By Mary M. Howell, Esq. & David A. Kline, Esq
In 2011 the California legislature enacted SB 150, a bill championed by the California Association of Realtors, intended to deprive association owners of the ability to restrict rentals within their communities. This bill added section 4740 (formerly 1360.2) to the Civil Code. Owners within a common interest development are free to amend their CC&Rs to restrict rentals when it is reasonable to do so.
Since January 1, 2012, this right has been severely abridged. However, the law does not affect rental provisions that became effective before January 1, 2012.
The statute provides:
• Any amendments to CC&Rs which would prohibit rentals of dwellings within the development are effective only as to (a) owners who purchased after the amendment was recorded, and (b) prior owners who consent to be bound by the amendment.
• The amendment does not apply to commercial common interest developments. They may continue to enact rental restrictions without regard for the provisions of the new law.
• While it is not absolutely clear, it appears that only “prohibitions” are outlawed; lesser restrictions, such as 30-day minimums or requirements that only the entire dwelling may be rented, appear to be permitted under the law.
• The law includes a requirement that, prior to renting or leasing a dwelling, an owner “shall provide the association verification of the date the owner acquired title to the [dwelling] and the name and contact information of the prospective tenant or the tenant’s representative.”
• Because a new rental prohibition would create classes of owners with different rights, it may be cumbersome to enforce. It would also, in effect, delay the benefit of the restriction or the amelioration of the harm addressed by the restriction until every current homeowner opposed to the restriction sold his or her interest. This could undermine the stability of the community, rather than promote stability as covenants and restrictions are intended to do.
Certain types of rental restrictions are common, and some have found support in case law:
• In Colony Hill v. Ghamaty, a court of appeal upheld the application of a “single family residential use” restriction to prohibit room rentals (a “mini dorm”).
• In Mission Shores Association v. Pheil, the court approved the propriety of a CC&R provision which required a minimum 30-day rental period. (In the same case, the court also approved a portion of the amendment which allowed the association to evict a violating tenant.)
• In Fourth La Costa v. Seith, the court approved an amendment which required all leases to be in writing, and contain language binding tenants to the governing documents.
• While there are few reported cases, it would also appear that “occupancy restrictions” (that is, restrictions on the number of occupants who may reside in a dwelling), are also appropriate, provided such restrictions do not violate anti- discrimination guidelines. The usual acceptable number is 2 residents per bedroom plus 1.
• Restrictions based on “familial status” are hard to enforce, if the basis for enforcement is that the residents aren’t related “by blood or marriage.” Case law in the last 25 years makes it clear that a “family” consists of persons living together in the normal familial sense—sharing all rooms, sharing the responsibility for maintaining, paying the rent, etc. If (as the court in Colony Hill made clear) the use is not familial, but commercial (as when roommates are sought by advertisement, and certain portions of the homes are “off limits” to the residents), it is appropriate to conclude these are not “single family” uses.
Conclusion
If your community is serious about restricting rentals, it is wise to evaluate whether and how to proceed in light of Civil Code section 4740.
Rental restrictions should be contained in the CC&Rs, not in the rules; CC&Rs are entitled to a presumption of reasonableness under Nahrstedt, making them far easier to enforce in court actions. Further, since CC&Rs (not rules) are recorded, they provide actual and constructive notice to owners (that is, an owner is bound by the CC&Rs whether he knew about them at the time of purchase or not).
For more information on rentals, see also: