Inheriting a property is a complex process, but when that property is located in a 55+ community, it comes with a unique set of challenges and considerations. The primary distinction from a standard home inheritance is the age-related restriction. While you can almost always legally inherit the deed to the property, your ability to live in, rent, or even hold onto the home is governed by the community's homeowners' association (HOA) rules and federal law. Navigating this situation requires careful review and communication with legal counsel and the community itself.
The Legal Framework: HOPA and the 80/20 Rule
At the federal level, the Housing for Older Persons Act (HOPA) provides the foundation for age-restricted communities. To qualify as a 55+ community and be exempt from fair housing laws regarding familial status, at least 80% of the occupied units must be home to at least one person aged 55 or older. The remaining 20% of units can be occupied by younger residents, though this is not a guarantee and is often subject to the community's specific rules and discretion.
The Critical Role of CC&Rs
Your first and most important step after inheriting the home is to obtain and meticulously review the community's Covenants, Conditions, and Restrictions (CC&Rs). These documents contain the specific rules that apply to your property and the community, including provisions for inheritance, residency for non-qualified heirs, and rental policies. Don't rely on assumptions or general knowledge; the specific wording in these documents determines your rights and obligations.
Can You Live in the Home?
For an heir under 55, the ability to move into the inherited home is not a given. The outcome depends on a few critical factors:
- The 80/20 Rule Status: If the community is at its 20% capacity for younger residents, you will not be permitted to move in, even if the CC&Rs allow for it. You may be placed on a waiting list, but there is no guarantee.
- Community Policy: Some 55+ communities enforce stricter rules than HOPA requires, mandating 100% occupancy by age-qualified residents. In these cases, moving in is not an option.
- Minor Dependents: If you have children under 18, many 55+ communities have additional restrictions against minors residing in the community, further complicating your ability to move in.
Your Options as an Inheritor
If you are unable to reside in the home, you are not without options. The property is still a valuable asset that can be leveraged or sold. Your main choices are to sell the property or, if permitted by the HOA, to rent it out.
The Process of Selling the Inherited Home
Selling an inherited property in a 55+ community follows a process similar to any other real estate transaction, with the added layer of HOA coordination. The process involves:
- Probate: You must wait for the probate process to conclude and for ownership to officially transfer to you before you can sell.
- HOA Policies: Some communities have rules regarding sales, such as internal sales offices or specific procedures for showing the property.
- Real Estate Agent: Hiring an agent familiar with 55+ communities can be highly beneficial to navigate the specific market and HOA requirements.
- Capital Gains Tax: Be aware of the tax implications. The inherited property's value will be stepped up to its market value at the time of inheritance, which can affect your capital gains tax liability if the home is sold for a higher price later.
Can You Rent the Inherited Home?
Renting out an inherited home is a possibility, but it is often the most restricted option. Many HOAs have specific bylaws governing rental units, with potential limits on the number of rentals allowed in the community. You will also be restricted to renting only to age-eligible tenants.
To rent the property, you will need to:
- Check the CC&Rs: Verify that rentals are permitted and understand all associated rules and limitations.
- Review Rental Caps: Determine if there are restrictions on the number of homes that can be rented out simultaneously.
- Secure HOA Approval: Find an age-qualified tenant and submit their information to the HOA for approval before finalizing any lease.
Comparison of Inheritor Options
| Feature | Residing in the Home | Selling the Home | Renting the Home |
|---|---|---|---|
| Feasibility | Often very difficult for non-age-qualified heirs, depends heavily on the 80/20 rule and specific CC&Rs. | Highly feasible, but can be emotionally and logistically complex. | Feasible only if permitted by CC&Rs; requires renting to age-qualified tenants. |
| Income Potential | None, but saves on your own housing costs if allowed. | Immediate lump sum of cash from the sale, minus taxes and fees. | Steady, passive rental income, minus expenses and management. |
| Key Considerations | Residency is not a right; potential waitlists; minor children may be prohibited. | Subject to capital gains tax (with stepped-up basis); probate process required for clear title. | Requires adherence to all HOA rental restrictions; smaller pool of eligible tenants. |
| Level of Effort | Researching, negotiating with the HOA. | Sorting personal property, probate, working with real estate agent. | Property management (finding tenants, handling repairs), ongoing coordination with the HOA. |
Conclusion: Your Next Steps
Inheriting a home in a 55+ community is not a straightforward transfer of property. The key to successfully navigating this situation lies in understanding and respecting the community's specific rules. Your first priority should be to locate and thoroughly examine the CC&Rs and contact the HOA for clarification. From there, you can weigh your options for residency, sale, or rental, taking into account the legal and financial implications of each path. Consulting with a real estate attorney and a financial advisor is highly recommended to ensure all aspects are managed properly and to make the best decision for your circumstances.
This article is for informational purposes only and does not constitute legal or financial advice. We recommend seeking professional counsel for your specific situation.
