Sometimes, CC&Rs will limit the number of units a person or entity can own in the development. The most common restriction is either one or two units/lots. Such restrictions are reasonable so as to prevent investors from buying many or most of the properties in a development. The restriction keeps the development from turning into an apartment complex.
Lenders. Another reason for limiting ownership is to avoid the problem where some banks will not lend to anyone buying into the development or refinancing a unit if any one person or entity owns more than 10% of the units/lots.
Davis-Stirling. The Davis-Stirling Act provides another rationale for limiting ownership--the loss of liability protection under Civil Code § 5800(e). The legislature removed the protection for any members owning more than two separate interests.
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