Is that HOA Rental Clause Illegal? In this blog post, we will look at new HOA rental restrictions to the Davis-Stirling Act.
Last year Governor Newsom approved Assembly Bill 3182. The bill went into effect as of the beginning of this year (2021). Under the bill, owners of a separate interest in a common interest development such as a condominium will now have fewer rental restrictions. Specifically, any rules set by a homeowner’s association (“HOA”) that prohibit or unreasonably restrict the rental of a condominium unit is now possibly void and unenforceable. The information below provides further details of this new law and its exceptions.
The bill added California Civil Code Section 4741 into the Davis-Stirling Act. Pursuant to this code, “an owner of a separate interest in a common interest development shall not be subject to a provision in a governing document or an amendment to a governing document that prohibits, has the effect of prohibiting, or unreasonably restricts the rental or leasing of any of the separate interests, accessory dwelling units, or junior accessory dwelling units in that common interest development to a renter, lessee, or tenant.” (CC § 4741(a).)
The ban on rentals is not absolute. For example, California Civil Code Section 4741 permits HOA rules that require the composition of the entire condominium to be at least 75% owner-occupied. Stated in the reverse, the bill voids any HOA rules that limits rentals to below 25% of the total units. Thus, under the new law, HOA rules must permit the rentals of at least 25% of the units within a condominium.
The new law also allows HOAs to restrict transient rentals of 30 days or less. (CC § 4741(c) [“[t]his section does not prohibit a common interest development from adopting and enforcing a provision in a governing document that prohibits transient or short-term rental of a separate property interest for a period of 30 days or less].”)
For a HOA that willfully violates the new law, the law holds the HOA liable to the applicant or other party for actual damages, and requires the HOA to “pay a civil penalty to the applicant or other party in an amount not to exceed one thousand dollars ($1,000).” (CC § 4741(g).)
The new law certainly conflicts with the goals of an HOA. The belief among HOAs is that rental restrictions protect and provide a better stable living environment for owners. Under the new law, however, HOA rental restrictions will now be the subject of scrutiny. For example, to promote stability, some HOAs require a one-year waiting period before a new owner can rent their unit. The validity of such a rule is now questionable. What constitutes an “unreasonable” restriction will likely be the subject of future lawsuits.
Our real estate attorneys at Schorr Law have a great deal of experience with real estate matters and disputes, including HOA disputes. To schedule a 30-minute consultation, and to see if you qualify for one, contact us today!