Problems with Renters. Condominium and homeowners associations often find that (i) renters do not care for their rentals to the same degree as owner-occupants, (ii) renters tend to ignore the association's rules and regulations more than owner-occupants, and (iii) absentee owners have a higher delinquency rate than resident owners. Harrison v. Sierra Dawn Estates (2010) is an unpublished decision that describes the problems associated with renters.

Insurance Carriers and Lenders. The insurance industry has also recognized the problems associated with renters and takes notice when the rental percentage reaches 30-35%. Many preferred carriers draw the line at this percentage because claims histories have shown that associations with high rental populations have more claims. As a result, associations with excessive rentals are charged higher premiums. Lenders routinely ask for the percentage of rentals in a development, since a high percentage depresses market values.

Power to Regulate. Courts have recognized that homeowners associations can regulate rentals (Nahrstedt v. Lakeside Village (1994) 8 Cal.4th 361, 374, fn. 6) "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 barbecued, and rental of units."; Colony Hill v. Ghamaty (2006) 143 Cal.App.4th 1156, 1169 (association has power "to maintain its family character by prohibiting uses other than for single-family dwelling purposes."); City of Oceanside v. McKenna (1989) 215 Cal.App.3d 1420; Liebler v. Point Loma Tennis Club (1995) 40 Cal.App.4th 1600, 1611). Room rentals are included. See case law supporting rental restrictions.

CAR Interference. Although the courts support the proposition that a duly adopted restriction may be applied to existing owners as well as subsequent purchasers (Villa de Las Palmas v. Terifaj), the California Association of Realtors inserted itself in the HOA industry and sponsored legislation that became Civil Code §1360.2 which exempts owners in a common interest development from rent restrictions unless the restriction was in effect prior to the date the owner bought into the development. The statute takes effect January 1, 2012.

Notice of Restriction. In the event an association has a restriction in the governing documents limiting the  occupancy, residency, or use of a separate interest on the basis of age, owners must, as soon as practicable before transfer of title, provide notice of the restriction to the prospective purchaser. Civil Code §1368(a)(2).

ASSISTANCE: Despite the problems created by the California Association of Realtors, properly worded rent restrictions can still be adopted that will minimize the negative impact of renters. Contact us for amending your association's governing documents to regulate rentals.