Understanding the Impact of the HOA Rental Ban (AB 3182)

During the last legislative session, California lawmakers considered multiple bills related to housing and rental properties. One recently passed law, Assembly Bill 3182 (AB 3182), pertains to homeowner associations (HOAs). Specifically, AB 3182 has established new parameters on how HOAs can restrict rentals within California common interest developments. Here is more on the impact of the HOA Rental Ban (AB 3182).

Before AB 3182

When AB  3182 was before the state legislature, its bill analysis revealed that approximately one-third of Californians were living in Common interest developments (CIDs). The data also showed that the state has over 52,000 CIDs that range from 3 to 27,000 units. These CID properties consist of apartment projects, planned unit developments, condominiums, and housing cooperatives.

In California, CIDs are regulated and defined by the Davis-Stirling Common Interest Development Act. CIDs are also subject to the governing documents of their neighborhood and community HOAs. Before AB 3182, HOAs were able to restrict the number or percentage of housing units in a CID used for rental purposes. In some instances, HOAs banned rental units entirely from California CIDs.

The HOA Rental Ban (AB 3182)

AB 3182 added a new section to the Davis-Stirling Act and California Civil Code. The new section (4741) states in part that “[a] common interest development shall not adopt or enforce a provision in a governing document or amendment to a governing document that restricts the rental or lease of separate interests within a common interest to less than 25 percent of the separate interests.”

This change means that HOAs can no longer adopt or enforce a covenant, code, or restriction (CC&R) that prevents less than 25 percent of properties within a CID from being used for rental purposes. The law also clarified that HOAs were not restricted from allowing more than 25 percent of properties to be utilized as rentals. Despite this change, HOAs maintained the right to prohibit short-term rentals (those under 30 days).

The new law also bars CC&R provisions that prohibit or unreasonably restrict rentals of Accessory Dwelling Units (ADUs) or Junior Accessory Dwelling Units (JADUs). Further, AB 3182 states that these units will not count as separate interests for purposes of rental restrictions.

HOAs have until December 31, 2021, to amend their governing documents according to the current law. An HOA’s failure to amend by the designated date could result in a $1000 civil penalty.

AB 3182’s Impact on HOAs and CIDs

Before the passage of AB 3182, many California HOAs had restrictions in place that significantly reduced or prohibited rentals with the community. There are multiple reasons that HOAs may have imposed these limitations. One common concern regarding rentals is that they could be harmful to property values. Some HOAs have expressed fears that renters are more likely to violate CC&Rs, and that leased properties will fall into disarray. Renter populations are non-owners. Therefore, these residents are not subject to the same consequences for violating the CC&Rs as homeowners in a community. They are also not always committed to maintaining the outer appearance of properties.

Critics of the legislation have indicated that there are ambiguities in the law that leave open the question of whether HOA member approval will be necessary to amend CC&Rs to comply with AB 3182. It’s also unclear how a change in the CC&Rs can be applied retroactively to existing homeowners.

AB 3182 was passed to free up more rental housing during a time when the state’s need for these types of properties is at a critical height. Since the law went into effect on January 1, 2021, more CIDs are now eligible to become rental properties. It remains to be seen if the concerns commonly expressed by HOAs will become a widespread problem. Further, given the uncertainty of some of the language used in AB 3182, there may be future legal challenges.

Attorney Raffy Boulgourjian is a California real estate attorney with over twenty years of experience representing clients in residential and commercial real estate cases. He has the knowledge and expertise to assist with your unlawful detainer action, landlord-tenant disputes, and all of your other California real estate interests. Contact Mr. Boulgourjian today to schedule a free legal consultation to discuss your California real estate needs.

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