Inherited Property
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INHERITED PROPERTY RENT RESTRICTIONS

QUESTION: Our board will discuss rent restrictions at our next meeting. One restriction would be a 2-year restriction on leasing after purchase. The other, inherited property cannot be rented for two years. Does the Davis-Stirling Act protect inherited property so my son could rent my home since he is not 55+ and cannot live in the community at this time should I die?

ANSWER
: A two-year restriction on buyers renting their units is a good restriction. I’ve been using one for almost twenty years which has been very effective in keeping rentals low. This particular form of restriction offers the same benefits of a rental cap without the problems associated with strict rental ceilings.

Benefits
. The chief benefit is that it discourages investors from buying units since they would have to wait two years before they could turn the unit into a rental. As a result, your association gets buyers who want to make your community their home. Owner-occupants are more inclined to take care of their property, follow the rules and volunteer to serve on committees and boards. Investors and tenants, on the other hand, are not predisposed to take care of their property, follow the rules or volunteer their time to improve the community.

Non
controversial. By restricting buyers rather than existing owners, the restriction satisfies Civil Code §4740 which prohibits the implementation of new rent restrictions against current members. Buyer restrictions give present owners the flexibility to rent their units should they need to. It has been my experience over the past twenty years that a two-year restriction on new owner leasing stabilizes the community and protects property values. It allows rentals to reach a natural level in the 5% to 7% range–a more than acceptable level for a community.

55+ Community. Your son’s ability to install tenants after you die will depend on how the restriction is written. Some associations make no exception for inherited properties. In those cases, the person inheriting the property would have to sell or leave it empty for two years if he wanted to install a renter. Other associations adopt language that allow inheritees to rent out the property.

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Adams Stirling PLC