ASSEMBLY BILL 3182

UNDOING RENTAL RESTRICTIONS AND “FORCED” GOVERNING DOCUMENT AMENDMENTS

BY: MR. A.J. JAHANIAN, ESQ., BEAUMONT TASHJIAN

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?

There are strong arguments on either side of the answers to these questions. For example, CC&Rs should be amended and put to a vote of the membership to bring the governing documents into compliance with AB 3182, because this creates a stronger document that is less susceptible to legal challenge down the line; additionally, CC&Rs are recorded with the county, so all future owners are presumed to know what rental restrictions govern the community. On the other hand, some will argue that an amendment and vote is not necessary, and instead, the association can just adopt a simple rule change to impose AB 3182-compliant rental restrictions.

This, and many other issues created by AB 3182 mean that sweeping changes could be coming to your community. It is critical that boards and managers consult with the association’s legal counsel to determine what, if any precautionary measures can be implemented for the community, ahead of January 1, 2021.

A.J. Jahanian, Esq. is an associate attorney with Beaumont Tashjian, where he devotes his time servicing the unique needs of the Firm’sclients throughout California. Mr. Jahanian’s devotion to residentialand commercial common interest developments for the entirety of hiscareer make him specialized to advise boards and management in thepreparation and enforcement of governing documents and contracts, riskmanagement, dispute resolution, fair housing compliance, and all otherissues impacting community associations.