The Giardinelli Law Group and J Niswonger for Plaintiffs, Cross-defendant, and Appellants.
June Babiracki Barlow and Neil D. Kalin for the
California Association of Realtors as Amicus Curiae on behalf of
Plaintiffs and Appellants.
Epsten Grinnell & Howell, Mary M. Howell, and William S. Budd for Defendant, Cross-complainant, and Respondent.
Sierra Dawn Estates
(Sierra Dawn) is a senior citizen mobile home park in Hemet. It is a
common interest development; thus, as with a condominium, units are
individually owned, but common areas are owned by a homeowners
association, defendant Sierra Dawn Estates Homeowners Association, Inc.
(the Association). Ownership is subject to a set of recorded conditions,
covenants, and restrictions (CC&R's). The Association is
responsible for enforcing the CC&R's.
In 2005, the members
of the Association, by majority vote, adopted a set of CC&R
amendments restricting the rights of owners to rent their units,
including that: (1) The new owner of a unit cannot rent it out for at
least one year after acquiring it; (2) the maximum term of a lease is
one year; (3) leased units cannot exceed 20 percent of the total units;
and (4) no owner can lease more than three units.
Considered in the
abstract, these rental restrictions seem draconian. The three-unit
restriction seems particularly harsh as applied to the plaintiffs in
this case; between them, they own and rent out a total of about 24 units
in Sierra Dawn.
urge us to consider the validity of rental restrictions precisely thus —
in the abstract, as a pure question of law. This overlooks the fact
that the Association introduced overwhelming evidence that renters
create some genuine problems, in senior communities in general and at
Sierra Dawn in particular, and that the restrictions are in fact a
measured response to these problems. Even worse, it overlooks
plaintiffs' own failure to introduce evidence of the extent to which the
restrictions are a genuine burden on them.
In light of this record, the trial court properly ruled that the rental restrictions were valid. Hence, we will affirm.
I. FACTUAL BACKGROUND
A. Historical Facts.
Sierra Dawn is a
common interest development in Hemet. It consists of 1,474 lots for
mobile homes. It is limited to occupancy by senior citizens, aged 55 or
older. The Association is the homeowners association for Sierra Dawn.
Aldersons) are Isabelle Harrison and her adult children, Curtis
Alderson, Larry Alderson, Richard Alderson, and Sally Raehl. The
Aldersons collectively own approximately 25 units in Sierra Dawn;
Harrison alone owns some interest, ranging from 5 to 100 percent, in
approximately 23 of them. Harrison lives in one unit, and the other 24
or so are rented out.
When the Aldersons
purchased their units, the CC&R's expressly allowed owners to lease
out their units, with no restrictions other than those that would apply
equally to owner-occupied units (e.g., the age requirement).
In early 2004, a
number of owners of units in Sierra Dawn complained to the Association
about the increasing number of rentals. As a result, the Association
established an "ad hoc rental committee" (the Rental Committee). The
Rental Committee found that rentals were not as well maintained as
owner-occupied units. From the police, it learned that felons, parolees,
and registered sex offenders were looking for rental units in Hemet,
including in senior housing. It was also concerned about a decrease in
Based on the Rental
Committee's findings, the Association asked its existing "governing
documents committee" (the Documents Committee) to consider adding rental
restrictions to the Association's governing documents. Ultimately, the
Documents Committee proposed the following restrictions:
A. Not more than 20
percent of the units could be leased at any one time. However, the
Association would have discretion to allow exceptions "for good cause
(e.g.[,] temporary work[-]related transfers [or] temporary
hospitalization) . . . ."
B. No owner could lease more than three units at a time.
C. A unit could not
be leased until at least a year after acquisition; in other words, the
new owner would have to either live in it or leave it vacant for a year.
D. A lease could not have a term longer than one year.
E. Both new and renewed leases had to be approved by the Association.
F. An owner could not lease less than his or her entire interest in a unit.
G. Existing leases
would be "grandfathered" — i.e., they would not be subject to the new
rental restrictions. When an existing lease expired, however, the
underlying unit would become subject to the restrictions.
Committee recommended the 20 percent limit on rentals because the rental
level at the time was 18 percent; it had never exceeded 20 percent.
It recommended a
limit of three rentals per owner for two reasons. First, the City of
Hemet regarded the rental of more than three units as a business
requiring a business license. Second, relatively few owners owned more
than three units, so "this would impact the least number of [owners]."
The one-year waiting
period after acquisition was taken from rental restrictions that had
been upheld in Florida and Illinois. It was intended to make "the owner .
. . aware of the social nature of the [A]ssociation," which "would
limit the number of rentals" and promote volunteerism.
one-year maximum lease term would give the Association the opportunity
to disapprove a renewal by a tenant who had already violated the
At the same time,
the Documents Committee also recommended certain other amendments. A
number of these were necessitated by changes in state law, including the
A. The existing
CC&R's prohibited pets. Under state law, however, they had to allow
at least one pet per unit. (See Civ. Code, § 1360.5, subd. (a); see also
id., subd. (e).)
B. The existing
CC&R's effectively prohibited the display of the United States flag.
However, this had been made illegal. (See Civ. Code, § 1353.5.)
C. The existing CC&R's prohibited noncommercial signs. This had been made illegal. (See Civ. Code, § 1353.6, subd. (a).)
D. The existing
CC&R's provided that the pro forma operating budget had to be sent
out 45 to 60 days before the new fiscal year. State law had changed so
as to require that it be sent out 30 to 90 days before the new fiscal
year. (See Civ. Code, § 1365, subd. (a)(4).)
On February 3, 2005,
the Association held a "town hall" meeting at which it first disclosed
the proposed amendments. Back in 2004, the Aldersons had begun hearing
rumors that the Association intended to amend the CC&R's. In
December 2004, Harrison had asked the Association for a copy of the
proposed amendments, without success. The Documents Committee, however,
had not finished its work on the proposed amendments until just before
the February meeting.
At the meeting,
Clark Barton, the chair of the Documents Committee, gave a presentation
on the amendments. It featured a copy of the CC&R's, redlined so as
to highlight the amended portions, projected on a screen. Attendees were
also provided with a similarly redlined hard copy of the CC&R's.
During his presentation, Barton stated: "Sacramento is making changes in
the laws that force us to change our documents. Right at the moment we
are in violation. We will be in violation of state codes until we pass
these CC&R's. It's as simple as that."
Ballots had already
been printed; they were mailed out shortly afterward. The ballots
stated, "Sierra Dawn . . . will be in violation of certain state codes
if [the amendments] are not passed." Yet another redlined copy of the
CC&R's was mailed along with each ballot.
repeatedly broadcast a statement on Sierra Dawn's closed-circuit
television system that "passage . . . is absolutely essential to keep
Sierra Dawn Estates from being in continued violation of state statutes .
. . ."
On February 10, 2005
the Association held a second town hall meeting regarding the
amendments. Harrison appeared at both meetings and vocally opposed the
proposed rental restrictions.
The ballots were due
back by February 26, 2005. Once they were counted, the amendments
passed, by 53 percent of all potential votes, and by 84 percent of all
actual votes. On March 4, 2005, the amendments were recorded and went
Thereafter, when the
Aldersons asked the Association to approve new leases, it refused,
because they already had at least three leased units. In October 2005,
however, the Association entered into a stipulation allowing them to
lease all of their units while this action was pending.
B. Evidence Regarding Reasonableness.
1. Plaintiffs' witness.
Dr. Jon Pynoos, an
expert gerontologist, opined that the rental restrictions would
"reduc[e] housing at the low and moderate income level." The Aldersons'
units were "appropriate for low to moderately low income individuals[.]"
He conceded, however, that while the rental restrictions reduced
lower-income rental opportunities, they "could" actually increase
lower-income ownership opportunities.
2. Defendant's witnesses.
F. Scott Jackson was
an expert in common interest subdivision law. In his opinion, the
rental restrictions were reasonable. He explained that owners, as
opposed to renters, tend to take better care of their property. Owners
are also more compliant with rules such as use restrictions and parking
restrictions, and it is easier to enforce such rules against them.
Owners tend to be more involved in community activities. A high rental
rate impairs the willingness of mortgage lenders to make loans on units
in a community. Finally, the rental restrictions provided exceptions for
existing leases and for "hardship cases." The California Department of
Real Estate had approved similar rental restrictions for new projects.
According to Daniel
Goodrich, Sierra Dawn's property manager, "rentals ma[d]e up the
majority" of maintenance violations at Sierra Dawn, as well as the
majority of age violations. Since the rental restrictions had gone into
effect, there were fewer complaints about maintenance.
Mark Trabing, the
housing and code enforcement manager for Hemet, testified that, in his
opinion, the rental restrictions did not violate the city's policies.
The city generally preferred ownership to rental, because "ownership
communities typically [a]re more stable and you have less calls for
service to the police department." The homes in Sierra Dawn did not
qualify as "affordable housing" for purposes of Hemet's general plan.
Richard Masyczek was
the planning director for Hemet. He testified that the rental
restrictions "help the city policy." Generally, the city preferred to
"place rental units into complexes that can be regulated." The biggest
problems with unregulated rental units were crime and code violations.
That was true even in senior communities.
Shauna Clark was a
former city administrator of the City of San Bernardino. She testified,
based on a statistical analysis comparing Hemet police activity logs to
Sierra Dawn rental lists, that "there were a disproportionate number of
police calls for service to rental units." In 2006, police calls at
Sierra Dawn went down for the first time in at least three years; "the
main reason was that . . . the number of rental units had declined."
Sue Anne Sweeney, an
expert on senior citizen developments, testified that renters are a
particularly acute problem for such developments, because senior
citizens have different needs, as follows.
First, seniors want
"a social connection." "They have to depend on one another." "They won't
get as connected with the renter . . . ."
living on a fixed income are particularly concerned about dues
increases. Volunteerism reduces the costs that must be passed along to
residents. "[R]enters typically aren't going to volunteer as readily as a
homeowner . . . ."
Third, seniors are
particularly concerned about maintenance. Moreover, maintenance problems
tend to increase costs. "[M]ost of the problems . . . with
[maintenance] come from renters . . . ." Also, "the bulk of age
violations arise in a rental context[.]"
Wayne Guralnick was
an attorney expert in homeowners association elections. In his opinion,
the Sierra Dawn election complied with California law as well as with
the standards of the industry. It was "the standard of the industry" for
a committee to prepare proposed amendments without any input from
individual homeowners. The Association actually went above and beyond
the applicable standard by holding the "town hall" meetings.
II. PROCEDURAL BACKGROUND
In June 2005, the
Aldersons filed this action against the Association. They alleged that
the rental restrictions were an unreasonable restraint on alienation and
that the Association had made misrepresentations to the owners who had
voted for the rental restrictions. After a bench trial, the trial court
found that the rental restrictions were not an unreasonable restraint on
alienation. It further found that the electoral proceedings were not
misleading, improper, or unlawful. It therefore entered judgment against
the Aldersons and in favor of the Association. The Aldersons filed a
timely notice of appeal.
III. THE REASONABLENESS OF THE RENTAL RESTRICTIONS
The Aldersons contend that the rental restrictions are an unreasonable restraint on alienation.
are an inherent part of any common interest development and are crucial
to the stable, planned environment of any shared ownership arrangement.
[Citations.]" (Nahrstedt v. Lakeside Village Condominium Assn.8 Cal.4th 361,
372-373.) "[S]ubordination of individual property rights to the
collective judgment of the owners association together with restrictions
on the use of real property comprise the chief attributes of owning
property in a common interest development." (Id. at p. 374.) (1994)
contained in the CC&R's of a common interest development are
"enforceable . . . unless unreasonable . . . ." (Civ. Code, § 1354,
subd. (a).) Such use restrictions are "cloaked . . . with a presumption
of reasonableness [which] shift[s] the burden of proving otherwise to
the party challenging the use restriction. [Citations.]" (Nahrstedt v. Lakeside Village Condominium Assn., supra,
8 Cal.4th at p. 380.) "[S]uch restrictions should be enforced unless
they are wholly arbitrary, violate a fundamental public policy, or
impose a burden on the use of affected land that far outweighs any
benefit." (Id. at p. 382.)1
A. Standard of Review.
The Aldersons urge
us to review the judgment independently. As they concede, however, the
underlying facts were disputed. "Where the evidence before the trial
court was in conflict, its factual determinations, whether express or
implied, are reviewed for substantial evidence. We interpret the facts
in the light most favorable to the prevailing party. [Citation.]" (Sahlolbei v. Providence Healthcare, Inc. (2003) 112 Cal.App.4th 1137, 1145 [Fourth Dist., Div. Two].)
The application of
the "reasonableness" standard to the facts, as thus determined, is a
question of statutory interpretation (see Nahrstedt v. Lakeside Village Condominium Assn., supra, 8 Cal.4th at pp. 378-379) or at the very least a mixed question of fact and law (see People v. Cromer 24 Cal.4th 889, 894), both of which we review independently. (2001)
B. Violation of Public Policy.
The Aldersons argue
that the rental restrictions violate a fundamental public policy in
favor of low- to moderate-income housing and/or senior housing.
We recognize that
"the provision of housing for low and moderate income persons is in
keeping with the public policy of this state." (City of Oceanside v. McKenna (1989) 215 Cal.App.3d 1420, 1427.) Here, however, there was substantial evidence that this public policy was not violated.
The Aldersons rely
exclusively on the testimony of their expert, Dr. Jon Pynoos. He
conceded, however, that while the rental restrictions reduced low-income
rental opportunities, they "could" actually increase low-income ownership
opportunities. Moreover, Hemet's planning director testified that, in
Hemet, "the shortage in owner-occupied units in [low to moderate] price
ranges is larger than the shortage of rental opportunities[.]"
Hemet's housing and
code enforcement manager testified that the rental restrictions did not
violate Hemet's "public policy on providing housing." The homes in
Sierra Dawn did not even qualify as "affordable housing" under Hemet's
Thus, the Aldersons failed to make out any violation of public policy.
C. The Justification for the Rental Restrictions.
The Aldersons also
argue that the rental restrictions "bear no rational relationship to
Sierra Dawn's stated goals." There was ample evidence to the contrary.
The Association offered essentially three reasons for adopting the rental restrictions.
First, rentals were
correlated with crime. Hemet's housing and code enforcement manager
testified that there were typically fewer police calls in "ownership
communities." Moreover, Clark testified that, specifically at Sierra
Dawn, "there were a disproportionate number of police calls for service
to rental units." After the number of rentals went down, the number of
police calls also went down.
The Aldersons argue that "police calls do not equate to crime . . . ." However, they do relate
to crime. At least in the absence of some other explanation, it seems
most likely that an increase (or decrease) in police calls reflects an
increase (or decrease) in crime. The Aldersons also argue that Clark's
study was not "definitive," because she excluded some police calls from
her analysis. Clark explained, however, that she considered only five
categories of calls — "major property," "minor property," "major
personal," "minor personal," and "nuisance." She excluded calls
regarding "minor disturbances," such as noise, false alarm calls, and
canceled calls. This actually made her data more meaningful, not less
Second, rentals were
correlated with increased rule violations — particularly violations of
maintenance and age rules — which in turn tended to increase the
Association's administrative costs. The Rental Committee had
investigated this and had found that rentals were not as well maintained
as owner-occupied units. The Association's property manager testified
that rentals accounted for most of the maintenance violations at Sierra
Dawn. Since the rental restrictions had gone into effect, there had been
fewer maintenance complaints. Likewise, rentals accounted for most of
the age violations.
Admittedly, as the Aldersons point out, the Association's written
records did not specifically note whether violations related to rented
or owner-occupied property. Nevertheless, the testimony of these
percipient witnesses, based on their personal knowledge, was substantial
Association's experts supported their testimony. According to Jackson,
owners tend to take better care of property and to be more compliant
with rules. Sweeney likewise testified that in senior communities, "most
of the problems . . . with [maintenance] come from renters" and "the
bulk of age violations arise in a rental context[.]"
Third, rentals were
correlated with reduced volunteerism. In Sweeney's experience, "renters
typically aren't going to volunteer as readily as a homeowner . . . ."
Jackson agreed that owners tend to be more involved in community
In addition to
challenging the rental restrictions as a whole, the Aldersons also
challenge particular restrictions as arbitrary. For example, they argue
that limiting lease terms to one year will increase renter turnover and
hence decrease volunteerism. The one-year limit, however, does not
require that every renter be evicted every year. To the contrary, it
simply contemplates that every lease will have to be renewed from year
to year, which will give the Association an opportunity to disapprove
renewal, if it has good cause — typically, if the renter has a history
of rule violations.
They likewise argue
that prohibiting new owners from leasing for at least one year will
increase turnover and thus decrease volunteerism. The Association's
reasoning, however, was that new owners will most likely be buying for
their own occupancy and not for rental and that owners are more likely
to volunteer than renters. We cannot say that this was arbitrary. In any
event, under Nahrstedt, the Aldersons had the burden of proving that the rental restrictions were unreasonable. There was no evidence that this particular requirement would not actually further the Association's goals.
"[T]he reasonableness or unreasonableness of a condominium use restriction . . . is to be determined not
by reference to facts that are specific to the objecting homeowner, but
by reference to the common interest development as a whole." (Nahrstedt v. Lakeside Village Condominium Assn., supra,
8 Cal.4th at p. 386.) The record more than adequately demonstrates that
the rental restrictions benefit the community as a whole.
acknowledge that the burden of the restrictions falls disproportionately
on those who, like the Aldersons, own more than three units in Sierra
Dawn. However, the magnitude of this burden is unclear. Harrison,
for example, cannot continue to lease out all of her 25 units. She can
continue to live in one and to lease out two more, but as the leases on
the others expire, she will lose the rental income from them; presumably
she will have to sell them. There was no evidence, however, that having
to sell them would cause her a financial loss or any other harm.2 (See City of Oceanside v. McKenna, supra,
215 Cal.App.3d at p. 1429 [requirement that owner either occupy unit or
sell it was not a forfeiture where resale would be at a fair price].)
Association of Realtors, as amicus curiae on behalf of the Aldersons,
argues that the rental restrictions are unreasonable as a matter of law
because they apply to owners who purchased their property before they
went into effect. It claims that the "basic right" to rent must be
grandfathered. This argument is premised on the fact that the owner of
more than three units is effectively forced to sell.
This argument may
have merit in an appropriate case, but this is not such a case. We
repeat, the Aldersons had the burden of proving that the rental
restrictions were unreasonable. While there was some evidence that they
might have to sell some of their units, there was no evidence of the
financial effect that this would have on them. In the absence of such
evidence, we cannot just presume — as the amicus would have us do — that
the effect would be "devastating."
In sum, then, we conclude that the trial court could properly find that the rental restrictions were reasonable.
IV. DUE PROCESS VIOLATIONS
The Aldersons also
contend that the manner in which the rental restrictions were adopted
violated procedural due process. They cite no authority, however, to the
effect that any due process requirement actually applied, much less as
to what due process required. Accordingly, we deem this entire
contention forfeited. (Nelson v. Avondale Homeowners Assn. (2009) 172 Cal.App.4th 857, 862 [Fourth Dist., Div. Two].)
alternatively, the contention lacks merit. "It is well established that
`[o]nly those actions that may fairly be attributed to the state . . .
are subject to due process protections.' [Citations.]" (Shoemaker v. County of Los Angeles (1995) 37 Cal.App.4th 618, 631.) The Association's adoption of the rental restrictions was not state action.3 (Schmidt v. Superior Court (1989) 48 Cal.3d 370, 388-389; see also Homestead Savings v. Darmiento (1991) 230 Cal.App.3d 424,
433 ["A state's mere regulation of the exercise of a private power
allowed by the state law and which is exercised solely on the basis of
the power and without compulsion from the state does not convert the
actor's conduct into state action."].)
complain that there was not enough time between February 3, 2005, when
the rental restrictions were first disclosed, and February 26, 2005,
when ballots were due, "to organize any significant opposition to the
proposed changes." Again, however, they cite no evidence to
support this, and there is none. The Association held two "town hall"
meetings to inform its members regarding the proposed rental
restrictions, and Harrison spoke at both. There is no evidence that the
Aldersons so much as considered mounting a further opposition, much less
that they were prevented from doing so.
In their reply
brief, the Aldersons argue that this sequence of events violated Civil
Code section 1355, subdivision (b), which provides that a proposed
amendment to CC&R's must be distributed to all owners "not less than
15 days and not more than 60 days prior to any approval being solicited
. . . ." They never raised this particular argument below; thus, they
have forfeited it. (Fourth La Costa Condominium Owners Assn. v. Seith159 Cal.App.4th 563, 582, fn. 5.) They have additionally forfeited by failing to raise it in their opening brief. (Doe v. California Dept. of Justice 173 Cal.App.4th 1095, 1115.) (2008) (2009)
Aldersons also complain that the Association supposedly made two types
of misrepresentations regarding the rental restrictions. First, it
stated that the proposed amendments were necessary to comply with state
law; while this was true of some of the amendments, such as the pet
restrictions, it was not true of the rental restrictions. Second, it
supposedly misrepresented the extent to which units that were already
leased would be grandfathered. Yet again, however, the Aldersons do not
cite any evidence that anyone was actually deceived. (See Mission Shores Assn. v. Pheil 166 Cal.App.4th 789,
797-798 [rejecting claim that cover letter accompanying homeowners
association ballot was misleading where there was no evidence that any
homeowner voted in reliance on cover letter] [Fourth Dist., Div. Two].)
They themselves voted against the proposed amendments, so obviously they did not rely on the supposed misrepresentations. (2008)
We therefore conclude that the Aldersons have not established any due process violation.
The judgment is
affirmed. In our tentative opinion (see Ct. App., Fourth Dist., Div.
Two, Internal Operating Practices & Proc., VIII, Tentative opinions
and oral argument), we proposed to award costs to the Association. At
oral argument, the Aldersons argued that the Association could not
recover costs, citing Civil Code section 1363.09. That section provides
that, in an action by a member of a homeowners association "to enforce
his or her rights pursuant to this article," "[a] prevailing association
shall not recover any costs, unless the court finds the action to be
frivolous, unreasonable, or without foundation." (Civ. Code, § 1363.09,
refers to title 6, chapter 4, article 2 of the Civil Code (article 2),
sections 1363.03 through 1363.09, governing the conduct of homeowners
association elections. The gravamen of the action, as well as this
appeal, was an alleged violation of Civil Code section 1354, which is
not part of article 2. While the Aldersons did also challenge the
election, they did so on grounds unrelated to article 2. Finally, even
assuming that some costs; the costs would simply have to be apportioned. (See Federal Deposit Ins. Corp. v. Dintino 167 Cal.App.4th 333, 358.) of the Aldersons' claims could be deemed to assert their rights under article 2, the Association would still be entitled to (2008)
Association is awarded costs on appeal against the Aldersons. This
award, however, is without prejudice to a request in the trial court to
Civil Code section 711 generally prohibits unreasonable restraints on
alienation. By contrast, Civil Code section 1354 specifically prohibits
Aldersons do not argue that there is any difference between these two
standards. Quite the contrary: They assert that Civil Code section 1354
"modified" Civil Code section 711's "blanket proscription against
restraints on alienation . . . with respect to common interest
developments." Thus, they urge us to review the rental restrictions
under the standard of Civil Code section 1354, as set forth in Nahrstedt.
therefore assume, without deciding, that as long as the rental
restrictions do not violate Civil Code section 1354, they necessarily
also do not violate Civil Code section 711. (See, e.g., Nahrstedt v. Lakeside Village Condominium Assn., supra,
8 Cal.4th at pp. 381-382 [analyzing reasonableness of CC&R's under
standards generally applicable to equitable servitudes].)
As the Association points out, selling via an installment land sales
contract would provide the Aldersons with some of the benefits of
rental, including cash flow.
3. Unlike the right to due process, the common law right of fair procedure can apply to private action. (See generally Yari v. Producers Guild of America, Inc. (2008) 161 Cal.App.4th 172, 176-177.) The Aldersons, however, have never invoked this right. Accordingly, we need not decide how it might apply here.