Bad News for Beachfront HOAs Regarding Vacation Rentals

While short term rentals present an opportunity for members to make a profit on their home when not in use, such rentals also present many potential problems for both the municipality and the association. Weekender occupants are more likely to be less courteous and responsible to neighbors. Many will argue short term rentals to be “non-residential” use of the residence, more akin to a hotel. Cities may wish to limit hotel-type usage in this context, where they have no control nor collect bed tax. Many associations amend their governing documents to ban rentals shorter than one year, ban subletting, or just specifically banning vacation short term rentals. Short term rentals are often perceived as a “non-residential” or business usage of the common interest development residence, and are therefore deemed inconsistent with most residential HOA CC&Rs.

An Oxnard association of homeowners was surely quite disappointed with a Court of Appeals ruling announced on March 27, 2018 in the case of Greenfield v. Mandalay Shores. The Mandalay Shores Community Association, formed in 1959, consists of 1,465 detached home lots on public streets. There are recorded CC&Rs but no common area. Its board of directors adopted a resolution banning rentals shorter than 30 days. The resolution proved to be controversial, and a group reported to consist of about 60 homeowners supported a lawsuit by a homeowner named Greenfield to challenge the policy. After an adverse finding at the trial court level, Greenfield appealed.

There have been other recent legal challenges to short term rental bans in beach areas, but this appears to be the first case in which the opinion was published.

The California Coastal Act (Public Resources Code Sections 30000-30900) establishes a 1,000 yard “Coastal Zone” as a protected area for beach access (Public Resources Code 30103(a)). This group of homes in Oxnard was within that zone.

The appellate ruling overturned the association resolution, finding that the association policy adversely affected beach access. The opinion stated that the association would have to seek approval from both the city and the California Coastal Commission before imposing a short term rental ban.

While the Mandalay Shores group is (according to the association) not a common interest development falling under the Davis-Stirling Act, this ruling almost certainly will impact any common interest development association which is within the 1,000 yard Coastal Zone.

Some cities, such as Hermosa Beach, have adopted ordinances banning short term rentals (30 day minimum). Hermosa Beach’s ordinance was upheld in early 2018 as valid and as not violating the Coastal Act, but that opinion was not published and so is not considered a binding legal precedent. Another distinction is that the ruling involved a city, which has greater legal power than homeowners associations.

Common interest developments within the Coastal Zone should be cautious about short term rentals, and such associations should consult with their legal counsel about other ways to handle the problems created by short term rentals. For example, the association may tighten their rules regarding resident conduct, and hold owners responsible for their tenants’ behavior. Associations may also wish to revisit the 2015 published ruling in Watts v. Oak Shores, which validated an association’s move in/out fees, which were based on rough but reasonable actual cost calculations.

Written by Kelly G. Richardson

Kelly G. Richardson Esq., CCAL, is a Fellow of the College of Community Association Lawyers and a Partner of Richardson | Ober | DeNichilo LLP, a California law firm known for community association advice. Submit questions to [email protected]. Past columns at www.hoahomefront.com. All rights reserved®.