ASSEMBLY BILL 3182

New Law Restricting Association Adoption and Enforcement of Rental Restrictions

November 2020

While the Common Interest Development industry lobbied diligently against Assembly Bill 3182 (AB 3182), the California legislature has passed this new rental restriction legislation and Governor Newsom officially signed it into law. AB 3182 amends Civil Code section 4740 and adds a new section, Civil Code 4741, pertaining to Association rental restrictions. SB 3182 goes into effect January 1, 2021.

The intent of AB 3182 was to “…bring many more rental units to the state at virtually no cost” in an attempt to address California’s housing crisis. Unfortunately, not only does this new law do little to address California’s housing crisis, it also severely limits an Association’s ability to protect the value and integrity of their community by adopting common sense rental restrictions.

As you may be aware, in 2012 the California legislature adopted a rental restriction law that “grandfathered in” existing owners to the rental restrictions (or lack thereof) as of the date they purchased their home, meaning existing owners were no longer subject to newly adopted rental rules or restrictions. AB 3182 goes much further to restrict an Association’s ability to limit rentals by not only prohibiting the adoption of rental restrictions deemed to be “unreasonable”, but also establishing that owners have no obligation to comply with provisions of the Association’s governing documents (defined as the CC&Rs, Bylaws or Rules & Regulations) that prohibit or unreasonably restrict the renting of their separate interest (i.e. condominium unit, townhome or single family home). By definition, separate interest would also include accessory dwelling units and junior accessory dwelling units.

The Good News (yes, it’s short)

The good news is that this new law does still allow Associations to adopt and/or enforce governing document provisions prohibiting transient occupancy or short-term rentals for thirty (30) days or less.

The Bad News (buckle up!)

This new law prohibits Associations from adopting or enforcing the vast majority of common rental

restrictions and significantly increases an Association’s liability related to rental restriction governance.

  • AB 3182 Prohibits governing document provisions that limit lease terms, except for transient occupancy or short-term rentals, defined as thirty (30) days or less. In other words, if your current CC&Rs state that lease terms must be at least 3 months, 6 months or 1 year, this provision is no longer enforceable and your CC&Rs must be updated to comply with the new law.
  • The new law prohibits governing document provisions that restrict the percentage of units that can be rented to less than 25%. In other words, the Association can still adopt and enforce a rental cap, but the cap percentage must be greater than 25% of the Association’s units.
  • The new law MAY prohibit Associations from adopting or enforcing governing document provisions requiring a mandatory waiting period before a new owner may rent their unit. Many governing documents stipulate that an owner must own their unit for a specific time period (usually 1 year) before they can lease it. While AB 3182 does not specifically prohibit a mandatory waiting period, an argument can be made that such a restriction has the same effect as unreasonably restricting leasing of the owner’s unit, creating liability for the Association. Associations should consult with their legal counsel regarding the enforceability of mandatory waiting periods under AB 3182.
  • AB 3182 stipulates that Associations are required to comply with the new law beginning January 1, 2021. Moreover, assuming Associations have rental restrictions that conflict with the new law, they are required to update their governing documents to comply with AB 3182 by no later than December 31, 2021. This is important because rental restrictions are typically contained in the CC&Rs, which usually require a 2/3rd vote of the members (and always at least a simple majority). Associations should consult with their respective law firms and plan accordingly.

Lastly, AB 3182 clearly states that Associations that willfully violate this new rental law, and specifically Civil Code Section 4741, will be liable to the other party for substantiated damages as well as a civil penalty in an amount not to exceed $1,000.00.

We urge Associations to review their governing documents to ensure compliance with AB 3182. If your Associations rental restriction language conflicts with the new law, we recommend you consult with your Association’s attorney to ensure compliance by the mandated deadlines.

If you have specific questions related to your Association, please do not hesitate to email Brad Watson, President of PMP Management at bwatson@pmpmanage.com.

Please Note: PMP Management is not a law firm and nothing contained in this document should be considered legal advice. Associations are encouraged to consult with their respective attorney regarding this new law and how it may impact their Association.