Our board and management do a great job of overall maintenance and landscaping of the complex. Rental units have become a consistent problem to the quality of life in our community. At a recent HOA meeting our board and property manager refused to reveal how many units are rentals.
E.G., Santa Clarita
Dear Mr. Richardson:
I have read in the past that condominium complexes are not allowed to have more than a certain percentage of rentals vs owners occupying units. Some of we owners are becoming concerned with the fact that some owners instead of selling their properties have elected to rent them. We feel we may end up living in a less desirable neighborhood. Are there any laws stating the enforcement of so many rentals per total units?
J.G., Foothill Ranch
Dear Attorney Richardson:
Our HOA wants to limit renters to a certain percentage of units, a goal we agree with. However, I question whether the language in the CC&Rs is legal and good policy. Specifically, the CC&Rs say that any unit that is not owner occupied is considered to be leased. Would appreciate your comments on this sort of language.
Thanks as always, for your interesting and always educational articles.
Dear E.G., J.G. and M.H.:
Condominium associations have increasingly worked to limit rentals in recent years. That topic became more important in 2009 when FannieMae and FHA adopted condominium lending guidelines requiring the entire condominium project to meet certain requirements before approving loans on any unit in the project. Detached condominiums and planned developments are exempt from the project lending requirements. One of the initial lending requirements was that owners must occupy at least 50% of the attached units in the project. In 2016 the percentage was reduced to 35% for FannieMae. FHA also allows 35% if the HOA meets some financial criteria.
In response to HOAs adopting rental bans or rental maximums, California enacted the protection for rentals which is now found at Civil Code 4740. This statute makes leasing prohibitions adopted in 2012 or later apply only to owners taking ownership after the date the prohibition began. As rental caps are a partial prohibition on rentals, Civil Code 4740 applies, making a cap only apply prospectively (unless it was adopted before 2012). I think that other forms of restrictions discouraging but not preventing rentals would not trigger Civil 4740’s “grandfathering.” Your HOA’s legal counsel should have various suggestions of methods to discourage but not ban rentals. Provisions regarding rentals are best contained in the CC&Rs and a member vote is required to place them in that governing document.
Civil 4740(d) requires landlords to provide the HOA their tenant’s identity and contact information. This section, if scrupulously followed by all landlords, should help HOAs know how many rentals are in the community. If an HOA were to adopt a covenant such as at M.H.’s association, it may prove very difficult to enforce. There may well be non-owner occupied units which are not known by the HOA to be so, such as owners who allow relatives to live in the unit but are not rent-paying tenants. Associations should generally avoid adopting rules or restrictions which they are unable to enforce.
Thanks for your questions,
Kelly G. Richardson, Esq. is a Fellow of the College of Community Association Lawyers and Senior Partner of Richardson|Ober, a California law firm known for community association advice. Submit potential column questions to Kelly@Richardsonober.com. Past columns at www.HOAHomefront.com. All rights reserved®.