Beaumont Tashjian Law Blog

Tuesday, September 29, 2020

Assembly Bill 3182: Undoing Rental Restrictions and “Forced” Governing Document Amendments

As you have probably already heard, Assembly Bill 3182 (“AB 3182”) was approved by the Governor on September 28, 2020. With this Bill comes changes to the law which will undoubtedly alter the character of California’s homeowners’ associations.

Starting January 1, 2021, the California Civil Code will be amended to encourage rentals and, in many ways, discourage property ownership. Any provision in your governing documents which prohibits or “unreasonably restricts” renting will be considered void and unenforceable, with two (2) exceptions:

  1. Associations can prohibit short-term rentals of thirty (30) days or less;
  2. Associations can limit the total number of rental homes in the community, to twenty-five percent (25%), but no less.

Moreover, the law will require homeowners’ associations to amend their governing documents to reflect these changes, by December 31, 2021. Enforcing a prohibited rental restriction or failing to amend the governing documents will apparently expose the association to risk of incurring a $1,000.00 civil penalty as well.

Until now, boards were given relatively broad discretion to adopt and enforce rental restrictions. The State understood that reasonable rental restrictions tend to preserve the residential character of the community by promoting stability in ownership, minimizing increases in insurance premiums, maintaining property values and avoiding transient tenancy. Now, attempting to address California’s housing and homelessness crisis, the Legislature has drastically undercut those initiatives. Unfortunately, this Bill may have negative downstream effects, such as decreasing affordability, given that investors will be incentivized to buy up homes in communities for rental purposes, thus decreasing the supply of homes for purchase.

What to do? Beginning January 1, 2021 boards and managers should immediately comply with the new law, by not enforcing contrary rental restrictions. Additionally, the law requires that the governing documents be amended to reflect these changes, so boards need to work with legal counsel to determine what the next steps are: i.e., Does the board need to put the amendment to a vote of the membership? Can it amend without going through the voting process, simply to make the documents consistent with law? What other governing document provisions should be amended to mitigate the effects of AB 3182? Are local ordinances which conflict with AB 3182 still enforceable?

Beaumont Tashjian is working on an AB 3182 “Checklist” to guide you through these sweeping changes and summarize what steps boards and managers need to take in the coming days. Stay tuned!


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