California Court of Appeal Rules in Favor of HOA on its Short-Term Rental Rules

Homeowners associations in California don’t like it when a homeowner violates its rules and rents out a home on a short term basis.

An HOA adopted a rule that homeowners who rented out their homes could not do so for periods of less than seven days and imposed an annual fee on owners who rent out their homes. The purpose of the fee was to defray, at least partially, the extra costs to the HOA that were caused by renters.

gavel, 2011The HOA can do this according to California’s Second Appellate District Court of Appeal (Oak Shores Community Association v. Burlison, Second Appellate District, March 24, 2015).

The Oak Shores Community Association (HOA) is the governing body of Oak Shores, which has 660 parcels developed with single-family homes.  Some homes are occupied by full-time residents, and about 66 percent are absentee owners who rent their homes to short-term vacation renters.

The HOA adopted a set of rules including minimal rental period of seven days and a $325 annual fee imposed on owners who rented their homes. Two owners sued the HOA challenging these rules under California Civil Code 1366.1 (since renumbered), which said that “An association shall not impose or collect an assessment or fee that exceeds the amount necessary to defray the costs for which it is levied.”

The trial court found in favor of the HOA, and the plaintiffs appealed.  The court of appeal found in favor of the HOA and quoted from an earlier California Supreme Court decision (Lamden v. La Jolla Shores Clubdominium Homeowners Assn.) saying, “Generally, courts will uphold decisions made by the governing board of an owners association so long as they represent good faith efforts to further the purposes of the common interest development, are consistent with the development’s governing documents, and comply with the public policy.”

The court of appeal also said “short-term renters cost the Association more than long-term renters or permanent residents is not only supported by the evidence but experience and common sense places the matter beyond debate.”

The court of appeal referenced other court case decisions (Laguna Royale Owners Assn. v Darger) that had upheld the rights of the HOA to impose minimum rental periods.

Question of attorney fees was resolved in favor of the HOA.  The court of appeal upheld the trial court’s decision in favor of the HOA, which had awarded attorney fees in the amount of $1,180,646.50 for the HOA.

In many areas of California, HOAs and communities are trying to figure out impact on owners and property valeus of short-term rentals brought about by organizations such as Airbnb.  This court ruling in Oak Shores will provide some guidence.  It will be interesting to see whether this court of appeal decision will eventually be determined by the CA Supreme Court.

By Harrison K. Long, Realtor and professional real estate representative, Evergreen Realty HomeSmart at Orange County CA – 949-854-7747 (direct) or 949-701-2515 (cell or text) – CAL BRE 01410855.  Also an attorney member of the CA State Bar Association #69137.  This is for information only and is not the providing of legal services.  Source of some information here is recent article by Bob Hunt at RealtyTimes.

About Harrison K. Long

Real estate and business attorney. CA State Bar Association attorney member #69137. Professional real estate representative, REALTOR®, GRI, Real estate broker, CALBRE #01410855. Broker associate, HomeSmart Evergreen Realty, Irvine, CA. Providing real estate legal information and services for property owners, estate trustees, executors and administrators, fiduciaries, bankers, investor group managers, with their best decisions about homes and real estate. Orange County REALTORs® (member and prior service on its board of directors). "Realtor of the Year 2016" award by the Orange County REALTORs®. California Association of REALTORs® (now serving on its board of directors). National Association of REALTORs® member. Contact by cell or or text at 949-701-2515.
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