The Attack on Rental Restrictions

Despite our best efforts, the California Legislature recently passed — and the Governor signed into law — Assembly Bill 3182. Unfortunately, this is going to have a very rapid and significant impact on the enforcement of rental restrictions in many common interest developments. Some of these changes are not immediately apparent from a cursory reading of the new statute. This article will give an overview of the changes, and then discuss them in greater detail.

In general terms, the new law allows associations to prohibit short term rentals of thirty days or less, and to enforce a cap on rentals of twenty-five percent or more of the units in the association. Arguably, no other restrictions on rentals are allowed. To the extent that the owner lives anywhere on the rental property, including in the residence, in an Accessory Dwelling Unit (ADU), or in a Junior Accessory Dwelling Unit (JADU), then the property does not count as a rental unit at all. For more information about ADUs and JADUs, please see our earlier article on the subject. For purposes of this topic however, please note that ADUs and JADUs are not allowed in condominium developments, so this distinction will only apply to planned developments with properties on individual lots. Also note that AB 3182 includes a change allowing for both an ADU and a JADU to be constructed on the same lot.

As for the timing, all associations are required to fully comply with AB 3182 as of January 1, 2021, and to add further burden, any associations with conflicting provisions in their governing documents are required to amend those documents by no later than December 31, 2021. There are civil penalties for noncompliance built into the statute, and actual damages are available to offended parties.

More specifically, Assembly Bill 3182 makes the following changes to the California Civil Code:

AB 3182 adds an entirely new section to the Davis-Stirling Act, as Civil Code § 4741. Per § 4741, a condominium or stock cooperative association may not unreasonably restrict the rental or leasing of the owner’s unit. Similarly, a planned development association may not unreasonably restrict the rental or leasing of any of the owner’s individual lot, including the residence, ADU, or JADU.

An association also may not restrict the rental or leasing of a lot or unit to less than twenty-five percent of the total lots or units, however a higher percentage is allowed. This rental cap applies to all associations, including condominiums, stock cooperatives, and planned developments, but the rental of an ADU or JADU in a planned development will not count toward the cap.

As for the required duration of a lease, an association may only limit short-term rentals by imposing a minimum lease term of 30 days or less. Again, this applies to all associations.

Importantly, the residence on the property may not be counted as a rental unit at all if the owner lives anywhere on the property, including within an ADU or JADU. This means that owner-occupied rental properties are essentially exempt from the rental cap under the new law.

As mentioned above, all associations are required to comply with these changes by January 1, 2021 regardless of what the governing documents say. To the extent an association’s documents contain restrictions which conflict with these provisions, the association must amend those governing documents to be in compliance by no later than December 31, 2021. There is no shortcut built into the statute for complying with this requirement. Associations who need to amend their documents to conform to the new law will need to go through the regular membership approval process. Although legislation has been proposed which would ease this requirement, there is currently no guarantee that the law will be changed prior to the December 31, 2021 deadline.

Finally, the Legislature reaffirmed that new rental restrictions cannot be enforced against any owners who purchased their property at the association before the new rental restrictions were enacted. This means that, in the event an association’s non-conforming rental restrictions were nullified on January 1, 2021, any existing owners on that date are arguably exempt from any new rental restrictions which are later adopted.  In short, for many associations this will create a situation where all existing homeowners are grandfathered in and exempt from the rental restrictions, even if they wouldn’t have been in the prior year.

It is clear that these changes to the law will create a hardship on many of our community associations. Please do not hesitate to contact our offices with any questions you might have, or for assistance with bringing your governing documents into compliance, or with any of the enforcement issues which are bound to follow.