Rental
Caps are usually defined as restrictions that place a “cap” or ceiling on
the number of properties that may be rented out at any one time within a Home
Owner Association (HOA). Once the cap is reached, no further properties may be
rented out and owners wishing to do so are often placed on a waiting list
established by the association.
Most
of the rental caps I dealt with in Santa Clara County were between 25% and 30%.
That said, there are numerous communities which do not allow rentals. As a
proactive seasoned agent, I always enquire with the HOA and their property
management company whether there is a rental cap restriction or not for the
following reasons:
1) When
representing a seller: if a provision of
an association’s governing documents “prohibits the rental or leasing of any of
the separate interests in the common interest development,” the owner of the
property has a duty to disclose to its prospective purchaser the existence of
the rental prohibition and provide a statement describing the prohibition.
2) When
working with buyers: buyers need to know about the rental cap as it may affect
their decision to buy the property whether they are looking to purchase a condo
or a townhouse as an investment property or as their principal residence with
the idea that they might rent it in the future.
This is why it is so important for buyers and sellers of a
unit located in a Common Interest Development, to know about the new rental
legislation put in place by Assembly Bill 3182.
Starting January
1, 2021 common interest developments (CIDs) are required to allow at least 25%
of owners to rent or lease out their units, regardless of whether the HOA has
formally amended their governing documents. All associations are required to
comply with these changes by January 1, 2021, and all governing documents are
to be amended in compliance no later than December 31, 2021.
To put it simply, the new bill bans Common Interest
Development communities from adopting or enforcing CC&Rs provisions that
restrict the rental or lease of property to “less than 25 percent” of the total
properties.
The new bill still allows CC&Rs to prohibit
“short-term” rentals of 30 days or less. One question
remains, can the rental restriction be enforced against any owners who
purchased their property before the new rental restrictions were enacted. The
answer is yet to be clarified. Hopefully law practitioners will get us the
answer soon.
In October 2021, a new law (AB1584) has extended the deadline to eliminate certain unreasonable or unenforceable rental restrictions (as defined in Civil Code section 4741) from January 1, 2022, to July 1, 2022.