Capping Rentals Under Civil Code 4741

By Kelly G. Richardson, Esq. CCAL

 

Hi Kelly, thank you for your weekly articles, I really enjoy them. Regarding your recent article, does the section 4741 approval of rental caps as low as 25% of the HOA mean an HOA such as ours can disallow rentals above that percentage? We are a small community with surging rentals, creating automobile congestion on our streets. Thank you for your time, P.W., San Diego

 

Dear P.W.:

Civil Code Section 4741, new in 2021, allows HOAs to set rental caps as low as 25%. That is a minimum, so HOAs with current caps above 25% are unaffected by that aspect of the new law. HOAs adopting a rental cap should remember that Civil Code 4740(a) still applies so that the new cap, which is a partial prohibition, would apply only to owners acquiring title after the date the cap was voted into place. Sincerely, Kelly

Dear Kelly: A group of us would like to put out to a member vote to have our CC&R’s changed to have a 25% limit for rentals that is within the new Assembly Bill 3182 law in California.  The board says their decision is to not have any limit and our current CC&R’s do not have any restriction on the number of renters.  What can we do to get this out to a vote of all homeowners? E.P., San Diego

 

Dear E.P.:

Over the years, my experience has been that the subject of rentals is the most common source of controversy when associations are discussing updating their CC&Rs. Some association communities prefer wide open rentals while others prefer a cap or other limitations. Before you put the HOA to the expense of a membership vote, consider informally polling your neighbors to make sure you have strong support for the idea. Amending CC&Rs usually requires a majority vote of all members and sometimes even requires 75% approval vote to succeed. If you have enough support and the board still will not set a vote, you could petition for a special meeting of the membership. However, who is going to draft the proposed amendment? Normally that would be the HOA’s attorney, and the amendment must be properly drafted to prevent possible legal challenge. If you have a large amount of support for the idea, hopefully the board will listen to the community. Thanks for your question, Kelly

Dear Kelly: Civil Code 4740 has a paragraph grandfathering existing owners so that rental prohibitions would not apply, but now I see the new 4741 does not have that same paragraph.  Despite that, it is obvious that the purpose of both 4740 and 4741 is to limit the rent restrictions allowed by an HOA. T.Z., Santa Ana

 

Dear T.Z.:

Yes, the new section 4741 does not contain a grandfathering provision, although that is not really its point. When Civil Code Section 4740 became law in 2012, its main point was have newly-adopted full or partial rental prohibitions only apply to future owners. The new Civil Code Section 4741 goes much farther, banning all “unreasonable” restrictions by HOAs on rental of homes. To a certain degree, Section 4741 overshadows Section 4740 since it is difficult to conceive of a prohibition that could possibly be adopted without running afoul of Section 4741(a). Best regards, Kelly