HOORAY – I am able to get back into my other blog!! At least I think so. So I am tackling an important subject there and here.
LEASE LIMITATION AMENDMENTS – WHO’s GRANDFATHERED ANYWAY?
Let’s get it straight for the many people out there who have sent emails asking about various lease limiting amendments – on the question of who is “grandfathered” (exempt) from newly added restrictions.
In California, any leasing prohibition passed after January 1, 2012, cannot be enforced against current owners – meaning those that own property in the HOA when the measure becomes effective. They are effectively grandfathered, as are some successors as detailed in the Code.
Note I said “prohibition”. If an association proposes an amendment extending a minimum lease term from 7 to 30 days, or from 30 days to 12 months, that is not a prohibition.
An owner who wants to proceed under the original documents for the minimum lease term will argue it is. That their rights are violated because they bought in with the right to do so. But that argument is faulty. An HOA attorney will argue that it’s not a prohibition triggering the grandfathering. They win the argument.
To take it a step further, and in contrast, limiting rentals to 25% (or some other percentage) of the units is a prohibition. An HOA might try to argue it’s not because at some point the owner may get permission to lease, when the percentage goes down, but that is a poor argument.
And attorneys can argue whether a minimum residence period is required before leasing is or is not a “prohibition”. I would need to know more facts about an actual scenario to ponder that one out.
Read the law, it says (as excerpted along with comment from the Davis Stirling Act in Plain English, the book available at www.californiacondoguru.com):
4740. RENTAL RESTRICTIONS / PROHIBITING LEASING
(a) 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 the rental or leasing of any of the separate interests in that common interest development to a renter, lessee, or tenant unless that governing document, or amendment thereto, was effective prior to the date the owner acquired title to his or her separate interest.
(b) Notwithstanding the provisions of this section, an owner of a separate interest in a common interest development may expressly consent to be subject to a governing document or an amendment to a governing document that prohibits the rental or leasing of any of the separate interests in the common interest development to a renter, lessee, or tenant.
(c) For purposes of this section, the right to rent or lease the separate interest of an owner shall not be deemed to have terminated if the transfer by the owner of all or part of the separate interest meets at least one of the following conditions:
(1) Pursuant to Section 62 or 480.3 of the Revenue and Taxation Code, the transfer is exempt, for purposes of reassessment by the county tax assessor.
(2) Pursuant to subdivision (b) of, solely with respect to probate transfers, or subdivision (e), (f), or (g) of, Section 1102.2, the transfer is exempt from the requirements to prepare and deliver a Real Estate Transfer Disclosure Statement, as set forth in Section 1102.6.
(d) Prior to renting or leasing his or her separate interest as provided by this section, an owner shall provide the association verification of the date the owner acquired title to the separate interest and the name and contact information of the prospective tenant or lessee or the prospective tenant’s or lessee’s representative.
(e) Nothing in this section shall be deemed to revise, alter, or otherwise affect the voting process by which a common interest development adopts or amends its governing documents.
(f) This section shall apply only to a provision in a governing document or a provision in an amendment to a governing document that becomes effective on or after January 1, 2012.
Comment: basically this law was enacted to prevent associations from prohibiting current owners, on or before 1/1/12, from leasing their units, unless they consent to the restriction. Hint, in my experience, no one ever consents to having their right restricted since 2012 and no board has tried to get owners to consent. So generally, today, all current owners are grandfathered and the new restrictions apply for the most part to those who purchase the property after the amendment is recorded.
And most of all, get good legal advice before you step into these waters, so you don’t end up drowning in mistakes.