HOA Homefront: It’s almost time to lift illegal rent restrictions

Section 4741 of the first edition of the Civil Code, which prohibits “unreasonable” rent restrictions, became law in 2021, and initially required the HOA to amend its governing documents to remove such provisions in 2021.

The most common restrictions that clearly violate the statute are a rental unit cap of less than 25%, and the time period required from purchase to rental (most commonly a year or two). Since the law is not very clear about what is “unreasonable”, it can be difficult to draw a line between permissible and illegal tenancy restrictions.

Most HOAs have difficulty gaining vote participation to amend their governing files. So trying to comply with the law and quickly amend CC&R to remove unreasonable rental terms is also difficult.

An undisclosed number of HOAs have tried in vain to pass CC&R amendments in 2021. Others have modified their rules, which are also “administrative documents,” to point out certain parts of CC&R that may have been deemed illegal.

However, the California Legislature addressed the issue by amending Section 4741(f), extending the deadline for corrections to CC&Rs to July 1, 2022. What’s more, the law opens a six-month window between January 1 and July 1, 2022. The HOA Board of Directors may, without a member vote, amend only the CC&R to remove the statute-violating restrictions.

Board meetings must be held in public meetings, and proposed amendments must be announced to members at least 28 days before the amendments are approved by the Board. At the meeting where the amendment is approved, the board must allow members to comment on the proposed amendment.

After July 1, 2022, there will be a membership vote to remove any rental restrictions that violate Civil Code Section 4741. Unless it has already done so, HOA should seek the opinion of its legal counsel to determine if there are any violations of Section 4741 restrictions and to provide assistance with proposed draft amendments to remove such illegal tenancy restrictions.

Some HOAs may need to expand rent caps below 25%. Others may need to cancel the rental waiting period. Still others may need to remove CC&R lease restrictions that seem “unreasonable” (meaning their main purpose is to hinder leases).

The 28-day notice requirement means that, in effect, on June 3, 2022 (28 days prior to July 1), the last day for a general announcement of such proposed amendments to be issued for the July 1 Board meeting, 2022. If the Board announces the proposed amendments on June 3, 2022, and meets on July 1 to approve the amendments, the deadline will be narrowly met.

Associations shouldn’t wait until the last minute to risk losing the legislature’s rare opportunity to remove illegal rental restrictions at relatively low cost and with low effort.

Not all CC&R regulations on rent are illegal, and most HOAs probably do not violate Section 4741 restrictions. It’s best to check, though, in case your HOA needs to take advantage of this unique opportunity before it’s over.

If the board does make an amendment, make sure it only removes or corrects illegal language — anything else expressly prohibited by the same statute.

There are still a few weeks left to finish the job, don’t wait!

Kelly G. Richardson, Esq. is a Fellow of the Community Association Bar School and a partner at Richardson Ober DeNichilo LLP, a California law firm known for community association advice.Submit questions to [email protected].

US News.

Leave a Reply