Ownership vs. Residency: The Key Distinction
The most important concept to understand when inheriting a property in an age-restricted community is the difference between ownership and residency. Owning the title to the property, which is transferred through a will or trust, is generally not restricted by age. Anyone can legally hold the title to the home as an asset. The restrictions come into play when considering who can live in the property.
The Federal Housing for Older Persons Act (HOPA)
The Housing for Older Persons Act (HOPA) of 1995 provides an exemption to the Fair Housing Act, allowing certain communities to legally maintain age restrictions. For a community to qualify under HOPA, it must meet several criteria:
- At least 80% of the occupied units must be occupied by at least one person 55 years of age or older.
- The community must publish and adhere to policies and procedures that demonstrate its intent to operate as housing for persons 55 or older.
- The community must follow federal regulations for age verification.
This federal law sets the baseline, but the specific details are determined by each community's homeowners' association (HOA) covenants, conditions, and restrictions (CC&Rs). It is these specific rules that determine if a younger heir can reside in the home.
Investigating the Community's Governing Documents
For a 25-year-old inheriting a home, the first and most critical step is to obtain and review the specific CC&Rs for that 55+ community. These documents outline the rules regarding inheritance, residency, and what happens when an under-aged individual takes ownership. You can request these documents from the HOA board or property management company.
Common provisions to look for include:
- The 80/20 Rule: Many communities leverage this provision of HOPA, allowing up to 20% of their homes to be occupied by residents under 55. If the community is at its 20% cap when you inherit, you may be denied residency. If they are under the cap, you may be approved to live there. Your chances depend entirely on timing and the HOA's discretion.
- Total Age Restriction: Some communities have stricter bylaws that mandate 100% of residents (with limited exceptions for caregivers or spouses) meet the age requirement. In this case, residency would be impossible for the 25-year-old heir, even if they own the home.
- Rental Restrictions: The documents will clarify if the home can be rented out. If so, it will likely be to a tenant who meets the age requirement. If rentals are prohibited or heavily restricted, your options will be more limited.
- Forced Sale Clause: In rare but important cases, the CC&Rs may contain a clause that requires the immediate sale of the property if it is inherited by a non-qualifying individual. This is the worst-case scenario and would leave the heir with no option but to sell.
Options for the Under-55 Heir
Upon inheriting the property, a 25-year-old has several potential courses of action, depending on the community's rules:
- Sell the property: This is often the simplest and most common path. The inherited home becomes an asset to be sold, and the proceeds go to the beneficiary. This avoids any conflicts with the HOA and provides the heir with liquid funds.
- Rent to an age-qualified tenant: If the community allows rentals, the heir can retain ownership and rent the property to someone over 55. This turns the asset into an income-generating investment, but the heir will still be responsible for property management, HOA fees, and maintenance.
- Attempt to live there: If the community operates under the 80/20 rule and has availability, the heir may be able to petition the HOA for residency. This requires careful communication and adherence to all application procedures.
The Importance of Estate Planning
This complex situation underscores the importance of proper estate planning for anyone living in an age-restricted community. The original owner can save their heirs a lot of trouble by planning ahead. Consulting with an estate planning attorney who understands the nuances of age-restricted community rules is highly recommended.
A comparative look at heir outcomes in 55+ communities:
| Inherited Situation | Bylaws Allow 80/20 & Space | Bylaws Are 100% 55+ | Bylaws Prohibit Rentals | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Heir wants to live there | Maybe, with HOA approval; depends on current occupancy | No, residency is restricted | No, residency is restricted | n | Heir wants to rent it | Yes, to a qualified tenant (55+) | Yes, to a qualified tenant (55+), if rentals are allowed | No, rental is not an option | n | Heir wants to sell | Yes, though marketing may be restricted to age-qualified buyers | Yes, though marketing may be restricted to age-qualified buyers | Yes, marketing may still be restricted | n | Heir inherits and vacates | Yes, can own but not live there; must pay HOA fees | Yes, can own but not live there; must pay HOA fees | Yes, can own but not live there; must pay HOA fees |
The Emotional and Financial Factors
Beyond the legal and procedural aspects, inheriting a 55+ community home as a younger person also involves significant emotional and financial considerations. For many, the home represents a deep connection to a loved one. The decision to sell, rent, or fight for residency is not purely a business transaction.
Financially, the 25-year-old must be prepared to handle the associated costs of ownership, including HOA fees, property taxes, and maintenance, regardless of whether they live in the home. It is crucial to have a clear financial plan for the property's future.
For authoritative information on Fair Housing laws, heirs should review the guidance provided by the U.S. Department of Housing and Urban Development (HUD).
Conclusion
Ultimately, a 25-year-old can own a home inherited in a 55+ community, but ownership does not guarantee residency. The ability to move into the property, rent it out, or sell it will be governed by the specific rules of the community's homeowners' association. Heirs should prioritize reviewing these governing documents and seek professional legal and financial advice to navigate this complex process successfully. By doing so, they can make an informed decision that honors their loved one's legacy while protecting their own legal and financial interests.
