Assembly Bill 1584: Board Authority to Amend CC&Rs to Comply with New Law on Rental RestrictionsDrew Hendricks
Whether you liked or disliked the provisions of last year’s AB 3182, we are very pleased to inform you that Governor Newsom signed “clean up” Assembly Bill 1584 (AB 1584) into law on September 28. AB 1584 now expressly allows a board of directors to unilaterally amend the association’s governing documents to comply with AB 3182. Boards now have until July 1, 2022, to take this action.
Background: AB 3182. As you might recall, AB 3182 was a new law governing rental restrictions in homeowner associations which took effect on January 1, 2021. You can view our summary here. Essentially, it allows HOAs to ban short term rentals of 30 days or less, while simultaneously voiding minimum lease terms of more than 30 days (i.e., no more 6-month or 1-year minimum lease terms).
AB 3182 also allows associations to limit the total number of rentals to 25% or higher of the homes in the community. On the flip side, that means that an association can require that up to a maximum of 75% of the homes can be owner-occupied. For example, if a community has 100 homes, it can impose a restriction that only 25 of the 100 homes can be operated as rentals. However, if the community sought to limit the rentals to a maximum of 15 or 10 of the homes in the community (85% or 90% owner-occupied), such a rental cap would be void.
AB 3182 originally required associations to amend their governing documents to conform with the new law by December 31, 2021, or pay damages for illegal enforcement of old CC&R provisions plus a civil penalty of $1,000. Regrettably, in passing AB 3182, the legislature failed to acknowledge the challenges, time and costs in obtaining the required approval of members and lenders for an amendment, as well as the practical possibility that member and lender approval might never be obtained.
Although our firm took the position that boards were allowed to unilaterally amend the CC&Rs (without member approval) solely to ensure that the CC&Rs comply with AB 3182, many HOA law firms have insisted member approval is necessary, hobbling their clients’ ability to comply.
Effect of AB 1584. Fortunately, the Legislature has resolved this conflict through AB 1584, which expressly authorizes (and compels) the board of directors to amend CC&Rs (and any other governing documents) solely to comply with AB 3182. For example, if your CC&Rs impose a (now void) 6-month minimum lease term, AB 1584 requires the board to unilaterally amend the CC&Rs to eliminate that requirement, or to reduce it to the legally compliant term of 30 days.
Similar to rule changes, the board will need to provide homeowners with a 28-day period to review and comment on the proposed amendment, and the decision on the amendment must be made at an open meeting of the board. Also, as noted above, AB 1584 extends the compliance deadline from December 31, 2021, to July 1, 2022.
Finally, the legislature reaffirmed that new rental restrictions cannot be enforced against those owners who bought their home in the community before the new restrictions were enacted. In an upcoming newsletter, we will be discussing the recent decision Brown v. Montage at Mission Hills, Inc., where a Court of Appeal held that homeowners are exempt from a prohibition against short-term rentals that is adopted after they purchase their property.
Please let us know if you have any questions, and if you need assistance evaluating your governing documents or amending them to comply with the new rental laws.
Community Legal Advisors Inc.
Michael J. Alti, Esq.