Facts: Units in a common interest development (CID) are owned by both resident owners and absentee owners who rent their units on short-term basis as vacation rentals. The CID is governed by a homeowners’ association (HOA) which sets rules and regulations and charges fees to absentee owners relating to short-term rentals which are not charged to resident owners and long-term tenants. The CID’s conditions, covenants and restrictions (CC&Rs) state the HOA may adopt, amend or repeal rules for the benefit of the community.

Claim: The absentee owners seek to eliminate rules and fees pertaining to short-term rentals, claiming an HOA is prohibited from imposing or collecting fees that exceed the amount necessary to defray the costs for which they are levied since such rules and fees are unreasonable.

Counterclaim: The HOA seeks to enforce the rules and fees imposed on short-term rentals claiming the HOA may adopt, amend, or repeal rules and impose fees pertaining to short-term rentals for the benefit of the community, as stated in their CC&Rs, since they help defray the costs such rentals impose on all owners.

Holding: A California court of appeals holds the HOA has the authority to enact regulations and adopt rules or impose fees on its members relating to short-term rentals since the authority is stated in the CC&Rs and, thus, the HOA’s rules and regulations based on the decision that all owners should not be required to subsidize an owner’s vacation rental business are reasonable and comply with their governing documents and the law. [Watts v. Oak Shores Community Association (2015) 235 CA4th 466]

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