AB 1584: An Attempt to Cure HOA Compliance Issues Caused by AB 3182

by | Nov 14, 2021 | Firm News |

Prior to 2021, Homeowners’ Associations (“HOAs”) had fairly broad discretion to prohibit rentals in condominium communities. AB 3182, effective January 1, 2021, added Civil Code section 4741, which imposed limitations on this broad authority, including restricting an HOAs’ ability to impose certain rental restrictions in their CC&Rs (or Declaration of Covenants, Conditions and Restrictions). AB 3182 required an HOA to amend their CC&Rs to reflect these changes, and imposed a short timeline for compliance, which ultimately proved to be problematic for HOAs. In an effort to ameliorate these compliance problems, the Legislature amended Civil Code section 4147, via AB 1584, on September 28, 2021.

Background: AB 3182

AB 3182 prohibits HOAs from adopting or enforcing rental restrictions that limit rentals to less than 25% of the condominiums in the association. In other words, HOAs can only require that a maximum of 75% of the condominiums be owner-occupied. That cap is not applicable to units that are also occupied by an owner (i.e., an owner that rents a room in his/her condo). AB 3182 also prohibits HOAs from imposing minimum lease requirements for periods of more than 30 days. For example, this means that your CC&Rs cannot force you to impose a minimum lease commitment of six months on a tenant. However, the statute continues to allow prohibition of transient or short-term rental for periods of 30 days or less.

The new law does not affect the right of an owner who acquired his/her condominium before the effective date of the statute to rent or lease their property. In other words, HOAs may not subject homeowners to new rental restrictions if they bought their unit before the new restrictions were enacted. Finally, HOAs who willfully violate new section 4741 shall be liable to the applicant homeowner for actual damages, and shall pay a civil penalty to the applicant homeowner in an amount not to exceed $1,000.

AB 3182’s short time for compliance — December 31, 2021 — proved problematic for several reasons. For one, many HOAs encountered resistance from members who objected to the new law. This resulted in stalling the amendment process, which requires member involvement. In enacting AB 3182, the Legislature failed to take into account this costly, and often time-consuming CC&R amendment procedure. The law requires that CC&R amendments be done via member “secret ballots”, and sometimes even requires mortgage lenders’ approvals, which can be difficult to obtain. This, along with general resistance to the new law, impacted HOAs’ ability to come compliant by the end of 2021.

AB 1584 Changes

AB 1584, signed by Governor Newsom on September 28, 2021, seeks to address these compliance challenges. The new law, amending Civil Code section 4147, invests sole authority to amend the CC&Rs to remove rental restrictions in the HOAs’ board— member approval is no longer needed. Before proceeding, the board must give notice of the amendment for the members’ consideration at least 28 days before approving the amendment. The notice to the members shall include the text of the amendment and a description of the purpose and effect of the amendment. The decision on the amendment shall be made at a board meeting, after consideration of any comments made by the members. The extension of HOA board authority to amend CC&Rs on their own is limited to Civil Code section 4147’s new rental restrictions. That is, a HOA’s board may not make any other change to CC&Rs without the members’ approval as provided by law. AB 1584 also extended AB 3182’s compliance deadline from December 31, 2021 to July 1, 2022.

If your HOA is not taking the necessary steps to amend your CC&Rs to remove any prohibited rental restrictions, do not hesitate to contact us for assistance.

The attorneys at Zacks, Freedman & Patterson can assist you with compliance with AB 1584, AB 3182 or any other real estate matters. Contact us at your convenience to request a consultation.

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