With the advent of popular websites like Airbnb and VRBO, many homeowners have discovered a new source of income: short-term rentals of their property. There are a variety of entities that regulate homeowners’ ability to rent their units, including their HOAs. But to what degree can an HOA restrict a homeowner from utilizing their property as they see fit? As with most things in the law, the answer is “it depends.”
When evaluating whether or not a homeowner is authorized to rent their unit, the most important information will typically be found in their HOA’s governing documents (e.g., CC&Rs, Bylaw, Rules and Regulations, etc.). There are a number of different kinds of rental restrictions that are traditionally found in CC&Rs, but the two most common are (i) rental caps (e.g., a restriction on the number of units that can be rented in a community at any given time; and (ii) occupancy restrictions (e.g., set timeframes during which homeowners are not allowed to rent). Courts typically uphold these restrictions. (Colony Hill v. Ghamaty (2006) 143 Cal.App.4th 1156, 1169 [association has power “to maintain its family character by prohibiting uses other than for single-family dwelling purposes.”Nahrstedt v. Lakeside Village (1994) 8 Cal.4th 361, 374, fn. 6, [“[t]he power to regulate pertains to a wide spectrum of activities, such as the volume of playing music, hours of social gatherings, use of patio furniture and barbecued, and rental of units”]).
However, in January of 2012, the California legislature made drastic changes to HOA’s ability to restrict rentals by enacting Civil Code section 4740. Essentially, the legislature held that any homeowners that purchased a home within a community that did not contain rental restrictions would not be prohibited from renting the unit even if the HOA modified its governing documents to prohibit rentals. This is what is frequently referred to as “grandfathering.” This doesn’t mean that restrictions enact post-purchase are invalid, however. But any restrictions must be reasonable.
So, if an HOA amends its governing documents to include a 30-day minimum rental stay, that will likely be considered a reasonable rental restriction. If an HOA states that no rental can be for “hotel or transient use,” it will likely be considered a reasonable rental restriction (subject to what the HOA defines “hotel or transient use as”). But what if the HOA states that no one may rent for a period less than three-months? Six-months? A year? Each of these restrictions may be challenged on the basis that they are unreasonable.