Reader Questions - HOA or Hotel? Short Term Rental Headaches

Dear Mr. Richardson,

We own a house and a rental house in a homeowners association. The association directors are proposing to raise the HOA dues on rental units because of certain “administrative” costs associated with rentals. It seems to me that this is highly discriminating. Is this legal?

Sincerely,

E.M., Roseville

Dear E.M.,

Rental activity can add expense for the association, and can financially burden and bother the resident owners, if the association is not careful. This is most severe with short term rentals, in which temporary residents often have little concern for their temporary neighbors.

An association on the shores of Lake Nacimiento recently estimated what temporary rentals cost the association. Consequently it imposed an extra rental fee to landlord owners, and required home rentals have a minimum term of seven days. A homeowner challenged the fees, arguing that the association fee was illegal and excessive. However, the appellate court upheld the association’s actions in the published 2015 opinion of Watts v. Oak Shores Community Association. The court specifically noted that a reasonable good faith estimate of the association’s expenses was sufficient to support the extra fee.

The lesson of the case, as with most aspects of common interest community living, is that courts will generally support reasonable and fair conduct. A rental fee needs to be explainable, not arbitrary.

Thanks for your question,
Kelly

Dear Kelly,

Can an HOA change the CCR’s for restriction on use to read single family residence only, no short term rentals? They now read single-family residence only.

Thank you,

A.H., Carlsbad

Hi Kelly!

A neighbor has been renting their home for short term vacation rentals from one night stay up to a week on [internet rental sites]. They also have rented out their home for seminars and weddings – up to 50 people!

We feel that our property value has diminished greatly. Who wants to buy a home next to a hotel? It has been a nightmare living up the street from this ‘hotel’ and I would appreciate any advice you could give.

T.L. San Diego

Dear A.H. and T.L,

The members can vote to amend the CC&Rs and impose a minimum rental term. In my view, such an amendment would not be a “rental restriction” under Civil 4740 (which requires “grandfathering” rental bans) because the association is not banning rentals but is simply imposing a minimum length, so it would apply to all owners immediately upon approval by the members. The membership should discuss whether it wishes to have the ability to offer vacation rentals of the homes. If so, it may be fair to adopt a rental fee, under the Watts v. Oak Shores case.

“Single family” in most jurisdictions only means a group sharing a residence in common. It has no bearing on whether the persons are related, or are owners. However, vacation rentals seem much closer to hotel business use than “residential” use.

Some communities favor such usage, others do not. Association communities should make a conscious decision, and, if allowing such rentals, take solid steps to protect the association and its full-time residents. If the association bans short term rentals, consider adopting a higher (but not punitive) fine for this violation, since the violation is motivated by profit.

Best regards,
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®.