SB 918 – You Want Notice Where?

Assembly Member Ting from San Francisco authored Assembly Bill 3182. After multiple rounds of amendments, it was approved on September 1, 2020 by the California State Legislature and awaits the Governor’s signature before becoming law on January 1, 2021.

The bill was promoted as a solution to help California’s growing housing shortage, but it is certain to create several problems for HOAs.

AB 3182 will outlaw rental bans in HOAs. It creates a new Civil Code Section 4741 which voids rental limits below 25% of the members. Therefore, any governing documents with rental caps of less than 25%, will become unenforceable next year. HOAs will be permitted to amend their CC&Rs to add rental caps of 25% or more, provided the homeowners approve them.

AB 3182 still allows HOAs to ban rentals of 30 days or less (aka short term or transient rentals), but the law prohibits “unreasonable” restrictions on rentals of homes, accessory dwelling units (ADUs), or junior accessory dwelling units (JADUs). AB 3182 does not define, or give examples, of what would be considered unreasonable. But, if the HOA is found to have an unreasonable restriction, it could be liable for a $1,000 civil penalty as well as attorney fees to the complaining party.

There are many different rental requirements HOA memberships often approve by a majority vote. For example, a one-year minimum lease term, or a waiting period of one year before a new owner can rent a home, or the requirement that the tenant promise to abide by the HOA rules. Are any of these requirements “unreasonable?” We do not know. The issue of “unreasonably restricting” rentals is a vague standard, which could lead to litigation between homeowners and their HOA, since the definition of “reasonable” in this context is not obvious to all.

Associations choose to adopt rental restrictions for many reasons. The most common reason is to preserve a higher quality of resident, based upon the belief that owners will take more pride in their home and will behave better than tenants. Another common reason is availability of FHA and FNMA-backed mortgages, such as FHA and FNMA will not allow HOA rentals to exceed a certain maximum amount.

One requirement of AB 3182 is that all California HOAs (all 50,000+ of them) must amend their CC&Rs to conform to the new law before the end of 2021. Most HOAs have a very hard time obtaining sufficient participation to amend their CC&Rs and bylaws (no matter how out of date they are). Now is not the time to increase costs on California’s homeowners. AB 3182 forces HOAs to unnecessary spend management and legal cost for amendments in 2021, or they risk violating the new statute.

The most concerning part of this law is that it potentially jeopardizes safety and building code compliance in order to promote ADUs and JADUs. AB 3182 includes a new amendment to the Government Code, which provides that if a local building and safety department does not process and approve a building permit for an ADU or JADU, the permission is automatically granted after 60 days.

As with last year’s Senate Bill 323 addressing Association Election reform, AB 3182 is another “one-size-fits-all” approach, which does not reflect the complexities of the existing law and disrespects the right of homeowners to manage their own communities as they see fit. Why do Legislators not seek input from the organizations that educate HOAs, such as Community Associations Institute, or ECHO, before tinkering with HOA law?

AB 3182 passed the Assembly on June 11 with a substantial number of “no” votes and passed the Senate on the September 1 deadline. The bill is awaiting the Governor’s signature, and Newsom is expected to quickly sign the bill into law. To review the bill or any California law, visit www.leginfo.legislature.ca.gov.

By  Sep 8, 2020 | Community Association ArticlesLegislative Updates