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| Four story condominium bldg |
Condominiums, also known as "separate interests", have been viewed by some buyers as rental opportunities for investment purposes. HOAs may or may not have updated governing documents which address the most current requirements concerning rentals: some HOAs may tell owners that no rentals are allowed, and at the other end of the spectrum, some do nothing to address how many rentals there are.
But the truth is that a law was passed that effective January 1, 2021, common interest developments may limit the total number of rentals to no less than 25% and vacation rentals (30 days or less) may be prohibited. Civil Code § 4741). HOAs (common interest developments) were required to amend their governing documents by December 31, 2021. But even if they don't, the law is still in effect. Occasionally, in some MLS listings are statements that contradict the current law, so if a buyer in escrow sees contrary information in the CCRs or operating rules, or any other document, it would be a good time to review with their agent or an attorney about the purchase. Or another situation is that the HOA wants a lower renter percentage than what is currently allowed, another reason to ask questions in escrow if you believe that you're legally entitled to have a tenant occupied property after close of escrow. Or you decide you can have a tenant, but it turns out there's a waiting list and another owner is entitled to rent out their unit next.
Accessory Dwelling Units (ADUs) and junior ADUs do not qualify as a separate interests under this law. Moreover, a separate interest, an ADU or junior ADU is not counted as occupied by a renter as long as the separate interest itself is occupied by the owner. A $1000 penalty can be assessed against a CID that willfully violates these rules.
However, the probation would still allow for "reasonable" restrictions on rental or leasing a separate interest even if that reasonable restriction results in less than 25% of the separate interests being rented. And to complicate the picture a little, the right of any owner who acquired title to their property before January 1, 2021, to rent or lease their property remains unchanged. Prior law held that: an owner (member) in a common interest development is exempt from any prohibition in a governing document against renting or leasing their property, unless that prohibition was in effect before the member acquired title. The law does not apply to rental prohibitions in effect before 2012. An owner who does rent a property is also required, prior to renting a unit, to provide to the HOA verification of the date the member acquired title and the name and contact information of the prospective tenant or prospective tenant’s representative. And some HOAs may require a copy of the lease prior to the tenant moving in. A member’s right to rent under this law includes transfers exempt from property tax reassessments, such as probate, inter-spousal, and parent-to-child transfers, or a transfer to add a joint tenant.
(Cal. Civ. Codes §§ 4740 and 4741.)
So if this sounds just a little complicated, as a prospective buyer who is looking at a property for rental purposes within an HOA, you must 1) know the current law at the state and city level, and 2) carefully review the Association's documents. HOAs have the right to monetarily penalize for violations, hold hearings, or take other enforcement action. This is why reviewing the governing documents is so important.
Additionally, some cities have laws that restrict your ability to host paying guests for short periods, typically aimed at Airbnb type rentals. These laws are often part of a city's zoning or administrative codes. In many cities, you must register, get a permit, or obtain a license before you list your property or accept guests. Certain types of short-term bookings may be prohibited altogether. Local governments vary greatly in how they enforce these laws. Penalties may include fines or other enforcement.
(California Association of Realtors was a helpful resource for this post.)
Julia Huntsman, REALTOR, Broker | http://www.abodes.realestate | 562-896-2609 | California Lic. #01188996
