Things to Know About Renting in a California HOA

With the introduction of the sharing economy culture in the past few years, it’s been easier and easier to rent out your home. AirBnB, Gypsy Housing, and Craigslist have created platforms where you can find a longtime renter in a matter of minutes. The laws are just now catching up. Serial renting has proven to be potentially damaging to a community. Common complaints include:

  • A lack of consideration for community property
  • Higher delinquency rates for tenants
  • Renters are much less likely to participate and volunteer for community events
  • Increased rental rates impair the willingness of mortgage lenders to make loans on units in a community, potentially forcing out prospective buyers.

California HOAs are amending their CC&Rs to combat this growing trend. If you are the owner of a property not currently governed by an HOA, then you have the right rent it out as you please. However, it’s a little more complicated if you belong to a governed community. There are a few major considerations neighborhood governing bodies take into account when recording their covenants and conditions. For example, HOAs can face major financial issues by allowing too many of their members rent out their units. Major mortgage lenders in the country will refuse to insure certain properties if the renting ratio is too high – usually between 51%-70% needs to be occupied by the owners.

As early as 1994, California has faced cases dealing with HOA conflicts in regards to renting – ruling repeatedly in favor of the HOA’s right to regulate renting on their own terms. If the cc&r’s have been updated to not allow renting, it comes down to is whether the house or unit was rented prior to the amendment. If you’re thinking about investing in property in a California HOA regulated community, be sure to make yourself familiar with their rules on renting, or you could be finding yourself out of luck.

For those who have been renting since before 2012, you don’t have to worry about getting evicted. Part of the amendment to the Davis-Stirling Act that has clamped down on renting restrictions has grandfathered in tenants who have been renting long-term prior to its passing. So if you’re a law-abiding long-term renter and a good neighbor, you have little to worry about in terms of losing your rights. Just make sure that you’re aware of how the California HOA in your area is handling these renting restrictions. The common trend over the past several years is to amend the CC&Rs to restrict the influx of renters. Just keep an eye out if you’re looking to rent, or to buy for the purpose of renting, because the tide has changed greatly in favor of the homeowner.

 

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