For the purposes of any contract, deed, or covenant for the transfer of real property executed on or after January 1, 1979, a residential facility which serves six or fewer persons shall be considered a residential use of property and a use of property by a single family, notwithstanding any disclaimers to the contrary.
All posts by Steve Tinnelly
Family Day Care Homes
Many sets of association CC&Rs contain provisions that prohibit the commercial use of homes within the association’s development or any uses other than for a “single-family” dwelling. The California Legislature has limited the extent to which such provisions may used by a HOA to prohibit an owner or a tenant from operating his residence as a “family day care home”:
“…It is the intent of the Legislature that family day care homes for children should be situated in normal residential surroundings so as to give children the home environment which is conducive to healthy and safe development. It is the public policy of this state to provide children in a family day care home the same home environment as provided in a traditional home setting. The Legislature declares this policy to be of statewide concern with the purpose of occupying the field to the exclusion of municipal zoning, building and fire codes and regulations governing the use or occupancy of family day care homes for children, except as specifically provided for in this chapter, and to prohibit any restrictions relating to the use of single-family residences for family day care homes for children except as provided by this chapter.” (H&S Code § 1597.40(a).)
The Legislature has declared family day care homes to be immune from restrictions relating to the use of homes for single-family purposes. (H&S Code § 1597.40(a).) The Legislature has also rendered void any restriction contained within an association’s governing documents that “restricts or prohibits directly, or indirectly limits, the acquisition, use, or occupancy of [a] property for a family day care home.” (H&S Code § 1957.40(c).)
Similar protections exist for the operation of “residential care facilities” and “alcohol or drug abuse recovery or treatment facilities” (i.e., sober living homes).
“Family Day Care Home” Defined
A “family day care home” is defined under Health & Safety Code Section 1596.78(a) as a home that:
- Regularly provides care, protection and supervision for fourteen (14) or fewer children;
- In the provider’s own home;
- For periods of less than twenty-four (24) hours per day;
- While the parents or guardians are away; and
- Is either a “large family day care home” or a “small family day care home.”
Whether a family day care home is either a “large” or “small” family day care home is dependent upon the amount of children in the home that are being provided care, inclusive of those children under the age of 10 who reside at the home. (H&S Code § 1596.78(b)-(c).)
Licensing, Insurance & Operational Requirements
Licensing Requirements – the operator of a family day care home may be required to obtain proper licensing. The licensing requirements vary depending upon whether the family day care home is a “large” family day care home or a “small” family day care home. (H&S Code §§ 1597.44-46; 1597.4645.)
Insurance Requirements – the operator of a family day care home must maintain (1) liability insurance in the amount of at least $100,000 per occurrence and $300,000 aggregate, or a bond in the aggregate amount of $300,000; or (2) affidavits signed by each parent with a child enrolled in the family day care home that states that the parent knows that the day care home does not carry insurance or a bond. If there is insurance or a bond, a HOA may require that it be named as an additional insured, provided that the HOA pays any additional premium assessed for this coverage. (H&S Code §1597.531(b).)
Operational Requirements – the operator of a family day care home must comply with all regulations and operating procedures imposed on family day care homes by local and state laws. (See California’s “Manual of Policies and Procedures” for family day care homes.)
Family Day Care Homes within Age-Restricted (Senior) Developments
The provisions of the Health & Safety Code relating to family day care homes do not explicitly address whether they also apply to age-restricted (senior) developments.
Related Links
SB 234 Signed! Keeping the Kids Close to Home Act
-Published on HOA Lawyer Blog (October 2019)
Health & Safety Code Section 1597.531. Family Day Care Homes; Insurance Requirements.
(a) All family day care homes for children shall maintain in force either liability insurance covering injury to clients and guests in the amount of at least one hundred thousand dollars ($100,000) per occurrence and three hundred thousand dollars ($300,000) in the total annual aggregate, sustained on account of the negligence of the licensee or its employees, or a bond in the aggregate amount of three hundred thousand dollars ($300,000). In lieu of the liability insurance or the bond, the family day care home may maintain a file of affidavits signed by each parent with a child enrolled in the home which meets the requirements of this subdivision. The affidavit shall state that the parent has been informed that the family day care home does not carry liability insurance or a bond according to standards established by the state. If the provider does not own the premises used as the family day care home, the affidavit shall also state that the parent has been informed that the liability insurance, if any, of the owner of the property or the homeowners’ association, as appropriate, may not provide coverage for losses arising out of, or in connection with, the operation of the family day care home, except to the extent that the losses are caused by, or result from, an action or omission by the owner of the property or the homeowners’ association, for which the owner of the property or the homeowners’ association would otherwise be liable under the law. These affidavits shall be on a form provided by the department and shall be reviewed at each licensing inspection.
(b) A family day care home that maintains liability insurance or a bond pursuant to this section, and that provides care in premises that are rented or leased or uses premises which share common space governed by a homeowners’ association, shall name the owner of the property or the homeowners’ association, as appropriate, as an additional insured party on the liability insurance policy or bond if all of the following conditions are met:
(1) The owner of the property or governing body of the homeowners’ association makes a written request to be added as an additional insured party.
(2) The addition of the owner of the property or the homeowners’ association does not result in cancellation or nonrenewal of the insurance policy or bond carried by the family day care home.
(3) Any additional premium assessed for this coverage is paid by the owner of the property or the homeowners’ association.
(c) As used in this section, “homeowners’ association” means an association of a common interest development, as defined in Sections 4080 and 4100 of the Civil Code.
Health & Safety Code Section 1596.78. “Family Day Care Home” Defined.
(a) “Family day care home” means a home that regularly provides care, protection, and supervision for 14 or fewer children, in the provider’s own home, for periods of less than 24 hours per day, while the parents or guardians are away, and is either a large family day care home or a small family day care home.
(b) “Large family day care home” means a home that provides family day care for 7 to 14 children, inclusive, including children under the age of 10 years who reside at the home, as set forth in Section 1597.465 and as defined in regulations.
(c) “Small family day care home” means a home that provides family day care for eight or fewer children, including children under the age of 10 years who reside at the home, as set forth in Section 1597.44 and as defined in regulations.
Architectural Committee
An association’s governing documents may require association approval before a member may make a physical improvement or modification to the member’s property or to association common area. (Civ. Code § 4765(a); See also “Architectural Application & Approval Process.”) Such improvements and modifications are regulated by the association’s architectural standards. Administering the architectural standards and the application/approval process are tasks which are typically performed by the association’s architectural committee.
Depending upon the provisions of the association’s governing documents, the architectural committee may be referred to as any of the following:
- “Architectural Committee”
- “Architectural Control Committee”
- “Architectural Review Committee”
- “Art Jury”
- “Design Review Committee”
- “Environmental Control Committee”
- “Landscape Review Committee”
Many sets of association CC&Rs contain provisions that mandate the formation of an architectural committee that is separate from the board of directors. Where such provisions are absent, the board may either serve as the architectural committee or delegate its architectural control powers to an architectural committee that is created by the board. (See “Delegating Duties & Authority.”)
Scope of Authority
The scope of authority exercised by an architectural committee is impacted by the type of common interest development that the association was formed to manage:
| PUDs | Condominiums |
| Landscaping improvements | Balcony flooring surfaces, plants, and furniture |
| Lot setback requirements | Hardwood and interior flooring installations |
| Structure and improvement design, placement, and height | Plumbing and electrical modifications |
| Exterior finishes, paint colors, roofing materials | Window tinting, design, and coverings |
| Fencing | Satellite dish placement |
| Satellite dishes | EV charging stations |
| Solar panels | |
| EV charging stations |
Code Compliance
An architectural committee’s approval powers extend to compliance with an association’s governing documents and do not serve as a substitute for any ancillary requirements imposed upon a member by local building codes or county ordinances. In most cases, a member’s proposed improvements or modifications will require separate approvals from the association’s architectural committee as well as local building/code enforcement entities.
Decision Requirements
Any decision regarding a member’s architectural application must:
- Be made in good faith and not be unreasonable, arbitrary or capricious. (Civ. Code § 4765(a)(2); See also Cohen v. Kite Hill Community Assn. (1983) 142 Cal.App.3d 642.)
- Not be in conflict with any “governing provision of law” (e.g., Fair Employment and Housing Act, building codes, laws governing land use or public safety, etc.). (Civ. Code § 4765(a)(3).); and
- Be made in writing. (Civ. Code § 4765(a)(4).)
If an application is disapproved (rejected), the written decision of the architectural committee must include both an explanation of why the application was disapproved and a description of the procedure through which the member may request reconsideration of the decision by the board. (Civ. Code § 4765(a)(4).)
Disapproval & Reconsideration (Appeal)
Where a member’s application is disapproved by an architectural committee, the member is generally entitled to reconsideration by the board at an open meeting of the board. (Civ. Code § 4765(a)(5).) However, if the initial disapproval of the application was made by the board “or a body that has the same membership as the board” at a duly held board meeting, no reconsideration is required. (Civ. Code § 4765(a)(5).)
Architectural Committee Meeting Minutes
Because architectural committees are typically comprised of volunteer association members and not members of the association’s board of directors, the meetings of an architectural committee are not “board meetings” subject to the requirements and restrictions contained in the Open Meeting Act. However, to the extent that an architectural committees has “decisionmaking authority,” Civil Code Section 5210 requires the architectural committee to keep and maintain minutes of its meetings, and to make such minutes available for inspection by the association’s members within certain timeframes. (See “Committee Meeting Minutes.”)
Satellite Dishes on Common Area Roofs
Homeowners and renters within associations have rights under state and federal statutes to install satellite dishes on their respective “separate interests” (their lots or units), as well as exclusive use common areas such as patios or balconies, notwithstanding restrictions in an association’s governing documents to the contrary. (See “Satellite Dishes (Generally).”) In the context of condominium developments, associations may reasonably restrict (and in some instances prohibit) homeowners and renters from installing satellite dishes on common area roofs.
Townhomes with Exclusive Use Roofs
If an association’s CC&Rs define the roofs of townhomes as exclusive use common area, owners and tenants have federally protected rights to install satellite dishes on their respective exclusive use roofs. (FCC Declaratory Ruling, 2003.)
General Common Area Roofs
Civil Code Section 4725(b)(2) references a restriction that requires approval before a satellite dish may be installed on the “separate interest” owned by another. The term “separate interest” does not include association common area. (Civ. Code § 4095(a).) Civil Code Section 4725 therefore allows for an association to restrict or prohibit the installation of satellite dishes on common area roofs where the satellite dish would be visible from streets or other common areas. (Civ. Code § 4725(a); See also “Satellite Dishes (Generally).”)
Federal Preemption: Telecommunications Act and OTARD Rule
Parts of Civil Code Section 4725 have been preempted by the Telecommunications Act of 1996 (“TA”) (47 USC § §151-615b) and Over-the-Air Reception Devices Rule (“OTARD Rule”) (47 CFR §1.4000). The TA and OTARD Rule generally provide an association’s members and their tenants with federally protected rights to install satellite dishes on their separate interests (their lots or units) and exclusive use common areas (i.e., balconies, patios, etc.) notwithstanding the visibility restrictions contained in Section 4725. However, members and tenants do not have a federally protected right to install satellite dishes on common area components that are owned and maintained by the association (i.e., roofs, building exteriors, etc.)
“The [OTARD Rule] applies to antenna users who live in a multiple dwelling unit building, such as a condominium or apartment building, if the antenna user has an exclusive use area in which to install the antenna. ‘Exclusive use’ means an area of the property that only you, and persons you permit, may enter and use to the exclusion of other residents. For example, your condominium or apartment may include a balcony, terrace, deck or patio that only you can use, and the rule applies to these areas. The [OTARD Rule] does not apply to common areas, such as the roof, the hallways, the walkways or the exterior walls of a condominium or apartment building. Restrictions on antennas installed in these common areas are not covered by the [OTARD Rule]. For example, the [OTARD Rule] would not apply to restrictions that prevent drilling through the exterior wall of a condominium or rental unit and thus restrictions may prohibit installation that requires such drilling.” (FCC Information Sheet – OTARD Rule, Published Dec. 2007 (Emphasis added).)
Approval Requirement; Assumption of Maintenance Responsibilities; Indemnity & Reimbursement
Where an association permits, or is required to permit, the installation of a satellite dish on a common area roof or exclusive use roof, Civil Code Section 4725(b) allows for the association to impose “reasonable restrictions” that require the member or tenant to:
- Obtain the association’s approval for the installation;
- Assume the maintenance and repair responsibilities for the roofs or other building components that are impacted by the satellite dish’s installation, maintenance or use; and
- Require the installer of the satellite dish to indemnify or reimburse the association or its members for loss or damage caused by the satellite dish’s installation, maintenance or use.
Related Links
Preemption of Restrictions on Placement of Direct Broadcast Satellite, Broadband Radio Service, and Television Broadcast Antennas.
Satellite Dishes (Generally)
State and Federal statutes limit the degree to which an association’s governing documents (i.e., its CC&Rs or architectural standards) may restrict or prohibit the installation of satellite dishes. The limitations placed upon an association in this respect are impacted by the type of common interest development—namely, whether the association’s development is comprised of single family homes or condominium units. (See also “Satellite Dishes on Common Area Roofs.”)
Civil Code Section 4725
Civil Code Section 4725 renders void and unenforceable any provision contained in an association’s governing documents that “effectively prohibits or restricts the installation or use of a video or television antenna, including a satellite dish, or that effectively prohibits or restricts the attachment of that antenna to a structure within the development where the antenna is not visible from any street or common area, except as otherwise prohibited or restricted by law…” (Civ. Code § 4725(a).) However, this limitation applies only to provisions which prohibit/restrict the installation of satellite dishes that have a “diameter or diagonal measurement of 36 inches or less.” (Civ. Code § 4725(a).)
Reasonable Restrictions Permitted
The rights afforded to an association’s members under Section 4725 are further subject to “reasonable restrictions” imposed by an association on the installation, maintenance or use of satellite dishes that have a diameter or diagonal measurement of 36 inches or less. (Civ. Code § 4725(b).) Reasonable restrictions include restrictions “that do not significantly increase the cost of the [satellite dish]…or significantly decrease its efficiency or performance,” and include restrictions that (a) require a member to obtain association approval for the satellite dish installation, (b) require the member to assume the maintenance obligations for any roofs or building components impacted by the satellite dish’s installation, maintenance or use, and (c) require the installers of a satellite dish to indemnify or reimburse the association or its members for loss or damage caused by the satellite dish’s installation, maintenance or use. (Civ. Code § 4725(b).)
Association Approval Requirement
Where an association requires a homeowner to obtain association approval for the installation or use of a satellite dish, that approval must be processed in the same manner as an application for approval of architectural modifications to the member’s property. (Civ. Code § 4725(c); See also “Architectural Application & Approval Process.”)
Federal Preemption: Telecommunications Act and OTARD Rule
Parts of Section 4725 have been preempted by the Telecommunications Act of 1996 (“TA”) (47 USC § §151-615b) and Over-the-Air Reception Devices Rule (“OTARD Rule”) (47 CFR §1.4000). The TA and OTARD Rule generally provide an association’s members and their tenants with federally protected rights to install satellite dishes on their separate interests (their lots or units) and exclusive use common areas (i.e., balconies, patios, etc.) notwithstanding the visibility restrictions contained in Section 4725. However, members and tenants do not have a federally protected right to install satellite dishes on common area components that are owned and maintained by the association (i.e., roofs, building exteriors, etc.). (See “Satellite Dishes on Common Area Roofs.”)
Enforcement of Section 4725
In an action to enforce compliance with Civil Code Section 4725, the prevailing party is entitled to an award of its attorney’s fees. (Civ. Code § 4725(d).)
Related Links
Preemption of Restrictions on Placement of Direct Broadcast Satellite, Broadband Radio Service, and Television Broadcast Antennas.
Martin v. Bridgeport Community Association
[CC&R Enforcement; Renter Standing; Attorney’s Fees] The right to enforce CC&Rs is tied to ownership in a property; renters do not have standing to sue a HOA for a violation of its CC&Rs. Plantiff’s lack of standing does not preclude Defendant’s recovery of attorney’s fees under the Davis-Stirling Act.
OPINION
JACKSON, J.—
Plaintiffs James A. Martin and his wife, RaeAnn, appeal from a judgment against them, including the award of attorney’s fees and costs, entered after the trial court sustained a demurrer in favor of defendant Bridgeport Community Association. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND [1]
Richard and Rachel Peterson (the Petersons) purchased a home constructed by Richmond American Homes (Richmond) in a planned development community named Bridgeport in Santa Clarita at 23944 Windward Lane, lot 33 (the Property). The Bridgeport Community Association (BCA) was the homeowners association responsible for managing the common areas and enforcing the Master Declaration of Covenants, Conditions, and Restrictions for Bridgeport (the CC&Rs) and Rules and Regulations (the R&Rs) for the community.
Pursuant to an arrangement with the Petersons, James Martin and his wife, RaeAnn (the Martins), agreed that the Martins would live at the Property and [1028] pay all the costs involved with the Property, including the mortgage payments. RaeAnn Martin is the Petersons’ daughter. They also agreed that the Martins would deal directly with BCA on any issues regarding the Property. The Petersons executed a power of attorney to that effect, which was accepted by BCA. The Petersons agreed to assign all their rights, title, and interest in their causes of action stated in the FAC to the Martins.
During construction of the home on the Property, the Petersons and the Martins observed that the size of lot 33 where the construction was occurring was smaller than represented in the purchase transaction. Richmond agreed to move the northern property line 10 feet to include approximately 5593 square feet within the lot 33 lot lines (Adjustment Area). This required two separate lot line adjustments (Lot Line Adjustment #1 and Lot Line Adjustment #2). Before either adjustment could be completed, Richmond transferred the Adjustment Area to BCA as part of the common area.
As the result of negotiations with BCA by the Martins on behalf of the Petersons, BCA agreed to deed the Adjustment Area to the Petersons under certain terms and conditions (BCA Lot Line Agreement), as shown by a May 8, 2004 letter from Nancy O’Neil on behalf of the BCA Board of Directors and an August 10, 2004 letter from the attorney for BCA. [2] Both letters were addressed to the Martins. The Martins accepted the terms of the agreement proposed by BCA on behalf of themselves and the Petersons. Both letters represented that the BCA board had agreed to completing the Lot Line Adjustment #2 and the transfer of land, subject to the conditions that the homeowners would pay BCA’s attorney’s fees to prepare and execute the necessary documents and the homeowners would pay for the relocation of the common area sprinklers from the Adjustment Area.
After receiving notice of BCA’s agreement, the Martins invested money for fencing, landscaping and the importation of dirt on the Adjustment Area. The Martins also represented that the Petersons were not able to landscape and hardscape their front yard because they did not yet have ownership of the Adjustment Area and thus lost use of the yard for more than four years.
After lengthy delays, the City of Santa Clarita (City) approved Lot Line Adjustment #1. When BCA did not thereafter cooperate in order to begin [1029] the required City-approval process for Lot Line Adjustment #2, the Martins sought specific performance of the BCA Lot Line Agreement by filing the instant lawsuit on October 20, 2006. The original complaint named the Petersons and the Martins as the plaintiffs and BCA as the defendant. BCA filed a demurrer to the complaint, in part on the ground that the Martins lacked standing.
Then the Martins filed the FAC, the operative complaint in this action. The FAC named only the Martins as the plaintiffs. The first cause of action was for damages for breach of, and the second cause of action was for specific performance of, the BCA Lot Line Agreement. As a part of the allegations, the Martins requested that the court order BCA “to transfer title and cooperate in the approval and transfer of title to the property regarding Lot Line Adjustment #2 to Plaintiffs [the Martins].”
The third cause of action was for breach of the R&Rs of, and the fourth cause of action was for breach of the CC&Rs of, the Bridgeport Community. The fifth cause of action was for violation of Civil Code section 1363 et seq. [3]
The sixth cause of action was for intentional infliction of emotional distress. In part, the Martins alleged BCA took certain actions “in order to punish, and retaliate against, the Plaintiffs [the Martins] for enforcing their rights with respect to the Property.”
The seventh cause of action was for negligence arising from the duty of BCA to the Martins, “as residents and members of the BCA,” to use reasonable care in maintaining the common areas. The eighth cause of action was for negligence per se for violation of sections 1363 and 1364.
At the hearing on July 16, 2007, the trial court ruled that the demurrer to the FAC was sustained with leave to amend as to the first through the fifth, and the seventh and eighth causes of action, on the ground that the Martins lacked standing. With regard to the scope of the leave to amend, the trial court stated: “I am going to allow [plaintiffs’ counsel] leave to amend to bring in the Petersons, and I will give [counsel] one last shot at seeing if there’s any other claims the Martins have that can be pled.” As to the sixth cause of action, the trial court sustained the demurrer without leave to amend, on the ground that the facts did not support a finding of sufficiently outrageous conduct as is necessary for recovery based upon intentional infliction of emotional distress. [4] [1030]
The second amended complaint (SAC) was filed on August 6, 2007. The Petersons were the only named plaintiffs. They alleged only four causes of action: first cause for breach of the R&Rs, second cause for breach of the CC&Rs, third cause for violation of sections 1363 and 1364, and fourth cause for negligence per se based on the violation of the same statutes.
BCA filed a demurrer to the SAC. After hearing on December 10, 2007, the trial court sustained the demurrer with leave to amend as to the first, second and third causes of action on the ground of failure to allege sufficient facts to support the causes of action. The court sustained the demurrer to the SAC without leave to amend as to the fourth cause of action.
The Petersons filed the third amended complaint on January 4, 2008. Only the Petersons were named as plaintiffs.
Also on January 4, 2008, BCA filed a request that the court enter judgment against the Martins in favor of BCA. The request represented that on July 16, 2007, the trial court granted BCA’s demurrer to the FAC “without leave to amend,” except leave to amend to substitute the Petersons, as the real parties in interest, for the Martins as plaintiffs, and the Petersons filed the SAC.
BCA also filed a motion for an award of attorney’s fees pursuant to sections 1354, subdivision (c), and 1717, subdivision (a). The trial court granted BCA’s motion for award of attorney’s fees in the amount of $29,371.39 for defense against the Martins. The trial court entered judgment in favor of BCA against the Martins and included the award of attorney’s fees and costs to BCA. [5]
DISCUSSION
The Martins contend that trial court erred in sustaining BCA’s demurrer on the ground that they lacked standing to assert the first through fifth, seventh and eighth causes of action. They claim they had standing as to all the causes of action, in that the Petersons assigned “all of their rights, title, and interest in their causes of action stated in the First Amended Complaint . . . to the Martins.” As to individual causes of action, the Martins also [1031] present other grounds upon which they contend they have standing. The Martins further claim that the trial court erred in including in the judgment an award of attorney’s fees and costs pursuant to section 1354. We disagree and affirm the judgment.
I. Standard of Review
When a demurrer is sustained by the trial court, we review the complaint de novo to determine whether, as a matter of law, the complaint states facts sufficient to constitute a cause of action. (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.) Reading the complaint as a whole and giving it a reasonable interpretation, we treat all material facts properly pleaded as true. (Ibid.) The plaintiff has the burden of showing that the facts pleaded are sufficient to establish every element of the cause of action and overcoming all of the legal grounds on which the trial court sustained the demurrer, and if the defendant negates any essential element, we will affirm the order sustaining the demurrer as to the cause of action. (Cantu v. Resolution Trust Corp.(1992) 4 Cal.App.4th 857, 879-880.) We will affirm if there is any ground on which the demurrer can properly be sustained, whether or not the trial court relied on proper grounds or the defendant asserted a proper ground in the trial court proceedings. (Id. at p. 880, fn. 10.)
A trial court has discretion to sustain a demurrer with or without leave to amend. (Zelig v. County of Los Angeles, supra, 27 Cal.4th at p. 1126.) If we determine that the plaintiff has met its burden to demonstrate that a reasonable possibility exists that the defect can be cured by amendment of the pleading, then the trial court has abused its discretion in denying leave to amend and we reverse the denial. (Ibid.) Otherwise, we affirm the judgment on the basis that the trial court has not abused its discretion. (Ibid.)
[1] Standing is the threshold element required to state a cause of action and, thus, lack of standing may be raised by demurrer. (Buckland v. Threshold Enterprises, Ltd. (2007) 155 Cal.App.4th 798, 813; Blumhorst v. Jewish Family Services of Los Angeles (2005) 126 Cal.App.4th 993, 1000.) To have standing to sue, a person, or those whom he properly represents, must “‘have a real interest in the ultimate adjudication because [he] has [either] suffered [or] is about to suffer any injury of sufficient magnitude reasonably to assure that all of the relevant facts and issues will be adequately presented.’ [Citation.]” (Schmier v. Supreme Court (2000) 78 Cal.App.4th 703, 707.) Code of Civil Procedure section 367 establishes the rule that “[e]very action must be prosecuted in the name of the real party in interest, except as otherwise provided by statute.” [2] A real party in interest is one who has “an actual [1032] and substantial interest in the subject matter of the action and who would be benefited or injured by the judgment in the action.” (Friendly Village Community Assn., Inc. v. Silva & Hill Constr. Co. (1973) 31 Cal.App.3d 220, 225.) Upon review of action on a demurrer, we review the determination of standing de novo.
II. Standing
The Martins’ causes of action relate to BCA’s actions with regard to, or duties with respect to, the Property, that is, lot 33 owned by the Petersons, as part of a planned development subject to the Davis-Stirling Act. The causes of action other than the first and second seek either the enforcement of governing documents of the development, including its CC&Rs and R&Rs, or redress for violations of the Davis-Stirling Act. The Martins did not claim to have, and the record does not show that the Martins ever had, any ownership interest in the Property. As we explain below, ownership in the Property is a prerequisite to standing to assert each of the causes of action as each seeks redress for violations of rights of the owners of the Property, for which the causes of action are not assignable to the Martins.
[3] The Martins contend they have standing on the basis that the Petersons assigned to them all the Petersons’ interests in the causes of action pursuant to section 954, [6] which permits an owner of a chose in action to assign it to another person where it arises “out of the violation of a right of property, or out of an obligation.” Such types of choses in action include, for example, breach of contract or damage to personal or real property. (Curtis v. Kellogg & Andelson (1999) 73 Cal.App.4th 492, 504; 1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 720, p. 805.) Exceptions to the general rule of assignability under section 954 are choses in action for wrongs done to the person, the reputation or the feelings of the injured party, and to contracts of a purely personal nature, like promises of marriage. (Fireman’s Fund Ins. Co. v. McDonald, Hecht & Solberg (1994) 30 Cal.App.4th 1373, 1381.)
Assignability under section 954 is limited to “a thing of action,” a term defined in section 953 as “a right to recover money or other personal property by a judicial proceeding.” By definition, “[t]he words ‘personal property’ include money, goods, chattels, things in action, and evidences of debt,” and do not include “lands, tenements, and hereditaments,” which instead are “real property.” (§ 14.) [1033]
A. First and Second Causes of Action
The first cause of action for breach of the BCA Lot Line Agreement and the second cause of action for specific performance of the Agreement involve a right to recover an ownership interest in real property and not “a right to recover money or other personal property.” (§ 953.) Thus, contrary to the Martins’ contentions, the first and second causes of action were not choses of action assignable under section 954. They could be brought only by the real parties in interest, the Petersons. (Code Civ. Proc., § 367.)
The Martins also claim they had standing as parties to, or third party beneficiaries of, the BCA Lot Line Agreement. [7] They rely on the facts that they negotiated the agreement and lived on the property which was affected, and “accepted the terms of the agreement . . . on behalf of themselves and the Petersons.” Also, they claim that the letters from the BCA board of directors’ representative and BCA’s attorney show they were parties, in that the letters were addressed to them and phrased as if they were parties.
In the FAC, however, the Martins admitted that the Petersons were the owners of the Property and the parties to be bound by the Agreement, and that the Martins’ related actions were “on behalf of the Petersons.” In the first cause of action, the Martins state that BCA “agreed in writing to accept the offer made by the [Martins] on behalf of the Petersons at a board meeting[] . . . , to have [BCA] deed the property contained in Lot Line Adjustment #1 and Lot Line Adjustment #2, to the Petersons (collectively, the ‘BCA Lot Line Agreement’) under certain terms and conditions. . . . The Martins accepted the terms of the agreement . . . on behalf of themselves and the Petersons.” As a result of BCA’s actions, “the Petersons were not able to landscape and hardscape their front yard . . . and side yard because they do not yet have their ownership of” the Adjustment Area. “As a result they have lost usage of their usable yard for more than four years . . . .”
As the quoted material from the FAC shows, the Martins also admitted that specific performance would require BCA to deed the Adjustment Area to the Petersons, not to the Martins. Thus, they had no standing to assert a cause of action, as they did, seeking specific performance of the Agreement “to transfer title and cooperate in the approval and transfer of title to the property . . . to Plaintiffs [i.e., the Martins].” [1034]
[4] The same facts that show that the Martins were not parties to the Agreement also show that the Martins were not intended to be third party beneficiaries of the Agreement. In order to qualify as third party beneficiaries, the Martins were required to plead and prove that the Agreement was made for their benefit. (Schonfeld v. City of Vallejo (1975) 50 Cal.App.3d 401, 420.) “‘The test in deciding whether a contract inures to the benefit of a third person is whether an intent to so benefit the third person appears from the terms of the agreement . . . .’ [Citation.]” (Ibid.) The fact that a third party is incidentally named in the contract, or that the contract, if carried out according to its terms, would inure to his benefit, is not sufficient to entitle him to enforce it. (Jones v. Aetna Casualty & Surety Co. (1994) 26 Cal.App.4th 1717, 1724-1725.) Reading the agreement as a whole in light of the circumstances under which it was made, the terms of the agreement must clearly manifest an intent to make the obligation inure to the benefit of the third party. (Id. at p. 1725; Schonfeld, supra, at p. 421.)
The Martins did not attach a signed written Agreement to the FAC. Neither did they quote the terms of the Agreement in the body of the FAC. Even if we assume that the facts pleaded were sufficient to allege an enforceable contract, as we previously discussed, the facts pleaded by the Martins were that the BCA Lot Line Agreement was made in order to require the BCA to deed the Adjustment Area to the Petersons, and the Martins’ role was to negotiate the Agreement on behalf of the Petersons. Given their role, there is no significance to the fact that the letters from BCA’s board and attorney were addressed to the Martins. (See Jones v. Aetna Casualty & Surety Co.,supra, 26 Cal.App.4th at pp. 1724-1725.) The letter from BCA’s board stated that the board approved the request for the “corner of your lot to be deeded over to you [i.e., the Petersons]” on the condition that the “homeowners” would bear the financial responsibility for costs of legal fees and moving the common area sprinklers from the lot to the common area. The references to “your lot,” “deeded over to you,” and the “homeowners” could only be intended to be to the Petersons, in that the Martins owned no lot and were not homeowners in the Bridgeport Community. Assuming that the letter correctly reflects the content of the Agreement, there is nothing in its terms that clearly manifests an intent by BCA or the Petersons to make the obligation inure to the benefit of the Martins. We conclude that the facts pleaded do not support a determination that the Martins are third party beneficiaries of the BCA Lot Line Agreement. (Id. at p. 1725; Schonfeld v. City of Vallejo, supra, 50 Cal.App.3d at p. 421.)
[5] The Martins further contend that “[w]hether or not the property of [Lot Line Adjustment] #2 could be deeded to the Martins, they were entitled to at least receive an assignment of the damages.” As the Martins assert, a [1035] claim for damages to real property may be assigned without transferring title or possession of the damaged property. (Stapp v. Madera Canal & Irr. Co. (1917) 34 Cal.App. 41, 46.) In their prayer for relief, the Martins included a general request for damages as to all causes of action, but in the first and second cause of action, however, the Martins did not allege that the Petersons suffered monetary damages. [8]
B. Third Through Fifth, Seventh and Eighth Causes of Action
The third through fifth, seventh and eighth causes of action are premised on duties BCA owed to the Petersons under the Bridgeport governing documents or the Davis-Stirling Act pertaining to rights and restrictions incident to ownership of real property. These are mutual among all of the lot owners in Bridgeport. (Werner v. Graham (1919) 181 Cal. 174, 183-184.) What is at issue is the right of enforcement of the governing documents and the Davis-Stirling Act.
The Martins contend that, under the CC&Rs and sections 1351, 1354 and 1363 et seq., they are “bound parties” and, as such, have standing to enforce the CC&Rs and R&Rs. [9] They argue that, under the CC&Rs definitions, “bound parties” include “all occupants, guests and invitees of any Unit,” and therefore, the CC&Rs allow enforcement by them in their capacity as occupants. (See CC&Rs, art. III, § 3.1(e).) They assert that their standing to enforce the CC&Rs is also shown by the fact that the CC&Rs require the owner of a Unit to provide his or her lessee with copies of the governing documents. (See CC&Rs, art. III, § 3.1(c).) In support of their contention, they cite legal authority only for the proposition that CC&Rs are interpreted like a contract. (Cebular v. Cooper Arms Homeowners Assn. (2006) 142 Cal.App.4th 106, 119.)
We agree that the Martins are “bound parties” as defined in the CC&Rs. They are subject to compliance with the restrictions in the governing documents. That status is different from being an owner of a separate interest who, by virtue of his ownership, is also a BCA member. Section 1354 provides that CC&Rs “in the declaration shall be enforceable equitable servitudes, unless unreasonable, and shall inure to the benefit of and bind all [1036] owners of separate interests in the development. Unless the declaration states otherwise, these servitudes may be enforced by any owner of a separate interest or by the association, or by both.” (Id., subd. (a).) Subdivision (b) of section 1354 provides that “[a] governing document other than the declaration may be enforced by the association against an owner of a separate interest or by an owner of a separate interest against the association.” Section 1351, subdivision (l)(3) provides that “[i]n a planned development, ‘separate interest’ means a separately owned lot . . . .”
[6]In the instant case, as owners of lot 33, the Petersons qualify as “an owner of a separate interest” entitled to enforce the CC&Rs, the R&Rs and other governing documents of Bridgeport. (§§ 1351, subd. (l)(3), 1354, subds. (a), (b).) The Martins do not qualify. What is bound by an equitable servitude enforceable under CC&Rs is a parcel, a lot, in a subdivided tract, not an individual who has no ownership interest in the lot. (See § 1354, subd. (a).) “‘[W]hen the owner of a subdivided tract conveys the various parcels in the tract by deeds containing appropriate language imposing restrictions on each parcel as part of a general plan of restrictions common to all the parcels and designed for their mutual benefit, mutual equitable servitudes are thereby created in favor of each parcel as against all the others.’ [Citation.]” (Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 379-380.) Accordingly, the right of enforcement is inextricable from ownership of real property–a parcel, a lot–in a planned development such as Bridgeport and, thus, cannot be assigned absent a transfer of ownership of the parcel to which it applies.
[7] The Petersons’ Property and their membership in BCA, and consequently the rights of enforcement and duties they are owed, are indivisible interests under applicable law and Bridgeport governing documents. Section 1358, subdivision (c), provides that, in a planned development, any transfer of a separate interest includes the undivided interest in the common areas and any transfer of the separate interest owner’s lot also includes membership in the association. Under the CC&Rs, an owner is not allowed to subdivide a Unit or change its boundary lines. (CC&Rs, art. III, § 3.1(d).) The CC&Rs state that “[e]very Owner shall be a Member of [BCA]. There shall be only one membership per Unit,” regardless of the number of co-owners of the Unit. (CC&Rs, art. VI, § 6.2; see also Corp. Code, § 7312.)
[8] The fifth and eighth causes of action are for relief based upon the violation of provisions of the Davis-Stirling Act, sections 1363 and 1364. Section 1363 provides that a common interest development such as Bridgeport must be managed by an association such as BCA and sets forth duties and powers of the association. As previously explained, membership in the association is limited to owners of separate interests. Section 1364 [1037] apportions responsibilities for maintenance of the common interest development between the association and owners of separate interests. As we previously concluded, the Petersons’ rights, including membership in BCA, and the duties of BCA to the Petersons as owners of a separate interest, lot 33, are not assignable, whether set forth in the Bridgeport governing documents or in the Davis-Stirling Act.
The Martins cite no provision in the Davis-Stirling Act that authorizes an owner or a member to assign any right or obligation to any third party. The Martins mistakenly argue that section 1351 does not specifically define the term “owner,” which is used in section 1363 et seq., and, therefore, they have standing to seek redress for violations of sections 1363 and 1364. The references in section 1364, subdivisions (a) through (c), however, are to an owner of a “separate interest,” which is defined as noted in section 1351. Section 1364 clearly differentiates between an owner and residents such as the Martins. Section 1364, subdivision (e), states: “For purposes of this section, ‘occupant’ means an owner, resident, guest, invitee, tenant, lessee, sublessee, or other person in possession on the separate interest.” Section 1364 primarily deals with the association’s rights and responsibilities, including notifying “occupants,” with respect to the presence of wood-destroying pests or organisms. (§ 1364, subds. (b), (d).)
In the seventh cause of action for negligence, the Martins claimed that BCA had a duty to them, “as residents and members,” which BCA breached by improper use and maintenance of the watering system, which caused water damage to the Property. As previously discussed, they are not and do not qualify as members of the BCA. By law under the Davis-Stirling Act and equitable servitude principles applicable to the CC&Rs, only owners are members of the BCA.
Citing Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, the Martins contend that BCA had a common law duty “to exercise due care for the residents’ safety in those areas under [the association’s] control,” similar to a duty a landlord owes to his tenants. (Id. at p. 499.) The duty they pleaded as being breached, however, was BCA’s duty to maintain the common grounds. That duty arises out of the Davis-Stirling Act and the CC&Rs, not out of common law principles of negligence. Thus, as we previously concluded, it is a duty owed only to members of BCA, i.e., the owners.
The Martins argue that they suffered damages to their vehicle, personal injury, loss of work, clean up due to the excess water, interference with their peaceful enjoyment of the Property and loss of use and enjoyment of the Property, and, therefore, have standing to bring negligence claims against [1038] BCA on the basis of nuisance and trespass under section 3479, the statutory definition of nuisance, and related law. [10] These were not the elements the Martins pleaded as negligence, however. The damage they asserted was to the Property owned by the Petersons due to breach of a duty BCA owed to the Petersons.
Not being owners and, therefore, having no authority to enforce the CC&Rs as equitable servitudes arising under the CC&Rs, the Martins are not the real parties in interest for the seventh cause of action and do not have standing to maintain the cause of action. (§ 1354, subd. (a); Code Civ. Proc., § 367.)
[9] In summary, the causes of action are not assignable and the Petersons, as owners of the Property, are the real parties in interest. The Martins failed to establish standing under any of the other arguments they advanced. Given that the causes of action are incidents of the Petersons’ ownership of the Property, and the Martins have no ownership in the Property, we conclude that none of the causes of action can be reasonably amended to give the Martins standing. Accordingly, the court’s action in sustaining the demurrer was proper.
The Martins were given leave to amend the complaint to state some other cause of action for which the Martins may have had standing and to substitute the Petersons as real parties in interest for the causes of action at issue in this appeal. The SAC was filed, but the Martins did not take the opportunity to state any such causes of action. Thus they forfeited the right to do so and remain a part of the action. (Reynolds v. Bement (2005) 36 Cal.4th 1075, 1091.) Accordingly, the trial court properly entered judgment against the Martins in favor of BCA.
III. Attorney’s Fees and Costs
[10] The Martins contend that the trial court erred in awarding attorney’s fees and costs to BCA. Section 1354, subdivision (c), states: “In an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.” The Martins contend that, nevertheless, if the trial court’s finding that they did not have standing was based on the fact that they had no ownership in the Property and the CC&Rs as well as the R&Rs are enforceable only by the Property’s owners under section 1354, [1039] then there was no basis for the fees and costs award. The mandatory attorney’s fees and costs award under section 1354, subdivision (c), applies when a plaintiff brings an action to enforce such governing documents, but is unsuccessful because he or she does not have standing to do so. (Farber v. Bay View Terrace Homeowners Assn. (2006) 141 Cal.App.4th 1007, 1014.) Accordingly, we conclude that the trial court properly awarded attorney’s fees and costs to BCA for defense against the complaints in which the Martins were named plaintiffs. (Ibid.)
DISPOSITION
The judgment, including the award of attorney’s fees, is affirmed. BCA is to recover its costs on appeal.
[1]. In reviewing the propriety of sustaining a demurrer, we “‘treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.'” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) Accordingly, the statement of facts is based on the factual allegations in the first amended complaint (FAC), which was the subject of the demurrer at issue here.
[2]. The letter from the BCA board’s representative stated: “The Board considered your request for the additional parcel of land that includes the triangle-shaped piece of land on the northwest corner of your lot to be deeded over to you. The Board granted your request with the following conditions: [¶] 1. The homeowners will be financially responsible for the legal fees of [BCA’s] attorney to prepare and execute the necessary documents. [¶] 2. The homeowners will be financially responsible for the cost of moving the common area sprinklers to the common area by [BCA’s] landscape maintenance company.”
[3]. Section 1363 et seq. is a part of the Davis-Stirling Common Interest Development Act (Davis-Stirling Act) codified in the Civil Code beginning at section 1350. Further statutory references are to the Civil Code, unless otherwise identified.
[4]. The Martins do not challenge the trial court’s ruling as to the sixth cause of action.
[5]. We deny the Martins’ request for judicial notice of “the fact that [BCA] filed an action on November 27, 2007, after the demurrer on the FAC was decided by the Trial Court finding that the Martins lacked standing. [Citation.] [¶] The new action is against the Martins as well as the Petersons to enforce the Governing Documents (Los Angeles [County] Superior Court Case No. PC 041756, Bridgeport Community Association, Inc. v. James A. Martin et al.).” A copy of the then-current civil case summary for the lawsuit was attached as an exhibit to the request. Our review is limited to the trial court’s judgment against the Martins in the instant action. We will not consider evidence offered on appeal which was not before the trial court in connection with the judgment. (In re Zeth S. (2003) 31 Cal.4th 396, 405.)
[6]. Section 954 states: “A thing in action, arising out of the violation of a right of property, or out of an obligation, may be transferred by the owner.”
[7]. We render no opinion as to the existence or terms and conditions of the alleged BCA Lot Line Agreement. For the purposes of reviewing the trial court’s action on the demurrer only, for which we are required to assume the material facts pleaded to be true, we assume the Agreement existed.
[8]. In the first cause of action, the Martins allege that the Petersons lost the use of part of their yard due to BCA’s breach, but they do not allege that the Petersons incurred monetary damages.
[9]. With no legal authority cited, the Martins mistakenly assert that, given that the FAC states that BCA engaged in improper enforcement against the Martins, “this must be accepted as true.” We must accept as true only the material facts alleged in the FAC for the purpose of reviewing the trial court’s demurrer ruling. (Zelig v. County of Los Angeles, supra, 27 Cal.4th at p. 1126.) “Improper enforcement” is an alleged conclusion of law, however, and we are not required to accept such conclusions as true. (Ibid.)
Renter Rights
Membership in the Association
Association membership status is coupled with having an ownership interest in a lot or condominium within the association’s development. (Civ. Code § 4160.) The majority of the rights granted to members under the association’s governing documents or the Davis-Stirling Act therefore do not extend to renters, nor may they be validly transferred to renters. The following table illustrates what membership rights may be transferred from an owner to a renter; information in the table is discussed further below.
| Right | Transferrable to Renter |
| Attend Board Meetings | No |
| Attend Membership Meetings | No |
| Dispute Resolution (IDR & ADR) | No |
| Have Pets | Possible |
| Inspect Association Records | Possible |
| Serve on the Board | Possible |
| Standing to Sue Association | No |
| Use of Common Area Amenities | Yes (typically mandatory) |
| Vote | No |
Rights Transferred to Renters
- Use of Common Area Amenities – When owners lease their units to renters, they transfer their rights of use and enjoyment of the association’s common area amenities to their renters. Most sets of association governing documents contain provisions that require an owner to surrender those rights for so long as his property is being leased out to a renter. California courts have upheld the validity of such restrictions and the authority that associations have to enforce them. (Liebler v. Point Loma Tennis Club (1995) 40 Cal.App. 4th 1600, 1610.)
- Inspect Association Records (*Possible) – Various association records must be made available for inspection by members within certain time periods. (Civ. Code § 5205; See also “Member Record Inspection Rights.”) Renters do not have the right to request records; however, if a member issues a valid request to inspect and copy specified association records, the member may also “designate another person” (i.e., a renter) “to inspect and copy the specified records on the member’s behalf.” (Civ. Code § 5205(b).)
- Serve on the Board (*Possible) – Most sets of association governing documents allow only members of the association to serve on its board of directors. (See “Director Qualifications.”) Where such restrictions are absent from the governing documents, there may be circumstances where a renter may be eligible to serve as a director and ultimately be elected to the board.
- Have Pets (*Possible) – Civil Code Section 4715 grants “owners” within an association the right to keep and maintain at least one (1) pet within their respective units. (See “Pet Restrictions.”) However, Section 4715 makes no mention of whether that right also extends to renters. The degree to which an association may legally prohibit renters’ pets is ambiguous.
Rights Which Are Not Transferred
- Attend Board Meetings – Unless otherwise provided in an association’s governing documents, only members have the legal right to attend board meetings, as well as the right to address the board during open forum. (Civ. Code § 4925.)
- Attend Membership Meetings – Membership meetings are limited to the association’s members. (Civ. Code § 5000.) A member may not have a tenant attend a membership meeting as the member’s proxy, as a proxy may only be given to another member. (Civ. Code § 5130(a)(1).)
- Voting – A tenant may not be given the right to vote on behalf of a member, as proxies may only be given to other members of the association. (Civ. Code § 5130(a)(1).)
- Dispute Resolution – The dispute resolution procedures (i.e., IDR and ADR) which may be employed by an association’s members do not extend to their renters. (Civ. Code §§ 5900(a), 5910, 5930(a).)
- Standing to Sue Association – As provided for in Civil Code Section 5975, an association’s governing documents may be enforced by either the association or an “owner of a separate interest.” In Martin v. Bridgeport Community Association, the California Court of Appeal explicitly addressed this issue and held that renters do not have standing to sue an association for breach of its CC&Rs and violations of the Davis-Stirling Act, despite the fact that the owner had executed a power of attorney to his renters to handle matters relating to the owner’s property:
“…the right of enforcement is inextricable from ownership of real property…and thus, cannot be assigned absent a transfer of ownership of the parcel to which it applies…
…Not being owners and, therefore, having no authority to enforce the CC&Rs…[the renters] do not have standing to maintain the cause of action.” (Martin v. Bridgeport Community Assn. (2009) 173 Cal.App.4th 1024, 1036 and 1038.)
Limitations on Rental Prohibitions
The California Legislature had enacted several pieces of legislation limiting the degree to which an HOA’s governing documents may be utilized to prohibit and restrict rental activities within the HOA’s development. That legislation served to (a) render unenforceable broad prohibitions on rentals within an HOA, (b) limit the the types of rental restrictions an HOA may adopt and enforce, and (c) insulate owners from having to comply with newly adopted rental restrictions that were not in effect at the time the owner acquired title to their property within the HOA’s development.
*Note – In reading the information below, it is important to note the Civil Code’s definition of an owner’s “separate interest.” In a condominium project, the owner’s separate interest would be the owner’s condominium unit; in a planned development, the owner’s separate interest would be the owner’s lot. For more information, see “Separate Interests” and Civil Code section 4185.
Broad Rental Prohibitions are Not Enforceable
Civil Code section 4741 provides that an owner within an HOA is not subject to a provision of the HOA’s governing documents, or an amendment to the governing documents, that prohibits, has the effect of prohibiting, or unreasonably restricts the rental or leasing of any of the separate interests, accessory dwelling units (ADUs), or junior accessory dwelling units (JADUs) in the HOA to a renter, lessee or tenant. (Civ. Code § 4741(a).)
Prohibitions on the Rental of Individual Rooms for Owner-Occupied Units
In situations where an owner seeks to rental our a portion of their separate interest (e.g., an individual room in the home) to a renter, lessee or tenant, an HOA’s governing documents cannot prohibit such a rental provided that (a) the owner occupies the separate interest while a portion of it is being rented out, and (b) the portion being rented out is for a term of more than thirty (30) days. (Civ. Code § 4739.)
Restrictions Capping the Number of Rentals to 25% or More of the Separate Interests are Permitted
Civil Code section 4741 does allow for an HOA to place a ceiling (or ‘cap’) on the amount of rentals that may exist in the HOA at any one time to 25% (or more) of the separate interests:
“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. Nothing in this subdivision prohibits a common interest development from adopting or enforcing a provision authorizing a higher percentage of separate interests to be rented or leased.” (Civ. Code § 4741(b).)
To illustrate: if an HOA has 100 separate interests, the HOA may adopt a restriction providing that once 25 separate interests are being rented out, no other separate interest may be rented until one of the 25 rented separate interests ceases to be rented out. The same HOA would also be able to, if so desired, adopt a more relaxed restriction authorizing a higher percentage of rentals (e.g., a cap of 30 separate interests). However, the same HOA would not be able to adopt a more restrictive provision (e.g., a restriction imposing a cap of 15 separate interests, as such a restriction would be in violation of 25% threshold established under Civil Code section 4741(b) referenced above).
Prohibitions on Short-term Rentals are Permitted
Civil Code section 4741 also allows for an HOA to adopt and enforce a provision that “prohibits transient or short-term rental of a separate property interest for a period of 30 days or less.” (Civ. Code § 4741(c).)
*Note – The Legislature’s introduction of the unique term “separate property interest” in Civil Code section 4741(c) is considered by many HOA attorneys as a term which consolidates “separate interest” together with ADUs and JADUs; however, the proper interpretation of that language remains unsettled.
ADUs and JADUs are not “Separate Interests”
For the purposes of applying Civil Code section 4741’s provisions, ADUs and JADUs “shall not be construed as a separate interest.” (Civ. Code § 4741(d).)
This language is significant in situations where an HOA has imposed an enforceable rental cap. To illustrate: if the 100 separate interest HOA referenced above with a 25% rental cap already has 25 separate interests being rented out, that cap would have no impact on an owner’s desire to now rent out the owner’s ADU or JADU, as the owner’s ADU or JADU cannot be considered a “separate interest” to which the rental cap applies.
Separate Interest not “Rented” if Owner Occupies the Separate Interest, ADU, or JADU
For the purposes of applying Civil Code section 4741’s provisions, “a separate interest shall not be counted as occupied by a renter if the separate interest, or the accessory dwelling unit or junior accessory dwelling unit of the separate interest, is occupied by the owner.” (Civ. Code § 4741(e).)
This language is significant in situations where an HOA has a imposed an enforceable rental cap and/or an enforceable prohibition on short-term rentals. To illustrate: if the 100 separate interest HOA referenced above with a 25% rental cap already has 25 separate interests being rented out, the rental cap would be unenforceable against an owner who wants to now rent out the owner’s separate interest while residing within the owner’s ADU or JADU on the separate interest. To illustrate further: if the HOA also has a prohibition on short-term rentals, that owner would be able to rent out his separate interest for short-term rental purposes so long as the owner resides within the ADU or JADU on the separate interest.
Newly Adopted Rental Prohibitions are Only Enforceable Against Future Owners
Civil Code section 4740 further limits the enforcement of HOA rental prohibitions beyond what is provided in Civil Code section 4741 discussed above. Section 4740 provides that:
“An owner of a separate interest in a common interest development shall not be subject to a provision in a governing document or an amendment to a governing document that prohibits the rental or leasing of any of the separate interests in that common interest development to a renter, lessee, or tenant unless that governing document, or amendment thereto, was effective prior to the date the owner acquired title to his or her separate interest…” (Civ. Code § 4740(a).)
Thus, where an otherwise valid rental prohibition is incorporated into a HOA’s governing documents, that prohibition is only enforceable against an owner that bought into the HOA’s development after the rental prohibition became effective. This was affirmed by the California Court of Appeals in Brown v. Montage at Mission Hills, Inc. (2021) 68 Cal.App.5th 124, where the court held that an existing owner within a HOA who was renting out her separate interest for short-term purposes was exempt from a new amendment to the HOA’s governing documents that prohibited short-term rentals.
Verification Requirement
Where an owner seeks to utilize the protections under Civil Code section 4740 and rent out their property, the owner is required to first provide the HOA with (1) verification of the date the owner acquired title to his property, and (2) the name and contact information of the prospective tenant or the tenant’s representative. (Civ. Code § 4740(c).)
Requirement to Remove Unlawful Rental Prohibitions from Governing Documents no later than July 1, 2022
Civil Code section 4741 further imposes a mandate on HOAs to amend their governing documents as necessary to remove any unlawful rental prohibitions no later than July 1, 2022.
No Membership Approval Required for Amendment
In situations where amending a governing document in this regard would typically require membership approval (e.g., where the CC&Rs need to be amended to remove unlawful rental prohibitions), Civil Code section 4741 allows for the board to amend and restate the CC&Rs without membership approval by utilizing a process identical to that which is required for amending operating rules. (Civ. Code § 4741(f).)
Penalties for Noncompliance
An HOA that willfully violates Section 4741 “shall be liable to the applicant or other party for actual damages, and shall pay a civil penalty to the applicant or other party in an amount not to exceed one thousand dollars ($1,000).” (Civ. Code § 4741(g).)
Requirement to Notify Association of Occupancy and Rental Status
As part of the requirement under Civil Code section 4041 for each member to, on an annual basis, provide the association with information regarding the member’s preferred and alternative contact methods, each member must also inform the association whether the member’s property is owner-occupied or whether the member’s property is being rented out. (See “Annual Notice & Solicitation of Member Contact Information.”)
Disclosure of Rental Prohibition to Prospective Purchaser
If a provision of an association’s governing documents “prohibits the rental or leasing of any of the separate interests in the common interest development,” the owner of a property has a duty to disclose to its prospective purchaser the existence of the rental prohibition and provide a statement describing the prohibition. (Civ. Code § 4525(a)(9).)
