On September 28, 2020, Governor Newsom signed AB 3182 into law, ending homeowner’s association (HOA) restrictions on rental units. This bill may greatly affect rental restrictions in community associations throughout California since it disallows associations from limiting or prohibiting rentals.

Prior to this legislation, California homeowners’ association boards were given a wide berth to adopt and enforce rental restrictions as they saw fit. Reasonable rental restrictions were seen as necessary to promote stability in ownership, maintain property values and preserve a community’s residential character. AB 3182, in an attempt to address California’s housing and homelessness crisis, risks undercutting some of these initiatives.

Amendments to the Davis-Stirling Act

AB 3182 amends California Civil Code §4740, also known as the Davis-Stirling Act, which allows the limitation or prohibition of rentals, and adds §4741, which allows common interest developments (CIDs) to:

  • adopt and enforce rental restrictions that prohibit transient occupancy or short-term rentals of separate interests for 30 days or less; and
  • construct an accessory (ADU) and junior accessory dwelling unit (JADU) on the same lot.

However, California Civil Code §4741 prohibits CIDs from:

  • restricting the rental or lease of separate interests in the community to less than 25% of separate interests (a percentage increase, however, is allowed);
  • treating ADUS and JADUs as separate interests; and
  • counting the residence as being occupied by a tenant when the owner also occupies a separate interest, ADU, or JADU on the property.

The 25% cap applies to all associations including condominiums, stock cooperatives, and planned developments, but makes exceptions for ADUs and JADUs. The owner-occupied rule offers a loophole where owner-occupied rental properties are essentially exempt from these rental restrictions under the new law.

What does this mean for your HOA?

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. AB 3182 provides no shortcuts for associations to comply with this statute; associations will need to go through the regular membership approval process to amend their documents as needed.

Any new rental restrictions cannot be enforced against any owners who purchased their property before the new rental restrictions were enacted. This will create a situation in which all homeowners within an association are grandfathered in and exempt from these rental restrictions.

Nevertheless, AB 3182 may upend some homeowners’ association development plans. Consult with your homeowners’ association on how AB 3182 will affect your community and how to remain in compliance.

Related article:

Rentals: the future of California real estate?