Property Management Professionals (PMP)

Negotiating association rental restrictions

Dr. HOA,
I have lived in my townhome for nearly six years, and the association board is trying to implement new CC&Rs that will not allow us to rent our units.
My fiancé and I are looking to move into a house to start a family, but with the state of the current real estate market, it does not make sense to sell, so we are looking to rent our unit.
Can an association forbid me from renting out my townhome? Thank you 

— Suzie T.

Hello Suzie,

Association rental restrictions has been a popular topic in recent years, as the current state of the real estate market has given way to increased rental activity, and a topic that has gained popularity in recent months due to a newly passed Senate bill that redefines an association’s ability to adopt and enforce rental policies.

Stemming from concerns about the potential negative impact rental properties may have on communities; both in terms of maintenance issues, as well as the perceived impact on home values, many associations have contemplated amending their CC&Rs to include rental restrictions.

Arguably, many believe that because renters do not have a vested interest in the community, so they do not, or will not, care for the property the same way an owner would.

Additionally, effective Jan. 1, 2012 Senate Bill 150, which exclusively pertains to an association’s ability to adopt and enforce rental restrictions, became law, prompting many associations throughout California to revisit their CC&Rs, and more specifically the document’s rental language.

First, to be clear, I am not an attorney, so my opinion is based solely on my professional expertise in the field of common interest developments and is meant exclusively for educational purposes, not legal advice.
Senate Bill 150 adds Section 1360.2 to California Civil Code, essentially stating that any amendments to an association’s

CC&Rs regulating rentals are only effective and enforceable for owners purchasing after the amended documents are approved by the membership and recorded. The new law goes on to state that the only way an existing owner is subject to the updated rental provision is if they expressly consent.

Pursuant to Senate Bill 150, existing association members are essentially grandfathered into the community rental restrictions, or lack thereof, from the date they closed escrow.

In other words, an association is not able to enforce newly adopted rental restrictions on existing members, but rather only owners who closed escrow after the effective date of the new rule. It is important to note that should an owner sell their home, SB 150 further requires sellers to disclose any rental restriction language contained in the association’s governing documents to potential buyers, who would be obligated to comply with the rental restrictions.

To briefly digress, critics of Senate Bill 150 are concerned about the implications on property rights and ultimately home values. Opponents charge that it is unjust to hold two separate members in the same community to different standards, especially given that rental restrictions may negatively impact home values by decreasing the marketability of a particular residence. I have heard from legal experts that believe this new law, if challenged, will end up at the high courts.

Critics are also concerned that this new law sets a poor precedent regarding an association’s ability to draft, adopt and enforce new rules and amendments to their governing documents.

To my knowledge, never before has there been an instance when members of an association are grandfathered into an
existing rule and not required to abide by a newly adopted regulation. As laws change and communities mature, it is essential those associations have the ability to update their governing documents and that those updates are uniformly enforceable.

As it relates to your particular situation and your specific question, pursuant to Senate Bill 150, rental restrictions only apply to owners closing escrow after amended CC&Rs have been approved by the membership, recorded and distributed. As an existing owner, you should be exempt from any updated rental restrictions.

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