Q: I live in a condo which in 2015 imposed a restriction of rentals for not less than one year replacing the prior minimum of not less than 30 days, in effect when I bought my condo. Our management company says this is a “restriction” so that owners at the time of the restriction are exempt from it. However, the law does NOT address lease restrictions. It specifically addresses “rental prohibitions. So, what is the difference between a lease restriction and rental prohibition? — A.C., Oceanside
A: You’re correct! Civil Code Section 4740 grandfathers rental PROHIBITIONS, while Section 4741 bans rental prohibitions AND unreasonable restrictions.
However, rental caps (which are partial bans) of 25% or more are allowed by Section 4741(b). As partial bans, rental caps therefore under section 4740 only apply to owners who took title after the cap was approved by the members. A restriction or rule placing conditions on rentals is not a ban and so would apply to all owners.
What we don’t know yet is exactly what makes a rental restriction “unreasonable.” I think that “unreasonable” restrictions are those that are primarily intended to frustrate rentals. Restrictions which have a legitimate reason beyond preventing rentals will, I hope, be found to be reasonable. But we don’t have any appellate court guidance yet on this.
Q: Is there a means by which HOAs can protect their communities from becoming overrun with rentals due to corporate acquisition of private properties, for purely investment purposes? Can CCRs be changed to include leasing prohibition or can it be amended to limit the number of rentals? Or can some communities enforce a 6 month to 2-year residency requirement after purchase, requiring the owner to live there? — G.R., Encinitas
A: A requirement that rentals be at least 31 days in length is specifically permitted by Civil Code 4741(c). We don’t yet know if a one-year minimum rental term would be found “reasonable” or if courts will find it to be an unreasonable restriction. Imposing a waiting period after buying before one could rent appears to intentionally discourage rentals and so might not be enforceable if challenged. I have seen some HOAs amend their CC&Rs to limit owners to 2 or 3 homes, to discourage mass ownership of homes. Other than rental caps, the best technique to limit tenant problems may be to hold landlords responsible for the actions of their tenants. Thanks, Kelly
Q: I own three rental condos. I have voted for myself to be on the board every year only to have the management company deny my votes due to not being a resident of the complex. I am denied my right to run and to govern my investment assuming I would win an election. Is this restriction still valid and legal? Can the board continue to prohibit election of nonresidents due to this governing document clause? — J.B., Huntington Beach.
A: Your HOA board and manager are wrong. Per Civil Code 5105(h)(1), the only reason to deny someone a ballot is if they were not a member at the time ballots were distributed. Non-residency, delinquency or even unresolved governing document violations are not reasons to deny any owner a ballot.
Richardson is a fellow of the College of Community Association Lawyers and partner of Richardson Ober LLP, a California law firm known for community association advice. Submit column questions to kelly@roattorneys.com.
