Reader Questions - Can We Control Short Term Rentals?

Dear Kelly,

My HOA is facing a perplexing issue – internet-based short-term rentals. I understand it is becoming more common. As we revise our CC&R’s, in addition to a no-subletting clause, we want to add another clause that states listing with internet rental sites is a breach of the governing documents and the tenant’s lease agreement and cause for eviction. Would this be enforceable in court or is there a more effective way of handling this problem?

Thanks,

R.W., Coronado.

Dear R.W.,

Many associations amend their governing documents to ban rentals shorter than one year, and often go even further to explicitly ban short term rentals. I gather from your question that there may be a problem in your association with tenants subletting their units via internet web sites.

Short-term rentals may be inconsistent with the “residential usage” requirement in the typical HOA CC&Rs. Such rentals are more akin to private hotels than normal residential uses.

Some cities are also cracking down on short term rentals, because many cities believe that short term rental landlords are cheating the city by not paying a bed tax like normal hotels. Anaheim, Laguna Beach, San Francisco and Santa Monica are among the many cities restricting or regulating them. Check your city ordinances, which may also be of help in keeping these under control.

Some associations establish a “lease addendum” requirement in dealing with all rentals. In that approach, the lease addendum is required as a condition of renting in the association, and can, among other things, ban subletting. Other lease addendum items might be a requirement that tenants agree to submit to the association’s disciplinary jurisdiction as a condition of their tenancy, and owners are responsible for the acts of the owner’s tenants. This would help deal with tenant misbehavior issues.

It is important to know who is authorized to be in a residence at a given time. Civil Code 4740(d) requires landlords, prior to a rental, to “provide the association … the name and contact information of the prospective tenant…” This requirement can be either added to the CC&Rs or the association operating rules. Since it is simply a rule to restate existing law, Civil Code 4355(b)(5) exempts this from the 30-day notice process required of most rule changes under Civil Code 4355.

The association may want to consider creating a rough calculation of the association’s costs from vacation rentals moving in and out. Under the Watts vs. Oak Shores ruling from 2015, associations may make a “reasonable good faith calculation” of their costs from short-term rentals, and then establish a fee in that amount.

The lease addendum and its contents are best contained in a CC&R’s amendment, which would require a membership vote. With membership votes, apathy is often a problem, and can stymie good ideas.

Evicting a member’s tenant (or subtenant) would require an injunction. That can be expensive, and there is no guarantee it would be granted.

In my previous column I discussed the recent Greenfield v. Mandalay Shores case. This might affect your association if it is in the “Coastal Zone” under the meaning of the California Coastal Act. The HOA should consult with its attorney before drafting rules or CC&R amendments, and to determine that ruling applies.

Thanks,
Kelly

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®.