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HOA Homefront: Time almost up to remove illegal rent restrictions

The first version of Civil Code Section 4741, banning “unreasonable” rental restrictions, became law in 2021, and also originally required HOAs to amend their governing documents to remove such provisions in 2021.

The most common restrictions clearly violating that statute are rental unit caps lower than 25% and required periods of time after purchasing to being renting (most commonly one or two years). Since the law is not very clear about what is “unreasonable,” it’s hard to draw a sharp line between permitted and illegal rental restrictions.

Most HOAs have a very difficult time attaining voting participation to amend their governing documents. Therefore, trying to comply with the law and quickly amend CC&Rs to remove unreasonable rental provisions was also difficult.

An unknown number of HOAs pursued fruitless attempts to pass CC&R amendments in 2021. Others amended their rules, which are also ”governing documents,” to note certain CC&R sections that may have been rendered illegal.

However, the California Legislature fixed this problem by amending Section 4741(f), extending the deadline for CC&Rs correction to July 1, 2022. More importantly, the law opens a six-month window, from January 1 to July 1, 2022, in which HOA boards may without a membership vote amend CC&Rs solely to remove restrictions violating the statute.

The board meeting must be held in an open session, and the proposed amendment must be announced to the membership at least 28 days before the amendment is approved by the board. At the meeting approving the amendment, the board must allow comments from members on the proposed amendment.

After July 1, 2022, it will take a membership vote to remove any rental restrictions violating Civil Code Section 4741. Unless already done, HOAs should seek the advice of their legal counsel to determine if there are any restrictions that violate Section 4741 and to help draft proposed amendments to remove such illegal rental restrictions.

Some HOAs may need to enlarge rental caps that are lower than 25%. Others may need to remove rental waiting periods. Still others may need to remove CC&R rental restrictions which appear to be “unreasonable” (meaning that their main purpose is to frustrate rentals).

The 28-day advance notice requirement means, as a practical matter, that the last day to make a general announcement of such a proposed amendment would be June 3 (28 days before July 1), 2022, for a board meeting on July 1, 2022. If a board announced the proposed amendment on June 3, 2022, and held its meeting on July 1 to approve the amendment, it can barely meet the deadline.

Associations should not wait until the last minute and risk losing this rare opportunity from the Legislature to remove illegal rental restrictions at a relatively low cost and low level of effort.

Not all CC&R provisions regarding rentals are illegal, and most HOAs probably do not have restrictions violating Section 4741. Still, it’s a good idea to check, just in case your HOA needs to use this unique opportunity before the opportunity ends.

If the board does pursue an amendment, make sure it only removes or corrects the illegal language – anything else is specifically prohibited by the same statute.

There are a few weeks left to get this done, do not wait!

Kelly G. Richardson, Esq. is a Fellow of the College of Community Association Lawyers and Partner of Richardson Ober DeNichilo LLP, a California law firm known for community association advice. Submit questions to [email protected].

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