Reasonable restrictions on the alienation of condominiums are entirely consistent with Civil Code section 711 in which the California law on unlawful restraints on alienation has its origins. The day has long since passed when the rule in California was that all restraints on alienation were unlawful under the statute; it is now the settled law in this jurisdiction that only unreasonable restraints on alienation are invalid. (Laguna Royale v. Darger)
The problems associated with too many renters in a development are widely recognized by the courts. As a result, reasonable rent restrictions have been upheld by the courts. The following list of cases is by no means exhaustive.
Greenfield v. Mandalay Shores Community Association (2018). The beachfront association adopted a rule requiring rentals be for a minimum of 30 days. The Coastal Commission demanded the association cease enforcement of the restriction alleging the requirement constituted a “development” affecting the density and intensity of the use of the coastal area, which required a coastal permit. The trial court disagreed and found that a 30-day minimum was not a “development.” The court of appeal reversed stating, "The decision to ban or regulate short-term rentals must be made by the City and Coastal Commission, not a homeowner’s association."
Watts v. Oak Shores Community Association (2015). A landlord challenged the association's restrictions on short-term rentals. The court ruled that associations have the right to restrict short-term rentals, (ii) boards can impose a reasonable fee to offset expenses associated with renters, and (iii) courts should defer to boards on decisions related to the maintenance, control and management of common areas.
Clark v. Oakhill Condominium Association Inc. (2011) (U.S. District Court, N.D. Indiana.) Plaintiffs bought a condominium as a rental property investment. When the association's governing documents were amended restricting rentals, Plaintiffs sued the association alleging housing discrimination. They claimed the restriction had a disparate impact on the availability of rental housing for minorities and interfered with their tenant's lease and with their own reasonable expectation to receive rental income. The court denied Plaintiffs' request for injunctive relief based on its conclusion that Plaintiffs had no evidence of discriminatory effect or discriminatory intent.
Harrison v. Sierra Dawn Estates (2010) An unpublished case that describes the problems associated with renters.
Colony Hill v. Ghamaty (2006). Associations have the power to limit room rentals as a commercial enterprise.
City of Oceanside v. McKenna (1989). Restrictions on leasing and the requirement imposed on owners to occupy their units are rationally related to the purposes set forth in the CC&Rs.
Laguna Royale Owners Ass'n v. Darger (1981). As long as rental restrictions are reasonable they will be upheld by the courts. Restrictions are reasonableness if: (i) rationally related to the protection, preservation or proper operation of the property; and (ii) exercised in a fair and nondiscriminatory manner.
Ritchey v. Villa Nueva Condominium Ass'n (1978). Amendment restricting leasing to persons 18 years of age and older was reasonable and was retroactively enforceable against a condominium owner.
Statutory Limitations. For information on rent restriciton limitations imposed by the Davis-Stirling Act, see Rent Restrictions and Prohibitions.
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