HOA RENTAL RESTRICTIONS VS. PROHIBITIONS – WHAT DOES CALIFORNIA LAW REGULATE?

Here is a question that I am getting asked again and again by readers of late.
 If the Association passes a rental “restriction” but not a rental “prohibition”, do the terms of the California HOA rental laws kick in so that all owners are essentially grandfathered” ?
 I will admit that I refined the question because the inquiries were in some cases non-repeatable, and all over the map, but I think you get the gist.
 One of the areas where this comes in to play is in associations where the owners are getting creative about renting their units short term, like vacation rentals or a newer “phenom” – the “Air B & B”.  And the Board wants to look at prohibiting short term rentals.
 Another area where this comes up is when an HOA decides it wants to discourage investors from buying so it wants to add a requirement that an owner must reside in the home for 1, 2, or 3 years before the owner can lease the property.
 The law says in these words (see italicized words): 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.”
 We know the statute goes on to say that an owner of a separate interest in a common interest development may expressly consent to be subject to … an amendment … that prohibits the rental or leasing….” But who really thinks that any owner will ever “consent.” It is just not likely to happen.
 There is more to the “grandfathering” created by the statute. 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. It isn’t retroactive, but any restriction or prohibition passed after 1/1/12 does apply to purchasers after the amendment or document is approved and recorded.
 So back to the provisions that “limit” rentals but do not prohibit them. As far as I know, there is no appellate case saying that an amendment or document that limits a person’s rights to lease but does not “prohibit” the right to lease is regulated by 4740. So amending documents (with owner approval of course) to set a minimum lease/rental term, or increase that minimum term, does not technically trigger the grandfathering of the statute (in other words, does not exempt all current owners).
 However, if an amendment proposes to require a minimum term of “residence” before being able to lease, does that effectively “prohibit” an owner from renting for a specified period of time. So I would have to say that it does, at least for the term of the residence requirement, trigger 4740. If the amendment proposes to limit the number of rentals in the development – then would the statute be triggered? I would say yes, and in fact that is the very reason the statute was passed by the legislature, i.e., to prevent an owner from being barred from leasing their property if they could when they bought it.

 

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