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Building has a rental cap. Can you transfer ownership of a rental condo to an LLC and then sell the LLC to maintain a rental slot?

Our HOA and the property management company have been severely dropping the ball.

32 unit building with a cap of 6 units and those units have been taking up the cap slot for years.

Myself and another unit tried to get on the rental list in 2020-2021, but the property management company keeps horrible records and seems to have just totally forgot about us. Then when a unit became available in 2022, they didn't inform either of us and someone else somehow leapfrogged us on the rental list and took the slot.

What's also interesting is that as I've been researching this and looking at tax records, I see that two other units who have been taking up rental slots both coincidentally transferred ownership of their properties to LLCs that they currently own.

For example (using fake names)... John Smith in late 2022 transferred ownership of his condo to JS Inc, a "real estate investment" company he lists himself as the owner of on linkedin, which shows in tax records as "quick claim deed" under "instrument".

Meanwhile, Jane Doe in mid 2022 transferred ownership of her condo to J-Doe LLC (listed on tax records as "warranty deed" under "instrument")

The bylaws specifically say:

If a unit that has been rented is sold, or the ownership is changed through any legal filing, the right to rent that unit ends. The rental Tenant in a unit that changes owners may stay until the end of his or her lease but not beyond that if the maximum allowable number of units in the building is already rented.

Would you interpret transferring ownership to an LLC/Inc you own as a "change of ownership through any legal filing"?

If not, wouldn't this just mean that any of the current 6 rental units can just change their ownership to LLC, then sell their LLC, and the new owner gets to keep the condo as a rental unit indefinitely?

submitted by /u/Investnew
[link] [comments]

source https://www.reddit.com/r/RealEstate/comments/15eczgn/building_has_a_rental_cap_can_you_transfer/
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