WRESTLING WITH RENTALS IN THE 21 ST CENTURY

Transcription

1 HANDOUT WRESTLING WITH RENTALS IN THE 21 ST CENTURY FRIDAY CONCURRENT SESSION 8:00 9:15 AM 2:00 3:15 PM SPEAKERS Northern California: Morgan Hurlbutt,Esq., Jennifer Salazar, CCAM-PM, Amy Tinetti, Esq. Southern California: Laurie Poole, Esq., Lisa Tashjian, Esq., Robert Sides SPONSORED BY CMA Consulting is a multidisciplinary Construction Management Company offering innovative services to the Construction, Legal, and Common Interest Development Industries. Since 1979 our principal and highly qualified staff has made it our mission to assist Homeowners Associations to adequately plan, provide for and implement construction, reconstruction, and maintenance programs to preserve their buildings for generations to come CACM, Inc. - Law Seminar - All rights reserved. Page 1

2 Wrestling With Rental in the 21 st Century Presented by Northern California: Morgan Hurlbutt,Esq., Jennifer Salazar, CCAM-PM, Amy Tinetti, Esq. Southern California: Laurie Poole, Esq., Lisa Tashjian, Esq., Robert Sides I. Prohibitions and restrictions on rentals options A. Prohibitions Civil Code 4740 provides that prohibitions on rentals can only apply to new owners that purchase after the prohibition is recorded i. Mandatory waiting periods a. Sometimes referred to as residency requirements but doesn t really matter if owner actually resides in the unit so long as it isn t rented b. One to two year waiting period the most common; three years occasionally c. Unit bought for parents, children or resided in by immediate family does not violate prohibition so long as no rent or other consideration is paid. Make sure governing documents define immediate family Rental caps/ceilings a. 25%-30% most common. Can associations go lower? What is too high? b. Unpublished case law regarding reasonableness Harrison v. Sierra Dawn Estates Homeowners' Association, Inc. (2010) 4th District, Division Two. CC&R amendment that included one year rental waiting period, 20% rental ceiling and one year minimum lease provision and others. Reynolds v. Auburn Country Villa Homeowners Association (2013) 3rd District. Upheld CC&R amendment limiting rentals to a total of 6. Including both a waiting period and rental cap B. Restrictions i. Minimum lease terms Mission Shores Association v. Pheil (2008) 166 Cal.App. 4 th 789 a. Court held that 30 days is reasonable restriction b. Is that reasonable for all communities? c. Court held right to evict also reasonable Fees for rentals/short term rentals (security deposits, move in/move out, use fees) Watts v. Oak Shores Community Association (2015) 235 Cal.App.4 th 466 a. Can charge fees for costs associated with short term rentals b. If you can t beat them, join them allow short-term rentals during popular times and charge fees to cover extra security, administrative burdens, etc CACM, Inc. - Law Seminar - All rights reserved. Page 2

3 c. Assignment of rents What is it? CC&Rs provide that owner collects rents unless delinquent at which point HOA can collect rents directly. d. Association s right to evict tenant Mission Shores case e. Reasonableness of restrictions/rules that only apply to tenants e.g., no pets C. Impact of grandfathering requirement in Civil Code What is change in ownership? i. Moving into a trust? Inheritance? Divorce? iv. Foreclosure? v. Gift? D. How establish? By amendment to CC&Rs or by rule (or both)? i. Prohibitions (waiting period or rental cap) recorded in CC&Rs or amendment to CC&Rs Assignment of rents, right to evict, hardship waivers, minimum lease terms recorded in CC&Rs or amendment to CC&Rs iv. E. Competing issues Adopt a rental policy Other restrictions such as move/in move out fees, scheduling or other operational issues can be in rules i. Understanding the competing interests between resident owners and investor owners Satisfying FHA and institutional lenders Must decide what is in the best interest of the association F. Granting exceptions for hardships i. Include right in CC&Rs decide on parameters and limitations What is a hardship? G. FHA and VA Certification ever-changing requirements i. Allowable Restrictions Non-Allowable Restrictions II. Challenges A. Implementation i. Record keeping may need all of the following: a. Who occupies homes use Occupancy Report/Form? b. Copies of leases, including lease term c. Dates of record ownership d. List of rental properties 2015 CACM, Inc. - Law Seminar - All rights reserved. Page 3

4 e. Waiting list f. Affidavit re immediate family member More work for manager? YES a. Typically not included in management contract b. Include in management contract as extra cost c. Administrative burden Extra costs to association B. Enforcement a. Might be able to recoup administrative fees b. May need to update fine policy/schedule of fines to allow board to impose fines for violations of rental restrictions c. Reimbursement assessment for legal fees and other costs of enforcement i. Short term rentals what information is needed to enforce? How to gather information for the attorneys a. Complaints from residents in writing and detailed b. Printed copy of listing/ad c. Photos of cars and occupants d. Surveillance camera footage Complaint driven enforcement is norm for short term rentals; usually arise because of other issues (parties, noise, nuisance, trash, parking, access, amenities, etc.) Is there an affirmative duty on the part of manager or board to enforce rental restrictions? a. Complaints b. Off-site addresses c. Searching listings d. Time of year iv. Address other violations of the governing documents nuisance, parking, business use, single family, etc. v. Common questions a. Roommate vs. short term rentals Is it ok for an owner to rent a room or room in home so long as owner also occupies? Subject to other restrictions, including minimum lease term b. Home swaps III. Responses of Cities to Short Term Rentals 2015 CACM, Inc. - Law Seminar - All rights reserved. Page 4

5 A. Recent action taken i. Tiberon August, Amended its zoning ordinance to ban rentals fewer than 31 days. City of Laguna Beach August, Extended its moratorium on all short-term rentals in the city until October 1, 2016 to allow the city time to study potential revisions to its municipal code regarding short-term leasing. Manhattan Beach - June, Enacted a ban on short-term rentals of 29 days or less in residential areas. iv. Indian Wells June, After having a moratorium on short-term rentals less than 7 days since June, 2014, the City amended its ordinance governing shortterm rentals. The City currently allows short-term rentals of at least 7 days, but on July 4, 2018, the seven-day minimum expires and vacation rentals under 29 days will no longer be allowed in Indian Wells, except, again, during the BNP Paribas Open. v. Santa Monica May, Enacted a ban on the rental of an entire unit for less than 30 days and requires those who take part in allowable home-sharing to obtain a business license from the city and pay a 14% hotel tax. vi. City of Aliso Viejo March, Prohibits short-term rentals in residential districts. B. Action taken by cities against rental websites (e.g., San Francisco) i. San Francisco - February 1, City s legislation revised zoning laws to allow for short-term rental in residentially zoned districts. Previously, and as these short-term rentals constituted commercial use, homeowners and tenants were in violation of the city s zoning laws. a. Airbnb has agreed to collect taxes (e.g., transfer occupancy tax) and other fees from hosts and remit them to Cities and other governmental entities. July 2015, Airbnb agreed to collect in San Diego the 10.5% transient occupancy tax, as well as the 0.55% tourism marketing district tax and remit those fees to the city of San Diego. As of September 2015, Airbnb also collects and remits various taxes and fees in Malibu, San Francisco, San Jose, Santa Clara, Oakland, Palo Alto, Portland, Philadelphia, Phoenix, Chicago, Washington, D.C., North Carolina, Washington State, Amsterdam and Paris CACM, Inc. - Law Seminar - All rights reserved. Page 5