Would prohibit a non-resident homeowner in San Diego County from renting their property for more than 30 days in a calendar year as a short-term rental.
Current Status: Dead
FindHOALaw Quick Summary:
Existing law requires a hosting platform, as defined, to provide a specific notice to an occupant listing a residence for short-term rental on a hosting platform that states, among other things, that, if the occupant is a tenant, listing the room, home, condominium, or apartment may violate the lease or contract and could result in legal action by the landlord, including possible eviction.
This bill would add Business and Professions Code 22596 authorize a housing platform to make available a residentially zoned or residentially used unit within a residential property that is located within the coastal zone as a short-term rental 365 days per year if the primary resident lives onsite of the residential property full time. The bill would prohibit a housing platform from making available residential property that is located within the coastal zone in which the primary resident does not live onsite full time as a short-term rental for more than 30 days per year, unless the primary resident makes the residential property available as a short-term rental in accordance with the Lower Cost Coastal Accommodations Program administered by the State Coastal Conservancy. The bill would also require the housing platform facilitator of the short-term rental to be responsible for collecting and remitting applicable transient occupancy taxes, as specified.
**AB 1731 was amended on April 10, 2019, to apply to the County of San Diego and to define full time residence as 270 days per year.
(d) (1) This section does not apply to limit or supersede any restrictive covenant covenant, rental contract, or other rule private contractthat imposes additional restrictions upon the use of the residential property as a short-term rental or prohibit the residential property from being made available as a short-term rental.
(f) (2) “Full time” means at least 270 days per year.
(3) “Primary resident” means a person who physically occupies and lives in the residential property on a day-to-day basis. A person may only be the primary resident of one residential property at a time. If a person physically occupies and lives in more than one residential property in a calendar year, that person shall be the primary resident of the residential property in which the person lives for the greatest number of days in a year.
SEC. 3. The Legislature finds and declares that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique circumstances in the County of San Diego regarding short-term rentals.
**AB 1731 was amended on May 2, 2019, to provide definitions for “eligible area” and “residential property.”
(2) “Eligible area” means an area for which all of the following apply:
(A) The area is within the County of San Diego.
(B) The area is within the coastal zone.
(C) The area is identified as an urbanized area or urban cluster in the most recent United States Census.
(D) The area is zoned for residential use, not including a residential tourist zone…
(5) “Residential property” means improved real property used or occupied, or intended to be used or occupied, for residential purposes, including a single family home, multifamily home, apartment, or condominium. “Residential property” does not include a campground, cabin, limited stay recreational vehicle park, motel, or hotel.
**AB 1731 was amended on July 2, 2019, to limit short term rentals to no more than 30 days per calendar year, and to repeal the bill provisions as of January 1, 2023.
(2) If the primary resident does not live onsite of at the residential property full time, both of the following shall apply: time, then the hosting platform shall not book a transaction for the residential property as a short-term rental for more than 30 days per calendar year.
(h) This section shall remain in effect only until January 1, 2025, 2023, and as of that date is repealed.
[Short-term Rental Restrictions; Coastal Communities] A HOA within a coastal zone may not have the ability to restrict short-term rentals without approval of the California Coastal Commission.
Ferguson Case Orr Paterson, Wendy Cole Lascher and Michael A. Velthoen for Plaintiffs and Appellants.
Hathaway, Perrett, Webster, Powers, Chrisman & Gutierrez, Robert A. Bartosh and Seth P. Shapiro for Defendant and Respondent.
OPINION
YEGAN, Acting P. J.—
One of the basic goals of the California Coastal Act of 1976 (Pub. Resources Code, § 30000 et seq.; Coastal Act) is to “[m]aximize public access” to the beach (Pub. Resources Code, § 30001.5, subd. (c)). An appellate court is to liberally construe the Coastal Act to achieve this goal. Respondent Mandalay Shores Community Association has not erected a physical barrier to the beach but has erected a monetary barrier to the beach. (See post, at p. 899.) It has no right to do so.
Robert S. Greenfield and Demetra Greenfield appeal the denial of their motion for a preliminary injunction to stay the enforcement of a homeowners association resolution banning short-term rentals (STR ban) in Oxnard Shores. Appellants contend that the STR ban violates the Coastal Act (Pub. Resources Code, § 30000 et seq.),[1] which requires a coastal development permit for any “development” that results in a change in the intensity of use of or access to land in a coastal zone. (§§ 30600, subd. (a), 30106.) Respondent failed to get a coastal development permit before adopting the STR ban.
Denying the motion for preliminary injunction, the trial court remarked that “[t]he Superior Court is not the proper venue to assess whether or not Mandalay Bay HOA rules conflict with the Coast[al] Commission goals and plans. The parties should take this dispute to the Coastal Commission which has the authority and resources to develop a comprehensive plan to regulate the limited coastal beach front state asset.”
We reverse. Section 30803, subdivision (a) of the Coastal Act provides that “[a]ny person may maintain an action for declaratory and equitable relief to restrain any violation of this division…. On a prima facie showing of a violation of this division, preliminary equitable relief shall be issued to restrain any further violation of this division.” (Italics added.)
Facts and Procedural History
Oxnard Shores is a beach community located in the Oxnard Coastal Zone. (§ 30103, subd. (a).) Nonresidents have vacationed at Oxnard Shores for decades, renting beach homes on a short-term basis.
[899] Appellants own a single-family residence at Oxnard Shores and, in 2015, started renting their home to families for rental periods of less than 30 days. The property is zoned R-B-1 (single-family-beach) pursuant to City of Oxnard’s (City) local coastal program implementation plan, which was approved by the California Coastal Commission (Coastal Commission) in 1982. (Oxnard Ordinances, § 17-10(B).) The R-B-1 zoning ordinance makes no mention of STRs. City has historically treated STRs as a residential activity and collected a transient occupancy tax for short-term rentals. In 2016, City announced that STRs are not addressed in the city code and that it was considering drafting an STR ordinance to establish standards for the licensing and operation of STRs.
Respondent, Mandalay Shores Community Association, is a mutual benefit corporation established for the development of Oxnard Shores, now known as Mandalay Shores. In June 2016, respondent adopted a resolution barring the rental of single-family dwellings for less than 30 days. The STR ban affects 1,400 units and provides that homeowners who rent their homes “for less than 30 consecutive days will be levied incrementally. The first offense will result in a $1,000 fine; the second offense will result in a $2,500 fine; the third, and subsequent offenses will result in a $5,000 fine, per offense.”[2]
In August of 2016, Andrew Willis, regional enforcement supervisor for the Coastal Commission, sent a letter advising respondent that the STR ban was a “development” under the Coastal Act and required a coastal development permit. Willis requested that respondent work with the City and the Coastal Commission to “develop suitable regulations before taking action in the future related to short-term rentals in the community.”
Appellants sued for declaratory and injunctive relief. (§ 30803.) The trial court denied an ex parte application for a temporary restraining order and thereafter conducted a hearing on appellants’ motion for preliminary injunction. The trial court found that the STR ban was not a “development” within the meaning of the Coastal Act and denied the request for a preliminary injunction.
Standard of Review
(1) Where the grant or denial of a preliminary injunction depends upon the construction of a statute, our review is de novo. (Ciani v. San Diego Trust & Savings Bank (1991) 233 Cal.App.3d 1604, 1611 [285 Cal.Rptr. 699].) [900] “[T]he standard of review is not whether discretion was appropriately exercised but whether the statute was correctly construed. [Citation.]” (Ibid.) Section 30803, subdivision (a) states in pertinent part: “On a prima facie showing of a violation of this division, preliminary equitable relief shall be issued to restrain any further violation of this division.” (Italics added.) Under section 30803, any person may bring a lawsuit to enjoin an activity that violates the Coastal Act. (California Coastal Com. v. Quanta Investment Corp. (1980) 113 Cal.App.3d 579, 610-611 [170 Cal.Rptr. 263].) Because standing is conferred on “any person” (§ 30803, subd. (a)), it matters not when appellants started renting to short-term tenants or that appellants can be adequately compensated for economic damages if the STR ban is found to be invalid at trial.
Coastal Zone Development
(2) Enacted in 1976, the Coastal Act is intended to, among other things, “[m]aximize public access to and along the coast and maximize public recreational opportunities in the coastal zone consistent with sound resources conservation principles and constitutionally protected rights of private property owners.” (§ 30001.5, subd. (c).) The Coastal Act requires that any person who seeks to undertake a “development” in the coastal zone obtain a coastal development permit. (§ 30600, subd. (a).) “Development” is broadly defined to include, among other things, any “change in the density or intensity of use of land….” (§ 30106.) Our courts have given the term “development” “[a]n expansive interpretation … consistent with the mandate that the Coastal Act is to be `liberally construed to accomplish its purposes and objectives.’ [Citation.]” (Pacific Palisades Bowl Mobile Estates, LLC v. City of Los Angeles (2012) 55 Cal.4th 783, 796 [149 Cal.Rptr.3d 383, 288 P.3d 717].) “Development” under the Coastal Act “is not restricted to activities that physically alter the land or water [citation].” (Ibid.)
Closing and locking a gate that is usually open to allow public access to a beach over private property is a “development” under the Coastal Act. (Surfrider Foundation v. Martins Beach 1, LLC (2017) 14 Cal.App.5th 238, 248-250 [221 Cal.Rptr.3d 382] (Surfrider).) So is posting “no trespassing” signs on a 23-acre parcel used to access a Malibu beach. (LT-WR, L.L.C. v. California Coastal Com.(2007) 152 Cal.App.4th 770, 779, 805 [60 Cal.Rptr.3d 417].)
In Surfrider, the landowner argued that a broad interpretation of the term “development” would lead to absurd results and require a coastal development permit if a homeowner wanted to throw a party. (Surfrider, supra, 14 Cal.App.5th at p. 254.) Rejecting the argument, the Court of Appeal noted that the Coastal Act exempts certain activities such as “temporary events” [901] that do not have a significant adverse impact on coastal resources. (Ibid., citing § 30610, subd. (i)(1).) Such an exemption must be determined by the Coastal Commission executive director. (Ibid.) The Coastal Commission “shall, after public hearing, adopt guidelines to implement this subdivision to assist local governments and persons planning temporary events in complying with this division by specifying the standards which the executive director shall use in determining whether a temporary event is excluded from permit requirements pursuant to this subdivision.” (§ 30610, subd. (i)(1).)
Here the STR ban changes the intensity of use and access to single-family residences in the Oxnard Coastal Zone. STRs were common in Oxnard Shores before the STR ban; now they are prohibited. The trial court found that if it did not issue a preliminary injunction, “arguably the public will be restricted in its access to the coast.”
Respondent asserts that the STR ban is necessary to curtail the increasing problem of short-term rentals which cause parking, noise, and trash problems. STR bans, however, are a matter for the City and Coastal Commission to address. STRs may not be regulated by private actors where it affects the intensity of use or access to single-family residences in a coastal zone. The question of whether a seven-day house rental is more of a neighborhood problem than a 31-day rental must be decided by City and the Coastal Commission, not a homeowners association.
(3) Respondent claims that the STR ban is consistent with City’s R-G-1 zoning but points to nothing in the coastal zoning ordinance that says that the rental of a single-family dwelling for 29 days is prohibited.[3] The trial court stated that it is not in the business of tailoring STR rules. “That should be left for the City, which is in the process of considering amending its coastal zoning section to specifically deal with [STRs] and the Coastal Commission, which reviews any proposed amendment to the local coastal plan.” We concur. The decision to ban or regulate STRs must be made by the City and [902] Coastal Commission, not a homeowners association. Respondent’s STR ban affects 1,400 units and cuts across a wide swath of beach properties that have historically been used as short-term rentals. A prima facie showing has been made to issue a preliminary injunction staying enforcement of the STR ban until trial. (§ 30803.)
Disposition
The judgment is reversed. The trial court is ordered to enter a new order granting appellant’s motion for preliminary injunction. (§ 30803, subd. (a).) No bond shall be required. (Ibid.) Appellant is awarded costs on appeal. Appellant’s request for attorney fees under the private attorney general statute (see Code Civ. Proc., § 1021.5) is an issue to be decided in the first instance in the trial court on noticed motion. (Arden Carmichael, Inc. v. County of Sacramento (2000) 79 Cal.App.4th 1070, 1079-1080 [94 Cal.Rptr.2d 673].)
Perren, J., and Tangeman, J., concurred.
[1] Unless otherwise stated, all statutory references are to the Public Resources Code, also referred to as the Coastal Act.
[2] This escalating fine structure for “offenses” sounds like respondent may think it is a governmental entity. At oral argument, Justice Perren remarked that it looked like respondent had appointed itself “Emperor of the Beach.”
[3] Respondent asserts that the short-term rental of a single-family dwelling is a commercial use of property, similar to a bed and breakfast facility, and is subject to City’s Coast Visitor-Serving Commercial Sub-Zone zoning ordinance. (Oxnard Ordinances, § 17-18.) That ordinance regulates commercial/recreational activities in the coastal area such as skating rinks, amusement centers, boat rentals, night clubs, tourist hotels, motels, convention and conference facilities, and vacation timeshare developments. Section 17-18 makes no mention of bed and breakfast facilities or the short-term rental of single-family dwellings.
Respondent also argues that “family,” as used in the R-B-1 “single family dwelling” zoning ordinance, does not include families living in short-term rentals. City has never interpreted the R-B-1 zoning ordinance to ban STRs nor has the Coastal Commission. City’s interpretation of its zoning ordinance is entitled to deference (MHC Operating Limited Partnership v. City of San Jose (2003) 106 Cal.App.4th 204, 219 [130 Cal.Rptr.2d 564]), as is the Coastal Commission’s interpretation of the Oxnard Local Coastal Program. (Hines v. California Coastal Com. (2010) 186 Cal.App.4th 830, 849 [112 Cal.Rptr.3d 354].)
[Amendments to CC&Rs; Rent Restriction] An amendment to the CC&Rs which empowered the HOA to evict tenants who violate the CC&Rs was held to be reasonable.
Law Firm of Kaiser & Swindells, Raymond T. Kaiser and J. Rodney DeBiaso for Defendant and Appellant.
Peters & Freedman and Laurie S. Poole for Plaintiff and Respondent.
OPINION
HOLLENHORST, J. —
David Pheil (Pheil) appeals a trial court order that reduced the percentage of votes necessary to amend the Mission Shores Association’s (the Association) declaration of covenants, conditions and restrictions (CC&R’s). (Civ. Code, § 1356.)[FN.1] Pheil challenges the order on the grounds the trial court erred in finding that (1) the amendment was reasonable (§ 1356, subd. (c)(5)); (2) the balloting conformed to the CC&R’s (§ 1356, subd. (c)(2)); and (3) there was no impairment to the security interest of mortgagees (§ 1356, subd. (e)(3)). We affirm the order.
I. PROCEDURAL BACKGROUND AND FACTS
The Association is the homeowners association which governs the Mission Shores common interest development (Mission Shores) located in Rancho Mirage and consisting of 168 separate interests (Homes), in addition to common areas and facilities. On May 12, 2004, the CC&R’s were recorded for the development.
In 2004, Pheil and his wife decided to purchase a vacation home in Rancho Mirage. At Mission Shores, the developer’s agent represented to Pheil and his wife that they would be allowed to rent or lease a home without restriction. According to the applicable CC&R’s, an owner may rent to a single family where the rental agreement is in writing and subject to the CC&R’s. In reliance on the agent’s representation, Pheil and his wife purchased a Home, which they rented, on occasion, to others. As a homeowner, Pheil is a member of the Association.
The board of directors for the Association (Board) is composed of five members, three of which were appointed by the developer. The developer owns 11 of the 168 Homes in the development. Concerned with how some homeowners were renting their Homes, on May 19, 2005, the Board [793] unanimously voted to accept proposed rule 2.10.2 of the CC&R’s (Rule 2.10.2), which provided, “No short-term rentals or leases of less than 30 days are allowed.” Pheil challenged the rule. This dispute came before Mediator Peter J. Lesser. A July 31, 2006, mediation did not resolve the dispute. On August 23, Pheil, through his attorney, mailed a “Demand for Internal Dispute Resolution” to Attorney James R. McCormick, Jr., an attorney for the Association, with respect to Rule 2.10.2.
In response to the dispute over Rule 2.10.2, the Board decided to amend the CC&R’s to provide the same temporal limitation on rentals. Additionally, the proposed amendment granted the Association the right to evict a tenant for breach of the governing documents and to impose the related attorney fees and court costs on the homeowner. On September 28, 2006, the Association mailed a cover letter, voting instructions, official ballot, the proposed amendment to the CC&R’s (Amendment), and two envelopes to all members of record of the Association. It presented a “redlined” version of article II, section 2.1 of the CC&R’s, showing precisely the language to be added and to be deleted. A deadline of November 13, 2006, was set to return the ballots. The owners were further informed the ballots would be tabulated at the Board meeting on November 15.
Article IV, section 4.4.3 of the CC&R’s sets forth the different types of voting “classes.” “Class A” consists of members of the Association who own a Home. Of the 168 Homes, 157 had been sold such that there were 157 owner votes. The remaining 11 Homes were still owned by the developer, who was entitled to three “Class B” votes per Home, or a total of 33 developer votes. In order for the Amendment to pass, the Association had to obtain at least 67 percent of the voting power of both classes. Thus, passage of the Amendment required 105 owner votes and 22 developer votes. On November 13, 2006, 132 of the 168 ballots were received. The inspectors of the election opened the ballots and tabulated the results. In the “Class A” category, 93 owner votes were in favor of the Amendment, 28 owner votes were against the Amendment, and 36 owner votes abstained. In the “Class B” category, all 33 developer votes were cast in favor of the Amendment. Because the Amendment garnered only 59 percent of the owner vote, it failed.
On March 8, 2007, pursuant to section 1356, the Association petitioned the trial court for an order reducing the percentage of affirmative votes required for passage of the Amendment and approving the Amendment based upon the number of affirmative votes actually cast constituting at least a majority of each voting class. A hearing date was set for April 9, 2007. The Association filed a notice of hearing, memorandum of points and authorities, [794] and supporting declarations. Notice of the hearing was mailed to each homeowner of record on March 23, 2007.
Pheil opposed the petition, objecting to the imposition of a 30-day minimum for leases on the grounds that this violated an alleged representation made by the developers of the project when he purchased his Home. In reply, the Association stated the reason for the minimum lease term was to prevent use of any Home as a hotel. The Association provided a declaration from its counsel regarding the prevalence of CC&R restrictions containing a 30-day minimum provision.
At the initial hearing on April 9, 2007, the trial court continued the matter to allow Pheil’s counsel to obtain copies of the supporting declarations. The second hearing was continued to allow the Association to hold its election of directors to see if the new Board would want to continue pursuing the petition. During the final hearing on May 25, 2007, the trial court indicated its intent to grant the petition.
By order dated June 12, 2007, the trial court found that the Association had complied with the requirements of section 1356, subdivision (c)(1) through (6) and that granting the petition was “not improper” under section 1356, subdivision (e)(1) through (3). Thus, the trial court granted the petition, which reduced the percentage required to amend the CC&R’s. Pheil filed the instant appeal.
II. STANDARD OF REVIEW
(1) “[S]ection 1356, part of the Davis-Stirling Common Interest Development Act (the Act), provides that a homeowners association, or any member, may petition the superior court for a reduction in the percentage of affirmative votes required to amend the CC&R’s if they require approval by `owners having more than 50 percent of the votes in the association….’ [Citation.] The court may, but need not, grant the petition if it finds all of the following: Notice was properly given; the balloting was properly conducted; reasonable efforts were made to permit eligible members to vote; `[o]wners having more than 50 percent of the votes, in a single class voting structure, voted in favor of the amendment’; and `[t]he amendment is reasonable.’ [Citation.]” (Peak Investments v. South Peak Homeowners Assn., Inc. (2006) 140 Cal.App.4th 1363, 1366-1367 [44 Cal.Rptr.3d 892], fn. omitted.)
The purpose of section 1356 is to provide homeowners associations with the “ability to amend [their] governing documents when, because of voter [795] apathy or other reasons, important amendments cannot be approved by the normal procedures authorized by the declaration. [Citation.] In essence, it provides [an] association with a safety valve for those situations where the need for a supermajority vote would hamstring the association.” (Blue Lagoon Community Assn. v. Mitchell (1997) 55 Cal.App.4th 472, 477 [64 Cal.Rptr.2d 81].)
Section 1356, subdivision (c), gives the trial court broad discretion in ruling on such petition. Accordingly, on appeal, we review the trial court’s ruling for abuse of discretion. (Fourth La Costa Condominium Owners Assn. v. Seith (2008) 159 Cal.App.4th 563, 570 [71 Cal.Rptr.3d 299].)
III. WAS THE AMENDMENT REASONABLE?
Pheil contends that because three of the five seats on the Board were held by representatives of the developer, the developer “in fostering the petition was clearly acting for its own purposes and not [those] of the owners.” Specifically, Pheil claims there is no evidence that any individual homeowner complained about the rental of a home without temporal restriction. Instead, Pheil notes the evidence is limited to the vague determination by the Board and the self-serving declaration of the Association’s attorney. Given the facts that (1) the Board was controlled by the developer who was behind the petition; (2) this was not a case of homeowner apathy; and (3) the trial court’s words suggest that it thought the owners were entitled to a representative board, Pheil argues the trial court abused its discretion in finding the Amendment to be reasonable.
(2) Clearly, the Association was charged with the burden of proving the Amendment was reasonable. (Fourth La Costa Condominium Owners Assn. v. Seith, supra, 159 Cal.App.4th at p. 577.) “The term `reasonable’ in the context of use restrictions has been variously defined as `not arbitrary or capricious’ [citations], `rationally related to the protection, preservation and proper operation of the property and the purposes of the Association as set forth in its governing instruments,’ and `fair and nondiscriminatory.’ [Citation.]” (Ibid.)
Here, the Association argued that the need to restrict rentals to 30 days or more was to ensure the property would not become akin to a hotel. Mission Shores is a residential community. According to the Association’s attorney, “The overwhelming majority of the [CC&R’s] that [she] review[s], both in preparing restated [CC&R’s] and reviewing existing [CC&R’s], contain[s] provisions regarding minimum lease terms of thirty (30) days or longer….” As the trial court noted, “these kinds of restrictions are very common. And … many counties and cities have these restrictions that essentially when [796] you rent for less than 30 days, you’re essentially operating a hotel in a residential district.” Furthermore, the court observed, “there is a movement afoot to restrict homes from being on vacation rentals. It is not just in this project. It is throughout California. [¶] So for example … I have a home in San Luis Obispo County and they have a very strict rule about vacation rentals. I was just reading in the paper in Palm Springs they’re talking about passing a law restricting rentals to only 30 days or more.”
“A CC&R is unreasonable if it is arbitrary and capricious, violates the law or a fundamental public policy or imposes an undue burden on property, and it is reasonable unless it meets those criteria. [Citation.]” (Fourth La Costa Condominium Owners Assn. v. Seith, supra, 159 Cal.App.4th at pp. 577-578.) On the record before this court, we cannot find that the imposition of a 30-day minimum lease term is unreasonable. The provision applies to all owners who rent their Homes, the restriction does not violate public policy (see, e.g., City of Oceanside v. McKenna(1989) 215 Cal.App.3d 1420, 1426-1427 [264 Cal.Rptr. 275] [restrictions requiring owner occupancy and forbidding the leasing of units were reasonable in view of the city’s redevelopment goals of providing a stabilized community of owner-occupied units for low- and moderate-income persons]), and any burden to enforce the minimum lease term is outweighed by its beneficial value in preserving the residential character of the development.
With cursory argument and no citation to any legal authority, Pheil contends the Amendment is unreasonable because it grants the Association the right to evict tenants for breach of the CC&R’s and to impose attorney fees and costs on the owner. “[E]very brief should contain a legal argument with citation of authorities on the points made. If none is furnished on a particular point, the court may treat it as waived, and pass it without consideration. [Citations.]” (9 Witkin, Cal. Procedure (4th ed. 1997) Appeal, § 594, p. 627.) Although we may deem this point waived, we note the Association addressed it on the merits.[FN.2]
(3) The Association argues this provision is reasonable. First, the Association notes that associations have been analogized to landlords for purposes of determining tort liability. (Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 499-501 [229 Cal.Rptr. 456, 723 P.2d 573].) As such, if an association is held to a landlord’s obligations, it should equally benefit from any rights attributed to the landlord. We agree. Second, the Association argues that any tenant should be bound by the CC&R’s to the same extent that the homeowner is bound. In the event the homeowner fails [797] or refuses to take effective measures to assure his or her tenant is complying with the CC&R’s, the Association needs some means to assure compliance. We agree. Third, according to the Association, the enforcement remedies apply to any and all tenants in breach of the CC&R’s, and providing the Association with the right to enforce any breach of the CC&R’s does not violate public policy. (See, e.g., 1 Sproul & Rosenberry, Advising Cal. Common Interest Communities (Cont.Ed.Bar 2007 supp.) § 6.45, pp. 423-424.) Again, we agree. Nonetheless, in his reply brief, Pheil claims that commentators have criticized provisions allowing associations the right to enforce the CC&R’s against tenants as being “unlawful.” Reviewing the practice tip referenced by Pheil, we note the commentators merely caution practitioners to consider the risks involved. Specifically, an association may be liable for wrongful eviction given the fact that the association does not have possession of the property, and thus, is not the rightful party to bring the action. (Id. at pp. 424-425.)
(4) For the above reasons, we find that the trial court did not abuse its discretion in finding the Amendment to be reasonable.
IV. DID THE BALLOTING CONFORM WITH THE CC&R’S?
(5) According to Pheil, subdivision (c)(2) of section 1356 was not complied with because the letter that accompanied the ballot inaccurately portrayed the context of the Amendment and made improper reference to the ineffective rule. In response, the Association argues it complied with the procedures for amending the CC&R’s as governed by section 1363.03. According to that section, a secret ballot procedure must be used with a double envelope system, inspectors of the election must be appointed, and the results must be tabulated at a board meeting. (§ 1363.03, subds. (c), (e).) Here, the Association maintains it mailed the Amendment, the ballot, voting instructions, and two envelopes to each of its members. Furthermore, the results were tabulated at the Board meeting.
The Amendment clearly indicated the language to be added and the language to be deleted. Presenting the owners with a redlined version of the proposed Amendment constituted the reasonably detailed form the CC&R’s require. While Pheil claims the cover letter accompanying the ballot and other documents misled the owners, we note there is no evidence in the record that supports this claim. Not one owner submitted a declaration claiming he or she voted in a particular way solely due to the information contained in the cover letter. Moreover, as the Association points out, the [798] cover letter highlighted the fact that the Amendment would provide for a 30-day minimum leasing requirement and the ability of the Association to evict tenants.[FN.3]
Notwithstanding the above, Pheil claims the Association failed to give notice of the election results pursuant to section 1363.03, subdivision (g). That section provides, “The tabulated results of the election shall be promptly reported to the board of directors of the association and shall be recorded in the minutes of the next meeting of the board of directors and shall be available for review by members of the association. Within 15 days of the election, the board shall publicize the tabulated results of the election in a communication directed to all members.” The Association does not claim that it gave notice of the election results; however, it does claim the results were reported at the Board meeting on November 15, 2006, and recorded in the minutes of the Board meeting (which are available to each member). Thus, the Association argues that it provided the required notice to its members, but even if it had not, the petition was not precluded. We agree with the Association.
Pheil does not oppose the results of the election. Rather, he opposes the Amendment itself. Pheil does not provide any argument or legal citation to any authority as to the consequences which the Association should suffer given its failure to comply with section 1363.03, subdivision (g). Under the circumstances of this case, we find such failure to be trivial. Accordingly, we cannot agree that such failure should result in precluding the Association from proceeding with its petition. Moreover, we cannot find that the trial court abused its discretion in failing to find that the balloting did not comply with the CC&R’s.
V. DOES THE AMENDMENT IMPAIR THE SECURITY INTEREST OF MORTGAGEES?
In his final contention, Pheil argues that the CC&R’s require approval of 51 percent of first mortgagees who have previously requested notification [799] under two stated circumstances, namely, where any amendment affects the rights or protection granted to mortgagees and where any amendment could result in a mortgage being canceled by forfeiture. He claims the Association failed to give such notice and to obtain such approval. Again, we note that Pheil fails to support his claim with any legal argument with citation of authorities on the points made. His brief reference to section 1356, subdivision (e)(3), is insufficient. Nonetheless, given the fact that the Association addressed the merits of the issue, so will we.
(6) Section 1356, subdivision (e)(3), forbids the court from approving any amendment to CC&R’s that impairs the security interest of a mortgagee, if approval of a specified percentage of the mortgagees is required under the CC&R’s. According to article XIII, section 13.2.2 of the CC&R’s, the following amendments require 51 percent approval of the first mortgagees: “(a) Any amendment which affects or purports to affect the validity or priority of Mortgages or the rights or protection granted to Mortgagees, insurers or guarantors of first Mortgages. [¶] (b) Any amendment which would require a Mortgagee after it has acquired a Lot through foreclosure to pay more than its proportionate share of any unpaid Assessment or Assessments accruing before such foreclosure. [¶] (c) Any amendment which would or could result in a Mortgage being canceled by forfeiture, or in a Lot not being separately assessed for tax purposes. [¶] (d) Any amendment relating to (i) the insurance provisions in Article VIII, (ii) the application of insurance proceeds in Article IX, or (iii) the disposition of any money received in any taking under condemnation proceedings. [¶] (e) Any amendment which would subject any Owner to a right of first refusal or other such restriction, if such Lot is proposed to be transferred.” The Amendment does not fall under any item in this list.
In his reply brief, Pheil claims the temporal restriction on renting “clearly impacts the ability of owners to pay their mortgages.” However, Mission Shores is a residential development. Pheil has not provided any evidence to the contrary. Other than his claim that he was told he could lease or rent his home and that he thereafter on occasion rented it to others, there is no evidence that he needed to borrow money to purchase his home, that he obtained a non-owner-occupied loan, or that he purchased his home with the sole purpose of renting it out to pay the mortgage.
Accordingly, we conclude the trial court did not abuse its discretion in finding that there was no impairment to the security interests of mortgagees.
[800] VI. DISPOSITION
The order is affirmed. The Association is entitled to its costs on appeal.
Ramirez, P. J., and King J., concurred.
[FN.1] All further statutory references are to the Civil Code unless otherwise indicated.
[FN.2] The Association argues that this issue is waived because Pheil failed to raise it in his written opposition. While the Association discounts the fact that Pheil did raise the issue during oral argument before the trial court, we do not.
[FN.3] The cover letter provided, in part, the following: “The Association’s [CC&R’s] currently discuss[] rental of residences in a very broad manner. There are few protections afforded to the Owners against tenants who treat the Association not as their personal home, but instead as a weekend party place…. [¶] Enclosed is a proposed amendment of Article II, Section 2.1…. The purpose of the proposed amendment is to further define the rights and obligations of Owners who rent or lease their residences. Among other things and consistent with the current Rules and Regulations, the proposed amendment places a thirty (30) day minimum on any lease and provides the Association with the right, but not the obligation, to evict problem tenants on an Owner’s behalf if the Owner refuses to take corrective action.”
Overcrowding within residential community associations may result in various problems and nuisance issues that adversely affect the quiet enjoyment of the association’s residents. Associations do have some authority to impose reasonable, non-discriminatory restrictions on the occupancy of condominium units:
“The authority of a condominium association necessarily includes the power to issue reasonable regulations governing an owner’s use of his unit in order to prevent activities which might prove annoying to the general residents…Therefore, a reasonable restriction upon the occupancy of individually owned units of a condominium project is not beyond the scope of authority of the owner’s association.” (Ritchey v. Villa Nueva Condo. Assn. (1978) 81 Cal.App.3d 688, 698-699.)
Discriminatory Age-Based Restrictions
Federal and state statutes prohibit residential restrictions that discriminate on basis of race, religion, natural original, sex, ancestry, familial status, or disability. With the exception of senior communities, occupancy restrictions may not be used to discriminate against families with children, nor may they be used to limit residency to persons over a certain age. (O’Connor v. Village Green Owners Assn. (1983) 33 Cal.3d 790.) However, the Department of Housing and Urban Development (HUD) has stated that:
“…in appropriate circumstances, owners and managers may develop and implement reasonable occupancy requirements based on factors such as the number and size of sleeping areas or bedrooms and the overall size of the dwelling unit. In this regard, it must be noted that, in connection with a complaint alleging discrimination on the basis of familial status, [HUD] will carefully examine any such nongovernmental restriction to determine whether it unreasonably operates to limit or exclude families with children.” (HUD – Occupancy Standards Statement of Policy.)
Occupancy Formulas The California Health & Safety Code and the Federal Uniform Housing Code both contain provisions that restrict the number of persons residing within a unit by utilizing formulas based upon the square footage of bedroom sizes. Various cities and counties within California have issued their own occupancy standards/formulas. Additionally, the California Department of Fair Employment and Housing (DFEH) uses what is known as the “two plus one” formula, which permits two (2) people to occupy each bedroom, with one (1) additional person in the living spaces (i.e., five (5) people may reside in a two bedroom unit). The DFEH formula has not gained formal legal status at either the state or federal level.
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.)
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).)
HOAs with significant populations of renters may encounter problems that do not arise in developments that consist of primarily owner-occupied homes and condominiums. Those problems typically include higher amounts of assessment delinquencies, more rules violations, lower maintenance standards, more insurance claims, etc. HOAs seeking to avoid such problems often amend their governing documents (i.e., amend their CC&Rs) to impose reasonable rental restrictions within their developments. California courts have recognized a HOA’s authority to take such action as well as its general power to regulate rentals:
“Reasonable restrictions on alienation of condominiums are entirely consistent with Civil Code section 711 in which the California law on unlawful restraints on alienation has its origins. The day has long since passed when the rule in California was that all restraints on alienation were unlawful under the statute; it is now the settled law in this jurisdiction that only unreasonable restraints on alienation are invalid. (Laguna Royale Owners Assn. v. Darger (1981) 119 Cal.App.3d 670, 682.)
“The 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 barbecues, and rental of units.” (Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, FN 6.)
“Here we hold, among other things, that homeowners associations may adopt reasonable rules and impose fees on members relating to short-term rentals of condominium units.” (Watts v. Oak Shores Community Assn. (2015) 235 Cal.App.4th 466, 468.)
Statutory Limitations on Rental Prohibitions within HOAs The policy of the California Legislature in seeking to address the state’s housing and homelessness crisis has resulted in several changes to the law that significantly limit the degree to which an HOA may restrict the rights of its members to rent out their homes. For information addressing those limitations and the only rental prohibitions that may be lawfully enforced, see “Limitations on Rental Prohibitions.”
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).)
