this all takes place.” In a March 21 email, he made a clarification: “Cheryl—my relatives own nine homes, but one is a second home and not a rental. There are only eight rental homes.”
At the March 20, 2024, Board Meeting, Bill Carter cited Supreme Court case law between Vera Lee Angel and other property owners in her subdivision. Carter said Angel desired to rent his/her home, but the other homeowners objected. The Bill of Assurance did not restrict the ability to rent property. This case was eventually resolved at the Supreme Court level in favor of Angel.
Carter said, “In our Declarations and Protective Covenants, there is no restriction against renting property out. However, what the POA is doing, the Directors are doing, is placing a restriction on that, in that I have a right now to rent my property out without any restriction. The POA is now requiring me to get permission from the POA through a permit to do just that – do what I already have a right to do and pay a fee for that. That is absolutely a restriction and is not in our Declarations or our Protective Covenants.”
Next, Carter argued that the POA does not have the authority to impose assessments on property owners without a community vote.
Carter stated, “Regarding the fee, there is a 2012 [legal] case that directly addresses this. You might be aware of it. It is Hayes versus Hot Springs Village. In that case, the Directors of Hot Springs Village placed a fee on a subset of property owners, that being commercial property owners and the courts found they were wrong in doing that – that they did not have the legal right. They actually called that fee an assessment and that they did not have the right to pass an assessment like that. They ruled against them, using the reasonableness clause, saying it was arbitrary and capricious.”
Carter continued, “The cost of that to Hot Springs Village was significant. They had to pay back all those property owners about $85,000 in fees they collected. They had to pay their own expense of defending that and they had to pay the attorney for the opposition case about $26,000 in attorney’s fees.”
“My request to the POA and the Directors is to take a serious look at this and meet with an attorney.”
Carter said that he didn’t want the POA to be involved in a lawsuit.
POA Board and Staff response to Carter’s argument
General Manager Kelly Hale appreciated Mr. Carter’s comments and explained that they have been working with a lawyer on this topic. “We’ve got all the documentation. I spent a year and a half working with the State of Arkansas and all the city leaders on where we are.”
Hale continued, “It is not an assessment. It is a permit fee, just like it is required for a garage sale. I am sorry your 14 homes will be involved in this, and it will impact you, that whole $700. You are the one who stated that.”
Hale said he was willing to meet with Carter to discuss this subject, and Carter said he appreciated it.
Board Member Larry Siener said, “I have to admit, Kelly, that you are being a little kinder than I would be.”
Hale responded, “I don’t have time. Right now, we’re experiencing a natural disaster [aftermath of a catastrophic tornado], and we are burning up this [time]. This is a permitting fee, like a garage sale.”
Lisbett Christensen’s argument and POA response
Lisbett Christensen explained she was a fairly new property owner, but she also owned a rental property and she is concerned the permit fee will go up yearly. She stated that keeping track of rentals is healthy, but she objects to the $50 fee.
She is unaware of rental restrictions in the Governing Documents and said, “So I do object to having to pay to be able to do what I am supposedly allowed to do.” Although the POA is coping with a natural disaster, she felt the rental registration policy should be addressed before the March 31 registration deadline.
Christensen stated, “I don’t have any problems with my property. In fact, I am not allowed to have parties, per the agreement with the platforms I use. And I am very careful about those things. I am very careful to maintain a healthy atmosphere where I am, and I communicate with my neighbors, so I don’t see that I am any kind of menace that needs to be policed or, you know. But knowing how many there are is a healthy thing.”
Board Director Bob McCleod explained, “Knowing how many there are isn’t the problem. It is who to call when there is a problem. And that needs registration. It is a $50-a-year registration.”
“This really impacts you renting your house or your property?” asked McLeod.
McCleod continued, “It doesn’t [seem like it is an impact] to me. It is like you guys are complaining about a very small issue. $50 a year so that our police force and POA know who to call when there is a problem – if there is a problem.”
“Ninety percent of all the rentals are not a problem. But when we have something where there is a party, or there are people parking in the street or whatever, we need to know who to call. That is what this registration process is for,” stated McLeod
Board Director Larry Siener responded, “Thank you for your comments. It is appreciated. Let’s draw a little bit of a box around this. We did not wake up three months ago and say, ‘Gee, what can we do to irritate people today? And let’s stick a fee on [rental property owners] for no good reason.
“As Kelly noted earlier, this process has been going on now for the better part of two years and we didn’t do anything for about a year and a half of that two-year period of time because there were several entities, several cities in the State of Arkansas, that put into place some very interesting rules and restrictions and guidance regarding short-term rentals. They went to court. They lost in several of those court cases. So we sat back and watched for a year and a half to see what the case law in Arkansas would permit.
“Everything that we have put in here is based on the opinion that we received from our lawyers. And yes, we do talk to lawyers because we don’t do things like this until we talk to a lawyer because we don’t want to get sued. We believe everything put into place is case law in the State of Arkansas, and it has already been adjudicated in various legal opinions around the State of Arkansas. There are clearly folks out there who don’t agree with that. You know what? You can agree or disagree. If you disagree enough, you’ll get a lawyer, and you will litigate, and you’ll find out what the case law is in Arkansas. That is all I can tell you.”
Christensen asked, ” So what about the Governing Documents?”
Siener answered, “According to our lawyers, this is a permitting fee. This is not an assessment. The case that Mr. Carter stated from about 2012 was an assessment change. That is why we lost that case. We have talked to our lawyers. On the advice and counsel of our lawyers, we believe that the program we have put into place is legal within the laws of the State of Arkansas and legal within our Covenants. if we did not believe that, we would not have put that into place. Period. Dot.”
Janette Carter’s argument and POA response
Janette Carter said she is a village realtor and praised the realtors for helping in the tornado effort. She knew Kelly Hale thanked a lot of people, but “I do want to give a little shout-out because a lot of the realtors this weekend went and helped people get debris out of their house and move things, and we have been really trying to find rentals for these people that have lost their houses. I’ve still got one guy I’m trying to find a place for him to move to because his home was damaged. So shout out to the realtors for helping.”
Ms Carter said she would like to see the formation of a committee involving the village realtors before this all gets implemented.
Kelly Hale said that they had committees involving the realtors two years ago. “Clara Nicolosi was part of that, and Cindy Erickson was part of that. They were involved in those meetings at that time.”
Janette, “But whatever happened after that?”
Hale explained, “We had meetings with renters and people against it. Here is the other thing: renting out your home is your choice. But there are also about 9,000 other homeowners here who don’t rent their homes out who have an opinion on this as well. Just keep that in mind.”
Why rental registration is important
Carter asked me if there have been many problems with rentals. I had already contacted Police Chief Kristi Bennett. However, I subsequently discussed rental property issues with Community Support Manager Tom Benfield. (See section below the police chief’s commentary.)
Police Chief Kristi Bennett explains why rental registration is important
Police Chief Kristi Bennett said police and fire department response to rental property accounts for some of their calls. “The problem is when we handle any violation, whether it is noise, property, or trash, on a law enforcement level, we’re going to deal with the situation immediately. If someone calls 911 because the neighbors are loud, we go over there and ask them to turn the noise down. Oftentimes, they will say, ‘Well, we are renting here. We didn’t know.'”
“If someone breaks the law, we don’t care who lives [at] or owns the property. The problem comes when we have to respond to the same house multiple times because the property owner is not doing their due diligence to ensure that the person they are renting to understands the rules. And it takes some time for us to get ahold of that owner. “
“As we grow, this is a great concern for me on the law enforcement end if we have situations. For example, one of the big fires happened at a rental property, and It took approximately a week before the owner found out their house was gone.”
“There are so many good things about the Rental Property Registration Program. We need many things when we respond to different calls and situations where [contacting] a homeowner is necessary. For example, there was a structural fire, and the townhouse was burnt down completely. We didn’t have the homeowner’s information.”
“When those situations occur, it is helpful to have the property owner involved because most people who own property want to be good stewards of the residence and the neighborhood, and they want to know if there is a problem. “I’ve had a property owner reach out to me and say, ‘Hey, I just want you to know that I own this house. If you have issues with it, please call me first.’ Well, that is hard for me to do. I don’t have a database or anything for my dispatchers to readily access if there is a situation with the house, and we need to get ahold of the property owner.”
“One of the problems with rentals is that the tenants have not been advised of the rules. We have issues with fireworks and fires in backyards in firepits when a burn ban is in effect.”
“When we don’t have readily available owners’ information, it could take some time to determine the property owner.”
“With this system, we will have access to the Rental Property Registration information. It also gives property owners more of a buy-in to what’s happening with their rentals. It is just good for everybody, all the way around.”
Compliance issues with rental properties
I reached out to Tom Benfield, Community Support Manager.
By email, Benfield said, “Regarding compliance issues on rental properties, we have had many issues with trash pickup and vehicle parking that is obstructing roadways. When this happens, it is often hard to reach the property owner in a timely manner to correct the issue. In most cases, they do have a local property management company, but we have never been informed that it is a rental and locally managed. We must track down the owner, who may live out of state and who may not keep us updated with their current contact information. Having rental registration fixes both of those problems. We now know which properties are rentals and whether we have someone we can contact locally. We will still have problems, but they should be remedied much quicker.”
Carter’s last response on rental property registration
During a March 21 telephone conversation with Bill Carter, he asked, “Why are they doing this? What is the purpose of creating a whole program where you ask people to register and collect a fee? Have there been a lot of incidences with rental properties that they need to put together this program?”
Carter repeated his previous arguments against rental property registration, so I will not state most of them here. The previous arguments can be accessed by clicking here.
Carter said he met with Board Chair Joanie Corry and Board Director Larry Siener, who explained they are doing this because there are a lot of problems with rentals. The biggest problem is when they need to get ahold of the owner. Sometimes they have not been able to get ahold of the owner because they moved out of state or changed phone numbers, or whatever the reason.
Carter said he has no problems with his ten rentals, and his wife manages ten others. He is unaware of anyone having problems with their rentals.
Carter explained, “I don’t own [rental] properties to provide a great service. That would be altruistic and very nice to say. But basically, I own rentals as retirement income. Besides that, they do provide a nice thing in the village.”
Carter said he has a large stake in the village and wants to see well-kept properties. He does not have a problem if the rental registration is done on a volunteer basis.
Carter said that a single-family residence is not a commercial property.
Are rental registrations required elsewhere?
Required rental registration is not unusual.
A quick search revealed that Little Rock also requires rental registration.
Due to the difficulty of contacting the owners of rental properties in Little Rock, the city has enacted a registration program. The City of Little Rock was hindered in its ability to resolve property maintenance violations in a timely manner. Annual registration is required for each residential dwelling unit.
The City of Hot Springs has enacted a policy requiring short-term rental owners to acquire a business license. This is, in effect, a registration of short-term rentals.
The Hot Springs City website says, “The initial application fee and subsequent annual business and occupation tax, per short-term residential rental business address, shall be $50 per bed within any such property or properties to be licensed.”
Bella Vista has also instituted a permit requirement for short-term rentals. The Bella Vista website says, “Effective July 12, 2023, permits from the city will be required to operate a short-term rental (STR) property within the City of Bella Vista. Permits must be renewed annually, and must be posted clearly visible at the location of the STR. STR permits are required by city ordinance, which was approved by City Council members at the July 12, 2023, special meeting.”
Conclusion
In conclusion, I have attempted to present information regarding the objections to rental registration of the three parties who spoke at the Board meeting on March 20, 2024, and the POA’s reasons for registering rental properties. The two law cases cited by Mr. Carter can be accessed at the links below. I could not find a Justia Opinion Summary of the Hayes case; I am not a legal expert, and it is my “guess” that I could not locate the Justia Opinion because the case did not go to trial. Whether my guess is correct, I don’t know. Well, my point was just proven about me not being a legal expert. 🙂 This case did go to trial.
Click here to access HAYES VS HSV POA CV2010-803 Complaint, Answer, and Court Order.
Click here to access the Justia Opinion Summary of Vera Lee Angel Revocable Trust v. O’Bryant (Majority).
Featured image: HSV Board Director Bob McLeod responds to HSV rental property owners.
By Cheryl Dowden
Click here to contact the HSV Gazette.
Click here to join our private Hot Springs Village Property Owners’ Facebook group.
Property rental is a business. Many, if not most, businesses require permits or licenses. It is part of the cost of doing business. The annual fee of $50 seems reasonable to me.
Thanks to the POA for such thorough research and giving clear and concise responses. My experience has been that there are always problems with rental properties — not all of them, but some will crop up sooner or later. I am glad to know the POA is being proactive to advert chaos before issues could get out of hand. I am a previous rental owner and my husband served on the very same condo complex Board of Directors so we are both well versed on this subject.
All, we need to distinguish between pragmatic ideas (“it only costs $50”, it’s good for the community) with the legal issues. So while comparisons to programs created by municipalities within Arkansas are relevant for the pragmatic concepts, they are not for legal ones. Cam is correct in that legal authority for municipalities is different than the authorities expressed in the restrictive covenants governing this POA and Board. This is why the case law is important. The opinion that the HSV Board received from its legal counsel cited the Hutchens v Bella Vista case as offering a guideline for how to implement any kind of rule against rental properties. That case established the reasonableness test. The purpose of that test is to protect the minority from any arbitrary, capricious, or unreasonable action that discriminates against them.
This is why the Hayes v HSV POA is hugely significant and analogous to the recent efforts by this Board. Mr. Siener says that HSV lost that case because it was an assessment, which the Board cannot do. Well, go back and read the pleadings yourself. The POA argued that they had not created an assessment, but instead a charge allowable under the Declaration, Art VIII Sect 3.d. That section gives “the right of the Association to charge reasonable service or use charges, admission and other fees for the use, service and enjoyment of the Common Properties.” Using that section as justification, that HSV Board had established a “commercial service charge” that applied only to commercial property owners. The POA argued that “costs to the POA for security, fire protection, etc. is a proper need for such a user fee and is not the adoption of a different assessment.” Is this not eerily similar to the arguments today about establishing a permitting fee/charge against rental property owners for a service that the POA is providing? Consider what the Court in Hayes found to be fact:
“Article VIII, Section 3(d) does not provide authorization for the Defendant to charge property owners a sum of money based on whether their property is residential or commercial or based on the nature of the use of their property.” The Court further found that “the ‘commercial service charge’ enacted by the Board of Directors is indistinguishable from an assessment and that there was no vote of the property owners authorizing the assessment in question. As such, the actions of the Property Owners’ Association violate the clear terms of the Covenants and Restrictions and are arbitrary, capricious and unreasonable.”
Don’t take my word for it. Read it yourself. https://caseinfo.arcourts.gov/opad/case/26CV-10-803
It seems that the landlords who spoke at the meeting all agree that registering rental properties is a good thing for the village. They just don’t want to pay the fees that covers administrative costs. I guess the landlords want all the property owners to pay for the rental registration program. Mr. Carter with his 9 or 14 rentals probably pulls in a good profit. Fe can raise the rent $5 dollars a month and make $10 dollars extra profit!
The Vera Lee Angel and the Hayes lawsuits do not apply to HSV POA rental registration program. Apples and oranges.
Lastly, I want to commend staff and the board for taking this bold move and trying to protect the village by creating the rental registration program.
I have no objection to the Rentals Registration. However, we should note that Little Rock, Bella Vista and Hot Springs are ALL cities/ municipalities) which is totally irrelevant to HSV, thus those situations can not be used to inform. We are a private community, a corporation and city regulations do not apply.
Thank you for commenting. Of course they are municipalities but those were only listed as examples of these types of programs and to point out the legality of the programs. We have our own programs and rules here and I did not mean to suggest otherwise. We cannot do anything illegal. Thanks, again. – Cheryl