Senate Bill 150 to Limit Rental Restrictions in Common Interest Developments

The Davis-Stirling Common Interest Development Act requires the declaration of a common interest development recorded on or after January 1, 1986 to contain a legal description of the development and the restrictions on the use of or enjoyment of any portion of the development.  These declarations consist of Covenants, Conditions and Restrictions and are often referred to as “CC&R’s”.

 Senate Bill 150 (SB150) is a recently chaptered amendment to the Davis-Stirling Act and associated Civil Codes that could have significant impact on owners and investors in common interest developments.  The Bill limits certain rental restrictions recorded on or after January 1, 2012.  While the idea of legislation that limits rental restrictions at first sounds positive for owners and investors; the passage of the bill is causing Homeowners Associations (HOA’s) to move quickly to review and enact new rental restrictions prior to the cut off date of December 31, 2011.

 The bill applies to restrictions recorded on or after January 1, 2012 that prohibit the leasing of a unit or lot, a restriction that sets a cap on the number of units that may be leased at any one time as well as covenants requiring an owner occupancy or waiting period after a unit is acquired prior to an owner leasing the unit.

 SB150 does not apply to all rental restrictions.  Examples of exempt restrictions include prohibition of an owner to lease their unit for less than one year and requirements that leases include language that requires lessees to agree to abide by Associations Rules and Regulations.

 Existing rental restrictions will remain in effect unless otherwise amended or modified by the Homeowners Associations.

 I strongly urge owners and potential investors to fully review and understand the implication of any proposed revisions to CC&R’s in which they have an interest.  Rental restrictions in the form of revised CC&R’s could have a tremendous impact on future ability for owners to put their properties into service as rental units.  The inability to rent out investor owned units would be detrimental to the investors return on investment (ROI).  Rental restrictions could also impact property values as the inability to rent units could end up forcing the sale of distressed properties.

 As of this writing there is less than 107 days before this matter will be decided, it is imperative that owners or perspective owners take action now to contact their Homeowners Associations and determine what if any rental restrictions are being considered for implementation prior to the December 31, 2011 deadline.

 For further information please do not hesitate to contact me.