Whether through the Courts, the Legislature or human nature, from drought restrictions to email prohibitions, community associations are often forced to adapt quickly to change in order to govern effectively. In the case of the short-term rental craze, this change seems harder to tackle. Indeed, the short-term rental market is having an increasing impact on community associations. Residents often complain that short-term renters – who are transient by definition – do not treat association common areas with the same regard as resident owners. Most are unaware of association rules and contribute to mounting security, trash removal, parking, and noise related concerns, not to mention the increased common area expenses that come with the increased burden of handling short-term renters. On an emotional level, residents are often uncomfortable with the fact that their neighborhoods are filled with unfamiliar faces, many of whom are on-site for only a few days at a time.
The idea of transient rentals in our communities seems at odds with the objective of maintaining the residential character of our neighborhoods. We all have seen provisions in our communities’ documents that prohibit “non-residential” use of a unit, or that restrict use of property for “private single-family residential purposes.” While many associations have adjusted to an increase in tenant occupied residences in their communities, this “business” use of a residence, where unfamiliar groups of people share the common area and facilities for brief periods of time, never to be seen again, is incompatible with everything we’ve come to know and understand about community associations. The short-term use of a residence only adds to the resentment towards tenants who are often scorned for not having a financial stake in the community. Moreover, safety and security concerns are heightened by the ever-changing faces walking through lobbies, hallways and courtyards. “Who are these people? How did they get in here?” On-site owners are on guard and on edge. Many feel like strangers in their own communities.
The force against these legitimate concerns is the great demand from property owners seeking extra income from their vacant or unused assets. Some homeowners support short-term rentals, arguing that it provides homeowners with supplemental income and can prevent unoccupied units from staying empty for extended periods of time. There is at least an argument that permitting short-term rentals augments property values by enhancing a property’s ability to produce income. Short-term rentals increase the cash flow from ordinary rental property without the hassle for the landlord of a long-term lease and the obligations that come along with that. People pay up front, stay for a few days and are on their way. Thus, there is a divide between those who desire to increase income from their homes and those that desire to preserve the residential character of the community.
Associations concerned about managing short-term rentals may need to be proactive in order to get out in front of this issue. Although some cities are aiding the case against short-term rentals through citywide bans, insurance mandates or other controls, the responsibility for enforcing short-term rental bans in community associations rests with the board and will depend largely on what is contained within the community’s governing documents. There are also many factors an association should consider when seeking to manage, regulate, or restrict home-sharing and short-term rentals. For example, depending upon the age of the governing documents, most community associations prohibit short-term rentals either through lease restrictions, minimum rental periods, business use restrictions and transient occupancy prohibitions. Other communities may need to amend their CC&Rs to address the rise in short-term rentals.
How are relevant terms defined in your governing documents?
Some communities define transient use (rental less than 30 days) as a business use of a unit which may be prohibited. Or, to prevent short-term use by friends and relatives (such as with house exchanges or swaps) look to see how lease or leasing is defined. To prevent immediately family members and friends from bypassing lease restrictions, ”lease” should be defined broadly to include use or occupancy of the unit solely or exclusively by anyone other than the owner. Alternatively, if your community wants to allow short-term use of a residence by relatives, the definition of tenant could be drafted to exclude members of the immediate family.
Short-term rentals as a nuisance. Even if your governing documents do not prohibit short-term rentals, or the business use of a residence, look to your general nuisance provision for relief against disruptions created by short-term rentals. For example, the short-term transient rental of a residence may place an increased undue burden on the community in terms of increased patrol, access, increased traffic, parking, loud music and/or disturbance from several different and unidentified people in and out of the residence, and the common areas, week to week. This increased burden constitutes an annoyance and a nuisance. In this regard, the short-term or vacation rental of a unit interferes with the other residents’ right to quiet enjoyment of their homes. Moreover, allowing unidentified persons access to the property for short intervals is a safety risk. The residents have a right to be secure in their homes knowing who their neighbors are and being able to know or identify those who have a right to be present on the property.
Look to City or local ordinances for support
If there is not a specific ordinance regulating short-term or vacation rentals, there may be zoning restrictions that your community can use. For example, a Los Angeles ordinance, which defines short-term as use or occupancy intended for 30 days or less, prohibits short-term rentals in certain residential zones.
Of course, every community is different and not everyone considers short-term rentals a bad idea. Times are changing and communities may need to be more flexible in their short-term rental regulation, particularly in areas closer to recreation areas or tourist attractions. Board’s should survey their members, decide what may be acceptable, and enact rules and regulations or amend the CC&RS to clearly state what type of short-term rental use is permitted and under what circumstances. We know of at least one recent Court opinion, Watts v. Oak Shores Community Assn., 235 Cal. App. 4th 466 (2015), that supports an association’s ability to adopt reasonable rules and impose fees on its members relating to short-term rentals of units, provided there is a legitimate basis for the rule and it is not inconsistent with the CC&Rs. In Watts, absentee property owners within the Oak Shores Community Association regularly rented out their homes to short-term renters, many of whom used the recreation facilities and amenities. Some brought boats onto the property for use during their short-term stay. After studying the problems caused by short-term renters in the community, including increased wear on association roads and parking lots, the Association enacted regulations to minimize the impact of short-term rentals on the community.
Against a challenge that the short-term rental rules were discriminatory and exceeded the Board’s authority, the Court ruled in favor of the association, finding that (1) Associations have the right to regulate short-term renters; and, (2) Associations have the right to impose reasonable fees to offset increased costs associated with short-term renters. “The CC&Rs gives the Board broad powers to adopt rules…Nothing in the article or elsewhere prohibits the Board from adopting rules governing short-term rentals, including fees to help defray the costs such rentals impose on all owners. The Board may reasonably decide that all owners should not be required to subsidize Watts’ vacation rental business.” Finally, while Watts supports an association’s authority to enact reasonable rules regarding short-term rentals, the decision also underscores the importance of having specific evidence to support the rules. An essential part of the Watts decision was that the association established that its short-term rental rules were reasonable by presenting specific evidence that short-term rentals had a significant impact on the enjoyment of the community by other residents. There are also many other factors an association should consider when seeking to manage, regulate, or restrict home-sharing and short-term rentals. For example, depending upon the age of the governing documents, most community associations prohibit short-term rentals either through lease restrictions, minimum rental periods, business use restrictions and transient occupancy prohibitions. An owner is permitted to rent his unit provided he does so within the CC&Rs restrictions stated. But enforcement is a challenge. Although some cities are aiding the case against short-term rentals through citywide bans, insurance mandates or other controls, the responsibility for enforcing short-term rental bans in community associations rests with the Board and will depend largely on what is contained within the community’s governing documents.
As one can expect, there is debate as to whether association rules alone, as opposed to amended CC&Rs, should govern a homeowner’s rental of their home. Where the CC&Rs are silent on rentals, the sound approach is to amend the CC&Rs to include such restrictions. Accordingly, associations seeking to curb or prohibit home-sharing and short-term rentals in their communities are advised to seek the advice of legal counsel for assistance in drafting or enforcement.