An association has the general authority to restrict or prohibit the operation of commercial and business activities inside its members’ separate interests (in or upon their respective units or lots). Such restrictions and prohibitions are almost always contained in an association’s governing documents (i.e., in its CC&Rs) from the time the association was originally developed. Those provisions often define “commercial” in a broad sense to include any business, commercial, manufacturing, mercantile, storing, vending or other such non-residential purpose.

The intent behind such provisions are to reduce the burdens placed upon association common areas (i.e., customers/employees parking in the HOA’s streets or parking spaces), and to prevent commercial activities from becoming a nuisance to neighboring homeowners and the HOA in general. Municipal ordinances and laws that permit the operation of home-based business do not necessarily supersede conflicting provisions in an association’s governing documents unless they explicitly state that they do.

Interpretation of CC&R Restrictions & Judicial Deference
CC&R provisions that prohibit and restrict commercial uses and home businesses are often drafted broadly. Courts may grant judicial deference to a decision made by an association’s board of directors as to whether alleged business activity violates those restrictions:

“The trial court properly deferred to the Board’s discretionary decision that the Ketelhuts’ operation of the vineyard did not violate the prohibition against business or commercial activity because it did not affect the community’s residential character.” (Eith v. Ketelhut (2018) 31 Cal.App.5th 1, 17.)

Residential Care Facilities, Sober Living Homes & Day Care Homes
An association is limited in its ability to restrict and prohibit homeowners from operating residential care facilities (i.e., sober living homes) and day care centers out of their homes. (See “Residential Care Facilities,” “Family Day Care Homes” and “Alcohol or Drug Abuse Recovery or Treatment Facilities.“)

Commercial Signage
Civil Code Section 4710 affords homeowners with rights to display “noncommercial” signage on their separate interests. Even where an association does not have a restriction on commercial use, it may still have the authority to prohibit the display of commercial signage on a homeowner’s lot or unit. (See “Flags, Banners & Signs.”)

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