New Legislation: AB 1410, Rental Restrictions

As we are all aware, the California legislature has been cracking down on rental restrictions, permitting fewer restrictions year after year. Currently, associations are permitted to restrict leases to a minimum of thirty (30) days and implement a rental cap of twenty-five percent (25%) or more (Civil Code Section 4741).

Additionally, prior to the adoption of Civil Code § 4739, associations were permitted to prohibit leasing only a portion of an owners’ separate interest, and many associations’ CC&Rs strictly prohibit owners from renting only a portion of their separate interest, i.e., a room rental.

In theory, every home could rent a room as long as the owner continues to occupy the home.

What is required under the new Civil Code?

AB 1410 adds Section 4739 to the Civil Code, which renders provisions prohibiting room rentals unenforceable. This new code section provides:

“An owner of a separate interest in a common interest development shall not be subject to a provision of a governing document, or amendments thereto, that prohibits the rental or leasing of a portion of the owner-occupied separate interest in that common interest development to a renter, lessee, or tenant for a period of more than 30 days.”

The code explicitly requires the owner to be occupying the separate interest; therefore, owners may be prohibited from leasing out individual rooms while they are not occupying the home, unless otherwise permitted by law. However, there are no clear guidelines for how many rooms an owner can rent, so an owner could occupy one bedroom and individually rent each additional bedroom in the home.

Further, Civil Code § 4739 clarifies that both the owner and any resident renting or leasing a portion of the owner-occupied separate interest are subject to all provisions of the association’s governing documents. This includes, but is not limited to, parking restrictions and guest access to common areas and facilities, as well as provisions governing minimum lease terms.

How does Civil Code § 4739 interact with previous rental restrictions?

This new code section further limits associations’ ability to restrict rentals, continuing with the theme of loosening rental restrictions to promote adequate availability of housing throughout the state. AB 1410 may help accomplish the goal of increasing housing by providing new options for homeowners that could not previously rent out portions of their separate interest or accessory dwelling units, or at least clarifying that owners continue to have this right even if they reside in a common interest development.

It is also important to note that new room rentals under AB 1410 do not count towards the rental cap because Civil Code § 4741 refers to “separate interests” and states that “an accessory dwelling unit shall not be construed as a separate interest.” Specifically, Civil Code § 4741 states in relevant part:

“(d) For purposes of this section, an accessory dwelling unit or junior accessory dwelling unit shall not be construed as a separate interest.

(e) For purposes of this section, a separate interest shall not be counted as occupied by a renter if the separate interest, or the accessory dwelling unit or junior accessory dwelling unit of the separate interest is occupied by the owner.”

These provisions, in connection with Code § 4739 make it clear that no room rental, nor accessory dwelling unit will count towards an association’s rental cap. This means associations cannot limit the number of room rentals within a community and, in theory, every home could rent a room as long as the owner continues to occupy the home.

Since an accessory dwelling unit is not a separate interest, owners may now be permitted to rent rooms in their accessory dwelling units. This new policy could create an influx of renters, especially in communities with many accessory dwelling units.

Appropriate Next Steps for Associations

Going forward, associations should make sure their governing documents adequately address room rentals. This includes amending rental restrictions in CC&Rs to specifically apply to room rentals and ensuring that guidelines for these new rentals are clear, including requiring that the separate interest be owner-occupied, and that any resident or lessee is subject to all governing documents.

Owners may try to argue that because it is just a room rental, they do not have to comply with the minimum lease requirements; however, AB 1410 is clear that room rentals are subject to minimum lease terms. If the minimum lease term does not specifically apply to room rentals, then owners may rent rooms as vacation/Airbnb rentals. To protect the association’s interests and ensure compliance with governing documents, associations should require all lease agreements to be on file with the association so there is a record of who is residing in the community.

Additionally, associations should implement a fine policy for violations of rental rules, which is one of the few ways associations can protect property values and prevent the character of the community from shifting dramatically.

Further, it is important that all associations have adequate accessory dwelling unit and junior accessory dwelling unit policies in place. Now that owners can easily rent their accessory dwelling units it is crucial that associations have policies in place to timely approve or deny applications as well as enforce relevant governing document provisions regarding the new units. More owners may be inclined to build accessory dwelling units now that they have the potential for rental income.

A.J. Jahanian, Esq.

A.J. Jahanian, Esq., is an associate attorney with Beaumont Tashjian that specializes in preparation and enforcement of governing documents and contracts, risk management, dispute resolution, fair housing compliance, and all other issues impacting community associations.