Say you own a rental five minutes from Carmel City Center. You registered it with the city in January, paid the five dollar fee, and filed it under "handled." Then you decide to sell in 2027, and your buyer's agent calls with a problem: the subdivision is already at its rental cap, so the permit that came with the house does not come with the house. It resets to zero the moment the deed changes hands.
That single fact, buried in a city FAQ page rather than a headline, tells you more about where Carmel's rental rules are actually going than the ordinance that made every local news broadcast last year. The cap everyone talked about in 2025 is already the least durable piece of this story. The parts nobody put a microphone in front of are the ones with real staying power.
The Cap That Made Headlines Already Has an Expiration Date
Carmel's City Council passed Ordinance D-2770-25 on June 2, 2025, creating a rental registry and a hard limit: no more than 10 percent of dwellings in any subdivision of ten or more lots can hold a rental permit. The cap counts legacy dwellings that existed on or before January 1, 2026, and owners had until January 31, 2026 to register those properties and lock in that status. Registration and permitting became mandatory citywide on February 1, 2026, with a $5 annual fee and late penalties up to $200.
At the same council meeting where the ordinance was introduced, Councilor Adam Aasen made the case for acting before the problem grew.
"If we waited for everything to become big problems before we dealt with them, we'd be too late."
Just over a year later, the Indiana legislature answered back. House Enrolled Act 1210 bans cities and counties statewide from imposing new residential rental caps, effective July 1, 2026. Carmel's ordinance survives only because it was adopted before January 1, 2026, which grandfathers it in, but that grandfathering has a clock attached. The law requires existing caps in Carmel and Fishers to be fully phased out by January 1, 2028.
So the rule that generated public hearings, a council vote, and a permitting bureaucracy has a sunset date less than two years after it started being enforced. The rule that changed almost quietly, buried inside the same piece of state legislation, does not.
What Selling a Legacy Rental Actually Means Right Now
Here is where the timing gets specific enough to matter for a real transaction. Under the city's own guidance, a rental permit does not transfer with the sale of the home. When a property changes hands, the new owner has to re-register it, and if the subdivision is at or above the 10 percent cap at that moment, the new owner is denied a permit outright, even if the previous owner had one in good standing for years.
That creates an odd incentive around the calendar rather than the property itself. A rental sold in a capped subdivision in 2026 or 2027 could lose its rental eligibility entirely on the day it closes. The same property sold after the cap is required to disappear, sometime before January 1, 2028, would not face that problem at all, because the cap it would have violated is gone by law. For an owner weighing whether to sell a rental now or hold until that January 2028 deadline passes, that difference is not cosmetic. It is the difference between selling a house that can still be a rental and selling one that legally cannot be, at least not right away.
None of this touches whatever a homeowners association says on its own. The city has been explicit that its permit does not override HOA covenants, and that an HOA can ask the city to deny a permit if its own governing documents are more restrictive than the ordinance. A city permit was never the only gate. It was one of two.
The Vote Nobody's Talking About
The same House Enrolled Act 1210 that put an expiration date on the rental cap also rewrote who gets a say inside the HOA itself. Beginning July 1, 2026, only owners who use the property as their primary residence can vote on association matters involving rental restrictions or serve on the board in that capacity. Investor-owners keep every other voting right they had. They lose this one specifically.
That is a permanent change to the ballot, not a temporary rule with a phase-out date. An HOA with a strong majority of owner-occupants can still vote to tighten or ban rentals altogether, and investors in that community will not have a vote on the question. In a city where rental administration inside HOAs already existed well before the city ordinance, that matters. The Village of WestClay's Owners Association, for example, has long required owners of rental units to supply the association with the names and contact information of tenants and a copy of the lease before issuing the resident access cards that unlock the pools and clubhouses. The HOA was already tracking who was renting and from whom. What changed in 2026 is who gets to vote on whether that keeps happening.
What Changed at the Closing Table
Separately from anything about rentals, a second piece of 2026 legislation, House Enrolled Act 1115, rewrote what an HOA can charge a homeowner at the point of sale. For any Carmel property in an HOA, whether it has ever been a rental or never will be, this is the change most likely to show up on a settlement statement.
| HOA charge | Before July 1, 2026 | After July 1, 2026 |
|---|---|---|
| Resale or payoff letter | Up to $250 | Capped at $50 |
| Simple account balance statement | Often bundled into the paid package | Must be provided at no charge |
| Fee for producing records requested by a member | Up to $35 per hour after the first hour, capped at $200 | Eliminated |
The same act also gave every Indiana association explicit statutory authority to issue fines, something previously allowed only if an association's governing documents said so directly, provided the board first adopts a written fine schedule and gives proper notice. It also requires at least four days' written notice with an agenda before any board meeting, and it lets members count toward quorum by attending virtually. None of this made the news the way the rental cap did. All of it applies to every HOA closing in Carmel, starting the same month.
Short-Term Rentals Got Caught in the Crossfire
House Enrolled Act 1210 did one more thing that had nothing to do with subdivision caps. Since 2018, state law has generally barred cities from banning short-term rentals, but it grandfathered any local ordinance that predated 2018. Carmel had used that exception since 2017, regulating Airbnb-style rentals as a form of bed and breakfast requiring Board of Zoning Appeals approval. HEA 1210 retroactively redefined what counts as a bed and breakfast under that older law, which pulled Carmel's exception out from under it.
Mayor Sue Finkam described the effect on the city's enforcement tools as leaving them "effectively neutered." The city dropped its pending lawsuit against Zionsville-based XF Property Group, which it had accused of illegally operating a short-term rental on Concord Lane, in April 2026, after its own legal counsel confirmed the case had become moot. As of late August 2026, Carmel had not yet republished a revised short-term rental process, which means an owner considering an Airbnb listing today should call the city's Community Services office before assuming anything, and should still check their own HOA's covenants separately, since a private restriction against renting is not something state preemption touches at all.
A Few Questions Before You Sign Anything
Does a city rental permit override my HOA's rules? No. The city has stated directly that a permit does not authorize a rental the HOA prohibits, and an HOA can request denial of a city permit if its own restrictions are stricter.
If I sell my rental, does the buyer keep my permit? No. The new owner has to re-register, and if the subdivision is at or over the 10 percent cap on that date, the new permit is denied, regardless of the seller's history.
How much can my HOA charge for a resale certificate now? No more than $50 as of July 1, 2026, down from a prior cap of $250, and a basic account balance statement must be provided free.
Who can vote on my HOA's rental restrictions now? Only owners using the property as their primary residence, starting July 1, 2026. Investor-owners keep their other voting rights but lose this specific one.
The rule that got a council vote and a press release turns out to be the one with a countdown clock already running. The rule that arrived as a single clause inside a larger bill is the one that will actually decide, HOA by HOA, who gets to rent a home in Carmel once that clock runs out. If you own property inside one of these associations, or you're weighing whether to buy a rental in one, the paperwork worth reading closely right now is not the city's permit application. It's your HOA's bylaws on who gets a ballot.
If you want a second set of eyes on how any of this applies to a specific subdivision or a specific closing timeline, The Home Experts can walk through it with you. Request a free market valuation to start the conversation.
