CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 3182

Author:(Ting)

As Amended Ver:August 27, 2020

Majority vote

SUMMARY:

This bill requires common interest developments (CIDs) to allow at least 25% of owners to rent or lease out their units.

The Senate Amendments:

1. Authorizes a CID to impose reasonable rental restrictions that have the effect of limiting the total number of rentals of 25% or higher of the individual dwelling units in the CID. Provides that ADUs and junior accessory dwelling units (JADUs) must not be counted toward this cap. Provides that such a cap must not change the right of an individual owner who was renting their unit out prior to the effective date of this bill, to continue renting out their unit.
2. Requires CIDs to follow the requirements of this bill on January 1, 2021 and requires amendments of governing documents to be completed by CIDs by December 31, 2021. Requires CIDs to comply with this bill regardless of whether the governing documents have been amended.
3. Provides that a CID that violates the provisions of this bill must be liable for a civil penalty of up to $1,000.
4. Adds a number of provisions to address chaptering errors related to several 2019 bills pertaining to ADUs.

COMMENTS:

California has over 52,000 CIDs which range in size from three to 27,000 units. Approximately one third of Californians live in a CIDs. CIDs include condominiums, community apartment projects, housing cooperatives, and planned unit developments. They are characterized by a separate ownership of dwelling units coupled with shared access to common spaces and facilities, restricted by covenants and conditions that limit the use of common area, and the separate ownership interests and the management of common property and enforcement of restrictions by an association.

CIDs are regulated under the Davis-Stirling Act (Civil Code Section 4000 et seq) as well as the governing documents of the association, including the bylaws, declaration, and operating rules. CIDs also have Covenants, Conditions, and Restrictions (CC&Rs) which are filed with the county recorded at the time they are established. Owners in a CID are contractually obligated to abide by the CC&Rs and the governing documents of a CID, which specify the rules regarding how an owner can modify their home. However, the Legislature has passed a number of laws ensuring that homeowners association (HOAs) cannot deny a homeowner's request to install solar energy systems, electric vehicle (EV) charging stations, low-water use plants, and artificial turf. While HOAs are allowed to impose reasonable restrictions on these types of improvements, the governing documents of an HOA cannot prohibit their use.

In 2011, SB 150 (Correa) Chapter 62, Statutes of 2011, prevented CIDs from creating new restrictions on the rental and lease of separate interests in CIDs. However, that legislation left an exception allowing existing rental bans to be grandfathered in if they were in effect before January 1, 2012. This bill would remove the exemption for pre-2012 rental bans and prevent the governing documents of a CID from banning the rental or leasing of a separate interest. In its place, this bill authorizes a CID to impose rental restrictions that have the effect of limiting the total number of rentals of 25% or higher of the individual dwelling units in the CID. This restriction to 25 percent is designed to enable CIDs to remain eligible for loans from government entities like the Federal Housing Authority and the Veterans Administration, which are predicated on CIDs maintaining certain owner occupancy rates.

According to the Author:

"We must marshal all available resources to address the housing and homelessness crisis. There are millions of homes across the state that have the potential to be rented to Californians in need of housing but that are prohibited from being leased under outdated homeowners association (HOA) rules. AB 3182 prohibits rental bans in HOAs to allow homeowners who want to rent out their homes."

Arguments in Support:

Supporters argue that the bill is necessary to ensure the development of ADUs and promote a diversity of housing options. According to California YIMBY, "HOAs can currently adopt rules that would ban tenants…prohibitions against tenants act as a prohibition against the production of important types of housing needed to solve California housing crisis, because if that housing cannot be occupied by a tenant, it is unlikely to be built in many cases. AB 3182 solves this issue by amending the Davis-Stirling Act…to limit the areas where CIDs can ban renters."

Arguments in Opposition:

Opponents argue that this bill would create impediments to their associations and prospective homebuyers. According to the Community Associations Institute - California Legislative Action Committee, "AB 3182 will create a couple major issues for associations, especially condominium associations. First, we are concerned it will jeopardize the opportunity for an association to access financing for critical maintenance and infrastructure issues that would otherwise need to be funded by assessment increases. It could also jeopardize the opportunity for first time homebuyers who rely on FHA loans, veterans who rely on VA loans and create issues for seniors seeking to refinance through reverse mortgages…AB 3182 will also increase investment buying within condominium associations because of the ability to rent multiple units."

FISCAL COMMENTS:

According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

VOTES:

ASM HOUSING AND COMMUNITY DEVELOPMENT: 5-2-1

YES: Chiu, Gabriel, Gloria, Limón, Maienschein

NO: Diep, Kiley

ABS, ABST OR NV: Quirk-Silva

ASSEMBLY FLOOR: 55-17-7

YES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bloom, Bonta, Calderon, Carrillo, Cervantes, Chau, Chiu, Chu, Cooley, Cooper, Daly, Eggman, Frazier, Friedman, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager, Levine, Limón, Low, Maienschein, McCarty, Medina, Mullin, Nazarian, O'Donnell, Petrie-Norris, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Weber, Wicks, Wood, Rendon

NO: Bigelow, Brough, Chen, Choi, Cunningham, Megan Dahle, Diep, Flora, Fong, Gallagher, Kiley, Lackey, Mathis, Obernolte, Patterson, Voepel, Waldron

ABS, ABST OR NV: Boerner Horvath, Burke, Gabriel, Mayes, Muratsuchi, Quirk, Quirk-Silva

SENATE FLOOR: 23-9-8

YES: Archuleta, Atkins, Beall, Bradford, Dodd, Durazo, Galgiani, Lena Gonzalez, Hertzberg, Hill, Hueso, Jackson, Leyva, McGuire, Mitchell, Monning, Pan, Roth, Skinner, Umberg, Wieckowski, Wiener, Wilk

NO: Bates, Borgeas, Chang, Dahle, Glazer, Grove, Morrell, Nielsen, Stern

ABS, ABST OR NV: Allen, Caballero, Hurtado, Jones, Melendez, Moorlach, Portantino, Rubio

UPDATED:

VERSION: August 27, 2020

CONSULTANT: Sandra Nakagawa / H. & C.D. / (916) 319-2085 FN: 0003575

 THIRD READING  

Bill No: AB 3182

Author: Ting (D)

Amended: 8/27/20 in Senate

Vote: 21

SENATE HOUSING COMMITTEE: 8-2, 8/6/20

AYES: Wiener, Durazo, McGuire, Moorlach, Roth, Skinner, Umberg, Wieckowski

NOES: Morrell, Bates

NO VOTE RECORDED: Caballero

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 55-17, 6/11/20 - See last page for vote

SUBJECT: Common interest developments: governing documents: rental or leasing of separate interests

SOURCE: California YIMBY

DIGEST:

This bill requires common interest developments (CIDs) to allow owners to rent or lease out their units, as specified.

Senate Floor Amendments of 8/27/20 address chaptering conflicts with SB 1030 (Committee on Housing).

Senate Floor Amendments of 8/25/20 clarify that a CID may impose an overall rental cap of 25% but no lower; clarify that homeowners who are currently renting their homes shall not lose their right to rent due to such a cap; require CIDs to amend their governing documents to comply with this bill by January 1, 2021, but require them to comply with this bill regardless; provide for a civil penalty on a CID that violates the provisions of this bill; and add a number of provisions to address chaptering errors related to several 2019 bills pertaining to accessory dwelling units (ADUs).

ANALYSIS:

Existing law:

1. Establishes, within the Davis-Stirling Common Interest Development Act, rules and regulations governing the operation of a CID and the respective rights and duties of a homeowners association (HOA) and its members. Requires the governing documents of a CID, and any amendments to the governing documents, to be adopted through HOA elections in accordance with specified procedures.
2. Deems void and unenforceable any covenant, condition, or restriction (CC&R) contained in any deed, contract, security instrument, or other instrument affecting the transfer of, or any interest in, real property, and any provision of the CID governing documents, that effectively prohibits or restricts:
   1. Installation of a solar energy system.
   2. Installation or use of a video or television antenna.
   3. Installation of low-water using plants, artificial turf, and other synthetic surface that resembles grass.
   4. Installation or use of an electric vehicle charging station within the owner’s unit or designated parking space.
   5. Display or affixation of one or more religious items on any entry door frame to a dwelling.
   6. Construction or use of an accessory dwelling unit (ADU) or junior accessory dwelling unit (JADU) on a lot zoned for single-family residential use that meets the requirements of existing law regarding ADUs and JADUs.
3. Provides, under existing law relating to ADUs:
   1. That if a locality adopts a local ADU ordinance, it must meet certain requirements and cannot impose certain requirements, as specified.
   2. That a local agency must ministerially approve, within 60 days, an application for a building permit to create an ADU and a JADU, as specified.
   3. That a local ordinance cannot require an applicant for an ADU to be an owner occupant.
   4. That ADUs must meet certain certain minimum and maximum square footage, height, and setback limits.
   5. That ADUs are subject to a tiered schedule of impact fees based on the size of the ADU, as specified.

This bill:

1. Provides that an owner of a separate interest (e.g., an individual dwelling unit) in a CID shall not be subject to a provision in, or amendment to, a governing document that prohibits, has the effect of prohibiting, or unreasonably restricts the rental or lease of any of the separate interests, ADUs, or JADUs, in that CID. Repeals the existing law provision allowing rent or lease prohibitions in CID governing documents effective prior to January 1, 2012.
2. Authorizes a CID, however, to prohibit the short-term rental of a separate interest for a period of 30 days or less.
3. Authorizes a CID to impose reasonable rental restrictions that have the effect of limiting the total number of rentals of 25% or higher of the individual dwelling units in the CID. Provides that ADUs and JADUs shall not be counted toward this cap. Provides that such a cap shall not change the right of an individual owner who was renting their unit out prior to the effective date of this bill, to continue renting out their unit.
4. Requires CIDs to amend their governing documents to comply with this bill but January 1, 2021. Requires CIDs to comply with this bill regardless of whether the governing documents have been amended.
5. Provides that a CID that violates the provisions of this bill shall be liable for a civil penalty of up to $1,000.
6. Adds a number of provisions to address chaptering errors related to several 2019 bills pertaining to ADUs.

Background

A CID is a form of real estate in which each homeowner has an exclusive interest in a unit or lot and a shared or undivided interest in common-area property. Condominiums, planned unit developments, stock cooperatives, community apartments, and many resident-owned mobilehome parks all fall under the umbrella of CIDs. There are more than 50,000 CIDs in California comprising over 4.8 million housing units, or approximately one-quarter of the state’s housing stock. CIDs are governed by homeowner associations (HOAs). The Davis-Stirling Common Interest Development Act provides the legal framework under which CIDs are established and operate. In addition to the requirements of the Act, each CID is governed according to the recorded declarations, bylaws, and operating rules of the association, collectively referred to as the governing documents.

ADUs are additional living spaces, either separate or attached, on single-family lots that have a separate kitchen, bathroom, and exterior access independent of the primary residence. Local ADU ordinances must meet specified parameters outlined in existing state law. According to a UC Berkeley study, Yes in My Backyard: Mobilizing the Market for Secondary Units, second units are a means to accommodate future growth and encourage infill development in developed neighborhoods. The study found that local regulations often impede development of ADUs. Last year, several bills, particularly SB 13 (Wieckowski, Chapter 653, Statutes of 2019) and AB 68 (Ting, Chapter 655, Statutes of 2019), relaxed multiple requirements for the construction and permitting of ADUs and JADUs. As locals have begun to implement the bills, however, stakeholders have caught multiple drafting and chaptering out errors. Those errors are addressed in this bill.

Comments

1. Author’s statement. According to the author, “We must marshal all available resources to address the housing and homelessness crisis. There are millions of homes across the state that have the potential to be rented to Californians in need of housing but are prohibited from being leased under outdated HOA rules. AB 3182 prohibits rental bans in HOAs to allow homeowners who want to, rent out their homes.”
2. Expanding the right to rent out. SB 150 (Correa, Chapter 62, Statutes of 2011) required CIDs to allow owners to rent or lease their units, but applied prospectively, exempting governing documents adopted prior to January 1, 2012. That bill, which was sponsored by the California Association of Realtors, was opposed by the Community Associations Institute (CAI), the organization representing CIDs. CAI argued that CID rules and regulations, including renter restrictions, need to be fluid and change with conditions imposed by the mortgage market or personal needs. In addition, CAI stated that that rental rules should be uniform for all owners, not differ based on when a unit was purchased. This bill, by removing the exemption for pre-2012 governing documents, would apply the right to rent or lease out a unit in a CID, to all units.
3. Home loan concerns. CAI opposed this bill in the Assembly based on concerns that it could jeopardize financing opportunities for those looking to purchase a home in a CID. Specifically, individuals seeking loans from government entities such as the FHA or VA, or seniors seeking to refinance through a reverse mortgage, would not be covered if the owner occupancy rate falls below a certain threshold. According to the FHA website, such requirements are intended to prevent investors from profiting off the government loan program’s affordable rates and less stringent lending guidelines. Most FHA loans require the purchaser to live in the home for at least one year prior to renting it out. These loan opportunities are important for low- to moderate-income households, who might otherwise be unable to afford to purchase a home. In addition, there are reports that homeowners and CIDs face difficulty with the issuance of insurance policies when more than 25% of home in the CID are rented out.

To address these concerns, the author amended this bill on July 15, 2020, to allow an HOA to impose restrictions that effectively limit the total number of rentals in the CID to 25%. The amendments also give an HOA the flexibility to raise the cap higher if needed to meet FHA or Freddie Mac requirements or to facilitate other financing or insurance needs.

1. Double-referral. Due to the COVID-19 Pandemic and the unprecedented nature of the 2020 Legislative Session, this bill was referred to both the Housing and Judiciary Committees but only heard in the Senate Housing Committee. The Senate Judiciary Committee noted this bill was silent as to remedies: “Presumably, the owner of the separate interest could sue for declaratory relief or an injunction perhaps, and any actual damages suffered, but as to attorney’s fees, the default ‘American Rule’ would apply. Under the American Rule, each side pays for its own attorney fees regardless of who prevails in a legal dispute. Since that bill is likely to be substantial, the prospect of paying it will dissuade many from bothering to try to enforce their rights in the first place. This may be seen as beneficial, since it discourages litigation. On the other hand, it can be viewed as problematic, since it probably means that the underlying policy probably will not be enforced as vigorously as it would be if a one-way fee shifting clause were included.” To address this concern, the amendments of August 25, 2020, add a provision for a civil penalty in the case of a CID violating the provisions of this bill.

Related/Prior Legislation

SB 150 (Correa, Chapter 62, Statutes of 2011) exempted an owner of a unit in a CID from any prohibition on renting or leasing the unit, except when the prohibition was effective on or after January 1, 2012.

AB 1927 (Knight, 2010) would have established specific procedures for a CID to follow when initially recording or amending governing documents, on or after January 1, 2011, in a manner that prohibits the rental or lease of individual units. The bill was vetoed by Governor Schwarzenegger.

AB 2259 (Mullin, 2008) would have exempted an owner of a unit in a CID from any prohibition on renting or leasing the unit, unless that provision was effective prior to the date the owner acquired title. The bill was vetoed by Governor Schwarzenegger.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

SUPPORT: (Verified 8/27/20)

California YIMBY (source)

Bay Area Council

California Apartment Association

Lake Wildwood Association

OPPOSITION: (Verified 8/27/20)

Community Associations Institute - California Legislative Action Committee

Daniel Burnham Court Master and Homeowners Associations

The Fairway Tennis Maintenance Association

Five Individuals

ARGUMENTS IN SUPPORT: California YIMBY, sponsor of this bill, states that HOA prohibitions against tenants act as a prohibition against the production of important types of housing needed to solve California’s housing crisis because if that housing cannot be occupied by a tenant, it is unlikely in many cases to be built. California YIMBY states that new housing for tenants, and those who would be tenants, is now even more critical as the need to shelter in place from COVID-19 reveals in stark clarity that California is ill-positioned to house all of its people.

ARGUMENTS IN OPPOSITION: CAI states that this bill will jeopardize the opportunity for an HOA to access financing for critical maintenance and infrastructure issues that would otherwise have to be funded through assessment increases on individual owner; that it could hurt first-time homebuyers’ ability to obtain FHA loans, veterans’ ability to obtain VA loans, and seniors’ ability to refinance through reverse mortgages; and that it will increase investment buying within CIDs due to the ability to rent multiple units. In addition, The Fairway Tennis Maintenance Association states that the provision allowing HOAs to continue to ban short-term rentals would alter the compromise reached by SB 150 (Correa, 2011) by taking away the rights of homeowners while granting new rights to CIDs.

ASSEMBLY FLOOR: 55-17, 6/11/20

AYES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bloom, Bonta, Calderon, Carrillo, Cervantes, Chau, Chiu, Chu, Cooley, Cooper, Daly, Eggman, Frazier, Friedman, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager, Levine, Limón, Low, Maienschein, McCarty, Medina, Mullin, Nazarian, O'Donnell, Petrie-Norris, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Weber, Wicks, Wood, Rendon

NOES: Bigelow, Brough, Chen, Choi, Cunningham, Megan Dahle, Diep, Flora, Fong, Gallagher, Kiley, Lackey, Mathis, Obernolte, Patterson, Voepel, Waldron

NO VOTE RECORDED: Boerner Horvath, Burke, Gabriel, Mayes, Muratsuchi, Quirk, Quirk-Silva

Prepared by: Erin Riches / HOUSING / (916) 651-4124

8/28/20 13:18:49

**** END ****

 THIRD READING  

Bill No: AB 3182

Author: Ting (D)

Amended: 8/25/20 in Senate

Vote: 21

SENATE HOUSING COMMITTEE: 8-2, 8/6/20

AYES: Wiener, Durazo, McGuire, Moorlach, Roth, Skinner, Umberg, Wieckowski

NOES: Morrell, Bates

NO VOTE RECORDED: Caballero

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 55-17, 6/11/20 - See last page for vote

SUBJECT: Common interest developments: governing documents: rental or leasing of separate interests

SOURCE: California YIMBY

DIGEST:

This bill requires common interest developments (CIDs) to allow owners to rent or lease out their units, as specified.

Senate Floor Amendments of 8/25/20 clarify that a CID may impose an overall rental cap of 25% but no lower; clarify that homeowners who are currently renting their homes shall not lose their right to rent due to such a cap; require CIDs to amend their governing documents to comply with this bill by January 1, 2021, but require them to comply with this bill regardless; provide for a civil penalty on a CID that violates the provisions of this bill; and add a number of provisions to address chaptering errors related to several 2019 bills pertaining to accessory dwelling units (ADUs).

ANALYSIS:

Existing law:

1. Establishes, within the Davis-Stirling Common Interest Development Act, rules and regulations governing the operation of a CID and the respective rights and duties of a homeowners association (HOA) and its members. Requires the governing documents of a CID, and any amendments to the governing documents, to be adopted through HOA elections in accordance with specified procedures.
2. Deems void and unenforceable any covenant, condition, or restriction (CC&R) contained in any deed, contract, security instrument, or other instrument affecting the transfer of, or any interest in, real property, and any provision of the CID governing documents, that effectively prohibits or restricts:
   1. Installation of a solar energy system.
   2. Installation or use of a video or television antenna.
   3. Installation of low-water using plants, artificial turf, and other synthetic surface that resembles grass.
   4. Installation or use of an electric vehicle charging station within the owner’s unit or designated parking space.
   5. Display or affixation of one or more religious items on any entry door frame to a dwelling.
   6. Construction or use of an accessory dwelling unit (ADU) or junior accessory dwelling unit (JADU) on a lot zoned for single-family residential use that meets the requirements of existing law regarding ADUs and JADUs.
3. Provides, under existing law relating to ADUs:
   1. That if a locality adopts a local ADU ordinance, it must meet certain requirements and cannot impose certain requirements, as specified.
   2. That a local agency must ministerially approve, within 60 days, an application for a building permit to create an ADU and a ADU, as specified.
   3. That a local ordinance cannot require an applicant for an ADU to be an owner occupant.
   4. That ADUs must meet certain certain minimum and maximum square footage, height, and setback limits.
   5. That ADUs are subject to a tiered schedule of impact fees based on the size of the ADU, as specified.

This bill:

1. Provides that an owner of a separate interest (e.g., an individual dwelling unit) in a CID shall not be subject to a provision in, or amendment to, a governing document that prohibits, has the effect of prohibiting, or unreasonably restricts the rental or lease of any of the separate interests, ADUs, or JADUs, in that CID. Repeals the existing law provision allowing rent or lease prohibitions in CID governing documents effective prior to January 1, 2012.
2. Authorizes a CID, however, to prohibit the short-term rental of a separate interest for a period of 30 days or less.
3. Authorizes a CID to impose reasonable rental restrictions that have the effect of limiting the total number of rentals of 25% or higher of the individual dwelling units in the CID. Provides that ADUs and JADUs shall not be counted toward this cap. Provides that such a cap shall not change the right of an individual owner who was renting their unit out prior to the effective date of this bill, to continue renting out their unit.
4. Requires CIDs to amend their governing documents to comply with this bill but January 1, 2021. Requires CIDs to comply with this bill regardless of whether the governing documents have been amended.
5. Provides that a CID that violates the provisions of this bill shall be liable for a civil penalty of up to $1,000.
6. Adds a number of provisions to address chaptering errors related to several 2019 bills pertaining to ADUs.

Background

A CID is a form of real estate in which each homeowner has an exclusive interest in a unit or lot and a shared or undivided interest in common-area property. Condominiums, planned unit developments, stock cooperatives, community apartments, and many resident-owned mobilehome parks all fall under the umbrella of CIDs. There are more than 50,000 CIDs in California comprising over 4.8 million housing units, or approximately one-quarter of the state’s housing stock. CIDs are governed by homeowner associations (HOAs). The Davis-Stirling Common Interest Development Act provides the legal framework under which CIDs are established and operate. In addition to the requirements of the Act, each CID is governed according to the recorded declarations, bylaws, and operating rules of the association, collectively referred to as the governing documents.

ADUs are additional living spaces, either separate or attached, on single-family lots that have a separate kitchen, bathroom, and exterior access independent of the primary residence. Local ADU ordinances must meet specified parameters outlined in existing state law. According to a UC Berkeley study, Yes in My Backyard: Mobilizing the Market for Secondary Units, second units are a means to accommodate future growth and encourage infill development in developed neighborhoods. The study found that local regulations often impede development of ADUs. Last year, several bills, particularly SB 13 (Wieckowski, Chapter 653, Statutes of 2019) and AB 68 (Ting, Chapter 655, Statutes of 2019), relaxed multiple requirements for the construction and permitting of ADUs and JADUs. As locals have begun to implement the bills, however, stakeholders have caught multiple drafting and chaptering out errors. Those errors are addressed in this bill.

Comments

1. Author’s statement. According to the author, “We must marshal all available resources to address the housing and homelessness crisis. There are millions of homes across the state that have the potential to be rented to Californians in need of housing but are prohibited from being leased under outdated HOA rules. AB 3182 prohibits rental bans in HOAs to allow homeowners who want to, rent out their homes.”
2. Expanding the right to rent out. SB 150 (Correa, Chapter 62, Statutes of 2011) required CIDs to allow owners to rent or lease their units, but applied prospectively, exempting governing documents adopted prior to January 1, 2012. That bill, which was sponsored by the California Association of Realtors, was opposed by the Community Associations Institute (CAI), the organization representing CIDs. CAI argued that CID rules and regulations, including renter restrictions, need to be fluid and change with conditions imposed by the mortgage market or personal needs. In addition, CAI stated that that rental rules should be uniform for all owners, not differ based on when a unit was purchased. This bill, by removing the exemption for pre-2012 governing documents, would apply the right to rent or lease out a unit in a CID, to all units.
3. Home loan concerns. CAI opposed this bill in the Assembly based on concerns that it could jeopardize financing opportunities for those looking to purchase a home in a CID. Specifically, individuals seeking loans from government entities such as the FHA or VA, or seniors seeking to refinance through a reverse mortgage, would not be covered if the owner occupancy rate falls below a certain threshold. According to the FHA website, such requirements are intended to prevent investors from profiting off the government loan program’s affordable rates and less stringent lending guidelines. Most FHA loans require the purchaser to live in the home for at least one year prior to renting it out. These loan opportunities are important for low- to moderate-income households, who might otherwise be unable to afford to purchase a home. In addition, there are reports that homeowners and CIDs face difficulty with the issuance of insurance policies when more than 25% of home in the CID are rented out.

To address these concerns, the author amended this bill on July 15, 2020, to allow an HOA to impose restrictions that effectively limit the total number of rentals in the CID to 25%. The amendments also give an HOA the flexibility to raise the cap higher if needed to meet FHA or Freddie Mac requirements or to facilitate other financing or insurance needs.

1. Double-referral. Due to the COVID-19 Pandemic and the unprecedented nature of the 2020 Legislative Session, this bill was referred to both the Housing and Judiciary Committees but only heard in the Senate Housing Committee. The Senate Judiciary Committee noted this bill was silent as to remedies: “Presumably, the owner of the separate interest could sue for declaratory relief or an injunction perhaps, and any actual damages suffered, but as to attorney’s fees, the default ‘American Rule’ would apply. Under the American Rule, each side pays for its own attorney fees regardless of who prevails in a legal dispute. Since that bill is likely to be substantial, the prospect of paying it will dissuade many from bothering to try to enforce their rights in the first place. This may be seen as beneficial, since it discourages litigation. On the other hand, it can be viewed as problematic, since it probably means that the underlying policy probably will not be enforced as vigorously as it would be if a one-way fee shifting clause were included.” To address this concern, the amendments of August 25, 2020, add a provision for a civil penalty in the case of a CID violating the provisions of this bill.

Related/Prior Legislation

SB 150 (Correa, Chapter 62, Statutes of 2011) exempted an owner of a unit in a CID from any prohibition on renting or leasing the unit, except when the prohibition was effective on or after January 1, 2012.

AB 1927 (Knight, 2010) would have established specific procedures for a CID to follow when initially recording or amending governing documents, on or after January 1, 2011, in a manner that prohibits the rental or lease of individual units. The bill was vetoed by Governor Schwarzenegger.

AB 2259 (Mullin, 2008) would have exempted an owner of a unit in a CID from any prohibition on renting or leasing the unit, unless that provision was effective prior to the date the owner acquired title. The bill was vetoed by Governor Schwarzenegger.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

SUPPORT: (Verified 8/25/20)

California YIMBY (source)

Bay Area Council

California Apartment Association

Lake Wildwood Association

OPPOSITION: (Verified 8/25/20)

Community Associations Institute - California Legislative Action Committee

Daniel Burnham Court Master and Homeowners Associations

The Fairway Tennis Maintenance Association

Five Individuals

ARGUMENTS IN SUPPORT: California YIMBY, sponsor of this bill, states that HOA prohibitions against tenants act as a prohibition against the production of important types of housing needed to solve California’s housing crisis because if that housing cannot be occupied by a tenant, it is unlikely in many cases to be built. California YIMBY states that new housing for tenants, and those who would be tenants, is now even more critical as the need to shelter in place from COVID-19 reveals in stark clarity that California is ill-positioned to house all of its people.

ARGUMENTS IN OPPOSITION: CAI states that this bill will jeopardize the opportunity for an HOA to access financing for critical maintenance and infrastructure issues that would otherwise have to be funded through assessment increases on individual owner; that it could hurt first-time homebuyers’ ability to obtain FHA loans, veterans’ ability to obtain VA loans, and seniors’ ability to refinance through reverse mortgages; and that it will increase investment buying within CIDs due to the ability to rent multiple units. In addition, The Fairway Tennis Maintenance Association states that the provision allowing HOAs to continue to ban short-term rentals would alter the compromise reached by SB 150 (Correa, 2011) by taking away the rights of homeowners while granting new rights to CIDs.

ASSEMBLY FLOOR: 55-17, 6/11/20

AYES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bloom, Bonta, Calderon, Carrillo, Cervantes, Chau, Chiu, Chu, Cooley, Cooper, Daly, Eggman, Frazier, Friedman, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager, Levine, Limón, Low, Maienschein, McCarty, Medina, Mullin, Nazarian, O'Donnell, Petrie-Norris, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Weber, Wicks, Wood, Rendon

NOES: Bigelow, Brough, Chen, Choi, Cunningham, Megan Dahle, Diep, Flora, Fong, Gallagher, Kiley, Lackey, Mathis, Obernolte, Patterson, Voepel, Waldron

NO VOTE RECORDED: Boerner Horvath, Burke, Gabriel, Mayes, Muratsuchi, Quirk, Quirk-Silva

Prepared by: Erin Riches / HOUSING / (916) 651-4124

8/27/20 20:43:47

**** END ****

 THIRD READING  

Bill No: AB 3182

Author: Ting (D)

Amended: 8/25/20 in Senate

Vote: 21

SENATE HOUSING COMMITTEE: 8-2, 8/6/20

AYES: Wiener, Durazo, McGuire, Moorlach, Roth, Skinner, Umberg, Wieckowski

NOES: Morrell, Bates

NO VOTE RECORDED: Caballero

ASSEMBLY FLOOR: 55-17, 6/11/20 - See last page for vote

SUBJECT: Common interest developments: governing documents: rental or leasing of separate interests

SOURCE: California YIMBY

DIGEST:

This bill requires common interest developments (CIDs) to allow owners to rent or lease out their units, as specified.

Senate Floor Amendments of 8/25/20 clarify that a CID may impose an overall rental cap of 25% but no lower; clarify that homeowners who are currently renting their homes shall not lose their right to rent due to such a cap; require CIDs to amend their governing documents to comply with this bill by January 1, 2021, but require them to comply with this bill regardless; provide for a civil penalty on a CID that violates the provisions of this bill; and add a number of provisions to address chaptering errors related to several 2019 bills pertaining to accessory dwelling units (ADUs).

ANALYSIS:

Existing law:

1. Establishes, within the Davis-Stirling Common Interest Development Act, rules and regulations governing the operation of a CID and the respective rights and duties of a homeowners association (HOA) and its members. Requires the governing documents of a CID, and any amendments to the governing documents, to be adopted through HOA elections in accordance with specified procedures.
2. Deems void and unenforceable any covenant, condition, or restriction (CC&R) contained in any deed, contract, security instrument, or other instrument affecting the transfer of, or any interest in, real property, and any provision of the CID governing documents, that effectively prohibits or restricts:
   1. Installation of a solar energy system.
   2. Installation or use of a video or television antenna.
   3. Installation of low-water using plants, artificial turf, and other synthetic surface that resembles grass.
   4. Installation or use of an electric vehicle charging station within the owner’s unit or designated parking space.
   5. Display or affixation of one or more religious items on any entry door frame to a dwelling.
   6. Construction or use of an accessory dwelling unit (ADU) or junior accessory dwelling unit (JADU) on a lot zoned for single-family residential use that meets the requirements of existing law regarding ADUs and JADUs.
3. Provides, under existing law relating to ADUs:
   1. That if a locality adopts a local ADU ordinance, it must meet certain requirements and cannot impose certain requirements, as specified.
   2. That a local agency must ministerially approve, within 60 days, an application for a building permit to create an ADU and a ADU, as specified.
   3. That a local ordinance cannot require an applicant for an ADU to be an owner occupant.
   4. That ADUs must meet certain certain minimum and maximum square footage, height, and setback limits.
   5. That ADUs are subject to a tiered schedule of impact fees based on the size of the ADU, as specified.

This bill:

1. Provides that an owner of a separate interest (e.g., an individual dwelling unit) in a CID shall not be subject to a provision in, or amendment to, a governing document that prohibits, has the effect of prohibiting, or unreasonably restricts the rental or lease of any of the separate interests, ADUs, or JADUs, in that CID. Repeals the existing law provision allowing rent or lease prohibitions in CID governing documents effective prior to January 1, 2012.
2. Authorizes a CID, however, to prohibit the short-term rental of a separate interest for a period of 30 days or less.
3. Authorizes a CID to impose reasonable rental restrictions that have the effect of limiting the total number of rentals of 25% or higher of the individual dwelling units in the CID. Provides that ADUs and JADUs shall not be counted toward this cap. Provides that such a cap shall not change the right of an individual owner who was renting their unit out prior to the effective date of this bill, to continue renting out their unit.
4. Requires CIDs to amend their governing documents to comply with this bill but January 1, 2021. Requires CIDs to comply with this bill regardless of whether the governing documents have been amended.
5. Provides that a CID that violates the provisions of this bill shall be liable for a civil penalty of up to $1,000.
6. Adds a number of provisions to address chaptering errors related to several 2019 bills pertaining to ADUs.

Background

A CID is a form of real estate in which each homeowner has an exclusive interest in a unit or lot and a shared or undivided interest in common-area property. Condominiums, planned unit developments, stock cooperatives, community apartments, and many resident-owned mobilehome parks all fall under the umbrella of CIDs. There are more than 50,000 CIDs in California comprising over 4.8 million housing units, or approximately one-quarter of the state’s housing stock. CIDs are governed by homeowner associations (HOAs). The Davis-Stirling Common Interest Development Act provides the legal framework under which CIDs are established and operate. In addition to the requirements of the Act, each CID is governed according to the recorded declarations, bylaws, and operating rules of the association, collectively referred to as the governing documents.

ADUs are additional living spaces, either separate or attached, on single-family lots that have a separate kitchen, bathroom, and exterior access independent of the primary residence. Local ADU ordinances must meet specified parameters outlined in existing state law. According to a UC Berkeley study, Yes in My Backyard: Mobilizing the Market for Secondary Units, second units are a means to accommodate future growth and encourage infill development in developed neighborhoods. The study found that local regulations often impede development of ADUs. Last year, several bills, particularly SB 13 (Wieckowski, Chapter 653, Statutes of 2019) and AB 68 (Ting, Chapter 655, Statutes of 2019), relaxed multiple requirements for the construction and permitting of ADUs and JADUs. As locals have begun to implement the bills, however, stakeholders have caught multiple drafting and chaptering out errors. Those errors are addressed in this bill.

Comments

1. Author’s statement. According to the author, “We must marshal all available resources to address the housing and homelessness crisis. There are millions of homes across the state that have the potential to be rented to Californians in need of housing but are prohibited from being leased under outdated HOA rules. AB 3182 prohibits rental bans in HOAs to allow homeowners who want to, rent out their homes.”
2. Expanding the right to rent out. SB 150 (Correa, Chapter 62, Statutes of 2011) required CIDs to allow owners to rent or lease their units, but applied prospectively, exempting governing documents adopted prior to January 1, 2012. That bill, which was sponsored by the California Association of Realtors, was opposed by the Community Associations Institute (CAI), the organization representing CIDs. CAI argued that CID rules and regulations, including renter restrictions, need to be fluid and change with conditions imposed by the mortgage market or personal needs. In addition, CAI stated that that rental rules should be uniform for all owners, not differ based on when a unit was purchased. This bill, by removing the exemption for pre-2012 governing documents, would apply the right to rent or lease out a unit in a CID, to all units.
3. Home loan concerns. CAI opposed this bill in the Assembly based on concerns that it could jeopardize financing opportunities for those looking to purchase a home in a CID. Specifically, individuals seeking loans from government entities such as the FHA or VA, or seniors seeking to refinance through a reverse mortgage, would not be covered if the owner occupancy rate falls below a certain threshold. According to the FHA website, such requirements are intended to prevent investors from profiting off the government loan program’s affordable rates and less stringent lending guidelines. Most FHA loans require the purchaser to live in the home for at least one year prior to renting it out. These loan opportunities are important for low- to moderate-income households, who might otherwise be unable to afford to purchase a home. In addition, there are reports that homeowners and CIDs face difficulty with the issuance of insurance policies when more than 25% of home in the CID are rented out.

To address these concerns, the author amended this bill on July 15, 2020, to allow an HOA to impose restrictions that effectively limit the total number of rentals in the CID to 25%. The amendments also give an HOA the flexibility to raise the cap higher if needed to meet FHA or Freddie Mac requirements or to facilitate other financing or insurance needs.

1. Double-referral. Due to the COVID-19 Pandemic and the unprecedented nature of the 2020 Legislative Session, this bill was referred to both the Housing and Judiciary Committees but only heard in the Senate Housing Committee. The Senate Judiciary Committee noted this bill was silent as to remedies: “Presumably, the owner of the separate interest could sue for declaratory relief or an injunction perhaps, and any actual damages suffered, but as to attorney’s fees, the default ‘American Rule’ would apply. Under the American Rule, each side pays for its own attorney fees regardless of who prevails in a legal dispute. Since that bill is likely to be substantial, the prospect of paying it will dissuade many from bothering to try to enforce their rights in the first place. This may be seen as beneficial, since it discourages litigation. On the other hand, it can be viewed as problematic, since it probably means that the underlying policy probably will not be enforced as vigorously as it would be if a one-way fee shifting clause were included.” To address this concern, the amendments of August 25, 2020, add a provision for a civil penalty in the case of a CID violating the provisions of this bill.

Related/Prior Legislation

SB 150 (Correa, Chapter 62, Statutes of 2011) exempted an owner of a unit in a CID from any prohibition on renting or leasing the unit, except when the prohibition was effective on or after January 1, 2012.

AB 1927 (Knight, 2010) would have established specific procedures for a CID to follow when initially recording or amending governing documents, on or after January 1, 2011, in a manner that prohibits the rental or lease of individual units. The bill was vetoed by Governor Schwarzenegger.

AB 2259 (Mullin, 2008) would have exempted an owner of a unit in a CID from any prohibition on renting or leasing the unit, unless that provision was effective prior to the date the owner acquired title. The bill was vetoed by Governor Schwarzenegger.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

SUPPORT: (Verified 8/25/20)

California YIMBY (source)

Bay Area Council

California Apartment Association

Lake Wildwood Association

OPPOSITION: (Verified 8/25/20)

Community Associations Institute - California Legislative Action Committee

Daniel Burnham Court Master and Homeowners Associations

The Fairway Tennis Maintenance Association

Five Individuals

ARGUMENTS IN SUPPORT: California YIMBY, sponsor of this bill, states that HOA prohibitions against tenants act as a prohibition against the production of important types of housing needed to solve California’s housing crisis because if that housing cannot be occupied by a tenant, it is unlikely in many cases to be built. California YIMBY states that new housing for tenants, and those who would be tenants, is now even more critical as the need to shelter in place from COVID-19 reveals in stark clarity that California is ill-positioned to house all of its people.

ARGUMENTS IN OPPOSITION: CAI states that this bill will jeopardize the opportunity for an HOA to access financing for critical maintenance and infrastructure issues that would otherwise have to be funded through assessment increases on individual owner; that it could hurt first-time homebuyers’ ability to obtain FHA loans, veterans’ ability to obtain VA loans, and seniors’ ability to refinance through reverse mortgages; and that it will increase investment buying within CIDs due to the ability to rent multiple units. In addition, The Fairway Tennis Maintenance Association states that the provision allowing HOAs to continue to ban short-term rentals would alter the compromise reached by SB 150 (Correa, 2011) by taking away the rights of homeowners while granting new rights to CIDs.

ASSEMBLY FLOOR: 55-17, 6/11/20

AYES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bloom, Bonta, Calderon, Carrillo, Cervantes, Chau, Chiu, Chu, Cooley, Cooper, Daly, Eggman, Frazier, Friedman, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager, Levine, Limón, Low, Maienschein, McCarty, Medina, Mullin, Nazarian, O'Donnell, Petrie-Norris, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Weber, Wicks, Wood, Rendon

NOES: Bigelow, Brough, Chen, Choi, Cunningham, Megan Dahle, Diep, Flora, Fong, Gallagher, Kiley, Lackey, Mathis, Obernolte, Patterson, Voepel, Waldron

NO VOTE RECORDED: Boerner Horvath, Burke, Gabriel, Mayes, Muratsuchi, Quirk, Quirk-Silva

Prepared by: Erin Riches / HOUSING / (916) 651-4124

8/26/20 15:03:04

**** END ****

 THIRD READING  

Bill No: AB 3182

Author: Ting (D)

Amended: 7/27/20 in Senate

Vote: 21

SENATE HOUSING COMMITTEE: 8-2, 8/6/20

AYES: Wiener, Durazo, McGuire, Moorlach, Roth, Skinner, Umberg, Wieckowski

NOES: Morrell, Bates

NO VOTE RECORDED: Caballero

ASSEMBLY FLOOR: 55-17, 6/11/20 - See last page for vote

SUBJECT: Common interest developments: governing documents: rental or leasing of separate interests

SOURCE: California YIMBY

DIGEST:

This bill requires common interest developments (CIDs) to allow owners to rent or lease out their units, as specified.

ANALYSIS:

Existing law:

1. Establishes, within the Davis-Stirling Common Interest Development Act, rules and regulations governing the operation of a CID and the respective rights and duties of a homeowners association (HOA) and its members. Requires the governing documents of a CID, and any amendments to the governing documents, to be adopted through HOA elections in accordance with specified procedures.
2. Deems void and unenforceable any covenant, condition, or restriction (CC&R) contained in any deed, contract, security instrument, or other instrument affecting the transfer of, or any interest in, real property, and any provision of the CID governing documents, that effectively prohibits or restricts:
   1. Installation of a solar energy system.
   2. Installation or use of a video or television antenna.
   3. Installation of low-water using plants, artificial turf, and other synthetic surface that resembles grass.
   4. Installation or use of an electric vehicle charging station within the owner’s unit or designated parking space.
   5. Display or affixation of one or more religious items on any entry door frame to a dwelling.
   6. Construction or use of an accessory dwelling unit (ADU) or junior accessory dwelling unit (JADU) on a lot zoned for single-family residential use that meets the requirements of existing law regarding ADUs and JADUs.

This bill:

1. Provides that an owner of a separate interest (e.g., an individual dwelling unit) in a CID shall not be subject to a provision in, or amendment to, a governing document that prohibits, has the effect of prohibiting, or unreasonably restricts the rental or lease of any of the separate interests, ADUs, or JADUs, in that CID.
2. Authorizes a CID, however, to prohibit the short-term rental of a separate interest for a period of 30 days or less.
3. Authorizes a CID to impose reasonable rental restrictions that have the effect of limiting the total number of rentals to 25% of the separate interests in the CID. Provides that ADUs and JADUs shall not be counted toward this cap.
4. Authorizes an HOA to adopt a higher percentage of rental restrictions in order to help buyers qualify for loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA), the Federal National Mortgage Association (Fannie Mae), or the Federal Home Mortgage Loan Corporation (Freddie Mac); facilitate loan financing for the CID; or facilitate acquisition and maintenance of insurance at industry-recognized HOA rates.
5. Repeals the existing law provision allowing rent or lease prohibitions in CID governing documents effective prior to January 1, 2012.

Background

A CID is a form of real estate in which each homeowner has an exclusive interest in a unit or lot and a shared or undivided interest in common-area property. Condominiums, planned unit developments, stock cooperatives, community apartments, and many resident-owned mobilehome parks all fall under the umbrella of CIDs. There are more than 50,000 CIDs in California comprising over 4.8 million housing units, or approximately one-quarter of the state’s housing stock. CIDs are governed by HOAs. The Davis-Stirling Common Interest Development Act provides the legal framework under which CIDs are established and operate. In addition to the requirements of the Act, each CID is governed according to the recorded declarations, bylaws, and operating rules of the association, collectively referred to as the governing documents.

Comments

1. Author’s statement. According to the author, “We must marshal all available resources to address the housing and homelessness crisis. There are millions of homes across the state that have the potential to be rented to Californians in need of housing but are prohibited from being leased under outdated HOA rules. AB 3182 prohibits rental bans in HOAs to allow homeowners who want to, rent out their homes.”
2. Expanding the right to rent out. SB 150 (Correa, Chapter 62, Statutes of 2011) required CIDs to allow owners to rent or lease their units, but applied prospectively, exempting governing documents adopted prior to January 1, 2012. That bill, which was sponsored by the California Association of Realtors, was opposed by the Community Associations Institute (CAI), the organization representing CIDs. CAI argued that CID rules and regulations, including renter restrictions, need to be fluid and change with conditions imposed by the mortgage market or personal needs. In addition, CAI stated that that rental rules should be uniform for all owners, not differ based on when a unit was purchased. This bill, by removing the exemption for pre-2012 governing documents, would apply the right to rent or lease out a unit in a CID, to all units.
3. Home loan concerns. CAI opposed this bill in the Assembly based on concerns that it could jeopardize financing opportunities for those looking to purchase a home in a CID. Specifically, individuals seeking loans from government entities such as the FHA or VA, or seniors seeking to refinance through a reverse mortgage, would not be covered if the owner occupancy rate falls below a certain threshold. According to the FHA website, such requirements are intended to prevent investors from profiting off the government loan program’s affordable rates and less stringent lending guidelines. Most FHA loans require the purchaser to live in the home for at least one year prior to renting it out. These loan opportunities are important for low- to moderate-income households, who might otherwise be unable to afford to purchase a home. In addition, there are reports that homeowners and CIDs face difficulty with the issuance of insurance policies when more than 25% of home in the CID are rented out.

To address these concerns, the author amended this bill on July 15, 2020, to allow an HOA to impose restrictions that effectively limit the total number of rentals in the CID to 25%. The amendments also give an HOA the flexibility to raise the cap higher if needed to meet FHA or Freddie Mac requirements or to facilitate other financing or insurance needs.

1. Double-referral. Due to the COVID-19 Pandemic and the unprecedented nature of the 2020 Legislative Session, this bill was referred to both the Housing and Judiciary Committees but only heard in the Senate Housing Committee. The Senate Judiciary Committee notes this bill is silent as to remedies: “Presumably, the owner of the separate interest could sue for declaratory relief or an injunction perhaps, and any actual damages suffered, but as to attorney’s fees, the default ‘American Rule’ would apply. Under the American Rule, each side pays for its own attorney fees regardless of who prevails in a legal dispute. Since that bill is likely to be substantial, the prospect of paying it will dissuade many from bothering to try to enforce their rights in the first place. This may be seen as beneficial, since it discourages litigation. On the other hand, it can be viewed as problematic, since it probably means that the underlying policy probably will not be enforced as vigorously as it would be if a one-way fee shifting clause were included.”

Related/Prior Legislation

SB 150 (Correa, Chapter 62, Statutes of 2011) exempted an owner of a unit in a CID from any prohibition on renting or leasing the unit, except when the prohibition was effective on or after January 1, 2012.

AB 1927 (Knight, 2010) would have established specific procedures for a CID to follow when initially recording or amending governing documents, on or after January 1, 2011, in a manner that prohibits the rental or lease of individual units. The bill was vetoed by Governor Schwarzenegger.

AB 2259 (Mullin, 2008) would have exempted an owner of a unit in a CID from any prohibition on renting or leasing the unit, unless that provision was effective prior to the date the owner acquired title. The bill was vetoed by Governor Schwarzenegger.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 8/7/20)

California YIMBY (source)

Bay Area Council

California Apartment Association

Lake Wildwood Association

OPPOSITION: (Verified 8/7/20)

Community Associations Institute - California Legislative Action Committee

Daniel Burnham Court Master and Homeowners Associations

The Fairway Tennis Maintenance Association

Five Individuals

ARGUMENTS IN SUPPORT: California YIMBY, sponsor of this bill, states that HOA prohibitions against tenants act as a prohibition against the production of important types of housing needed to solve California’s housing crisis because if that housing cannot be occupied by a tenant, it is unlikely in many cases to be built. California YIMBY states that new housing for tenants, and those who would be tenants, is now even more critical as the need to shelter in place from COVID-19 reveals in stark clarity that California is ill-positioned to house all of its people.

ARGUMENTS IN OPPOSITION: CAI states that this bill will jeopardize the opportunity for an HOA to access financing for critical maintenance and infrastructure issues that would otherwise have to be funded through assessment increases on individual owner; that it could hurt first-time homebuyers’ ability to obtain FHA loans, veterans’ ability to obtain VA loans, and seniors’ ability to refinance through reverse mortgages; and that it will increase investment buying within CIDs due to the ability to rent multiple units. In addition, The Fairway Tennis Maintenance Association states that the provision allowing HOAs to continue to ban short-term rentals would alter the compromise reached by SB 150 (Correa, 2011) by taking away the rights of homeowners while granting new rights to CIDs.

ASSEMBLY FLOOR: 55-17, 6/11/20

AYES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bloom, Bonta, Calderon, Carrillo, Cervantes, Chau, Chiu, Chu, Cooley, Cooper, Daly, Eggman, Frazier, Friedman, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager, Levine, Limón, Low, Maienschein, McCarty, Medina, Mullin, Nazarian, O'Donnell, Petrie-Norris, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Weber, Wicks, Wood, Rendon

NOES: Bigelow, Brough, Chen, Choi, Cunningham, Megan Dahle, Diep, Flora, Fong, Gallagher, Kiley, Lackey, Mathis, Obernolte, Patterson, Voepel, Waldron

NO VOTE RECORDED: Boerner Horvath, Burke, Gabriel, Mayes, Muratsuchi, Quirk, Quirk-Silva

Prepared by: Erin Riches / HOUSING / (916) 651-4124

8/7/20 17:31:40

**** END ****

SENATE COMMITTEE ON HOUSING

Senator Scott Wiener, Chair

2019 - 2020 Regular

Bill No: AB 3182 Hearing Date: 8/6/2020

SUBJECT: Common interest developments: governing documents: rental or leasing of separate interests

DIGEST: This bill requires common interest developments (CIDs) to allow owners to rent or lease out their units, as specified.

ANALYSIS:

Existing law:

1. Establishes, within the Davis-Stirling Common Interest Development Act, rules and regulations governing the operation of a CID and the respective rights and duties of a homeowners association (HOA) and its members. Requires the governing documents of a CID, and any amendments to the governing documents, to be adopted through HOA elections in accordance with specified procedures.
2. Deems void and unenforceable any covenant, condition, or restriction (CC&R) contained in any deed, contract, security instrument, or other instrument affecting the transfer of, or any interest in, real property, and any provision of the CID governing documents, that effectively prohibits or restricts:
   1. Installation of a solar energy system.
   2. Installation or use of a video or television antenna.
   3. Installation of low-water using plants, artificial turf, and other synthetic surface that resembles grass.
   4. Installation or use of an electric vehicle charging station within the owner’s unit or designated parking space.
   5. Display or affixation of one or more religious items on any entry door frame to a dwelling.
   6. Construction or use of an accessory dwelling unit (ADU) or junior accessory dwelling unit (JADU) on a lot zoned for single-family residential use that meets the requirements of existing law regarding ADUs and JADUs.

This bill:

1. Provides that an owner of a separate interest (e.g., an individual dwelling unit) in a CID shall not be subject to a provision in, or amendment to, a governing document that prohibits, has the effect of prohibiting, or unreasonably restricts the rental or lease of any of the separate interests, ADUs, or JADUs, in that CID.
2. Authorizes a CID, however, to prohibit the short-term rental of a separate interest for a period of 30 days or less.
3. Also authorizes a CID to impose reasonable rental restrictions that have the effect of limiting the total number of rentals to 25% of the separate interests in the CID. Provides that ADUs and JADUs shall not be counted toward this cap.
4. Authorizes an HOA to adopt a higher percentage of rental restrictions in order to help buyers qualify for loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA), the Federal National Mortgage Association (Fannie Mae), or the Federal Home Mortgage Loan Corporation (Freddie Mac); facilitate loan financing for the CID; or facilitate acquisition and maintenance of insurance at industry-recognized HOA rates.
5. Repeals the existing law provision allowing rent or lease prohibitions in CID governing documents effective prior to January 1, 2012.

COMMENTS

1. Author’s statement. “We must marshal all available resources to address the housing and homelessness crisis. There are millions of homes across the state that have the potential to be rented to Californians in need of housing but are prohibited from being leased under outdated HOA rules. AB 3182 prohibits rental bans in HOAs to allow homeowners who want to, rent out their homes.”
2. Background: CIDs. A CID is a form of real estate in which each homeowner has an exclusive interest in a unit or lot and a shared or undivided interest in common-area property. Condominiums, planned unit developments, stock cooperatives, community apartments, and many resident-owned mobilehome parks all fall under the umbrella of CIDs. There are more than 50,000 CIDs in California comprising over 4.8 million housing units, or approximately one-quarter of the state’s housing stock. CIDs are governed by HOAs. The Davis-Stirling Common Interest Development Act provides the legal framework under which CIDs are established and operate. In addition to the requirements of the Act, each CID is governed according to the recorded declarations, bylaws, and operating rules of the association, collectively referred to as the governing documents.
3. Expanding the right to rent out. SB 150 (Alarcon) of 2011 required CIDs to allow owners to rent or lease their units, but applied prospectively, exempting governing documents adopted prior to January 1, 2012. That bill, which was sponsored by the California Association of Realtors, was opposed by the Community Associations Institute (CAI), the organization representing CIDs. CAI argued that CID rules and regulations, including renter restrictions, need to be fluid and change with conditions imposed by the mortgage market or personal needs. In addition, CAI stated that that rental rules should be uniform for all owners, not differ based on when a unit was purchased. This bill, by removing the exemption for pre-2012 governing documents, would apply the right to rent or lease out a unit in a CID, to all units.
4. Home loan concerns. CAI opposed this bill in the Assembly based on concerns that it could jeopardize financing opportunities for those looking to purchase a home in a CID. Specifically, individuals seeking loans from government entities such as the FHA or VA, or seniors seeking to refinance through a reverse mortgage, would not be covered if the owner occupancy rate falls below a certain threshold. According to the FHA website, such requirements are intended to prevent investors from profiting off the government loan program’s affordable rates and less stringent lending guidelines. Most FHA loans require the purchaser to live in the home for at least one year prior to renting it out. These loan opportunities are important for low- to moderate-income households, who might otherwise be unable to afford to purchase a home. In addition, there are reports that homeowners and CIDs face difficulty with the issuance of insurance policies when more than 25% of home in the CID are rented out.

To address these concerns, the author amended this bill on July 15, 2020 to allow an HOA to impose restrictions that effectively limit the total number of rentals in the CID to 25%. The amendments also give an HOA the flexibility to raise the cap higher if needed to meet FHA or Freddie Mac requirements or to facilitate other financing or insurance needs.

1. Opposition concerns. CAI, writing in opposition to this bill, states concern that it will jeopardize the opportunity for an HOA to access financing for critical maintenance and infrastructure issues that would otherwise have to be funded through assessment increases on individual owners. CAI also states concern that this bill could hurt first-time homebuyers’ ability to obtain FHA loans, veterans’ ability to obtain VA loans, and seniors’ ability to refinance through reverse mortgages. Finally, CAI states that this bill will increase investment buying within CIDs due to the ability to rent multiple units.

In addition, this bill was amended in the Assembly to allow a CID to prohibit rentals of 30 days or less. The Fairway Tennis Maintenance Association, writing in opposition to this bill, states that this provision would alter the compromise reached by SB 150 by taking away the rights of homeowners while granting new rights to CIDs. The Association asks that the bill be amended to allow owners to continue short-term rentals.

1. Double referral. Due to the COVID-19 Pandemic and the unprecedented nature of the 2020 Legislative Session, all Senate Policy Committee are working under a compressed timeline. This timeline does not allow this bill to be referred and heard by more than one committee as a typical timeline would allow. In order to fully vet the contents of this measure for the benefit of Senators and the public, this analysis includes information from the Senate Judiciary Committee.

According to the Senate Judiciary Committee:

“One issue of particular relevance to Senate Judiciary Committee jurisdiction is remedies and enforcement. As noted elsewhere in this analysis, there are a number of provisions in existing law that limit the authority of common interest developments to restrict what the owner of each separate interest may do. Several of those provisions include specific remedies in the event that there is a dispute between the common interest development and a member about application of that provision.

In the event that the owner of a separate interest wants to install a television antennae or satellite dish and believes that the common interest development is putting unreasonable obstacles in the way, for example, the member may sue the common interest development and the prevailing party is entitled to recover attorney’s fees. (Civ. Code § 4725(d).) Similar provisions exist regarding installation of rooftop solar systems (Civ. Code § 714(g)) and display of the U.S. flag (Civ. Code § 4705(c). Such two-way fee-shifting statutes heighten the downside risk for litigants on both sides: not only may they lose the case; they may have to pay the other side’s attorney bill as well.

At least two provisions limiting the authority of common interest developments to regulate their members’ actions use a different approach. The provisions promoting installation of electric vehicle charging stations (Civ. Code § 4745(k) and time-of-use meters (Civ. Code § 4745.1(i)) both employ one-way fee shifting provisions: only the member gets attorney’s fees upon prevailing. The idea is to promote the underlying public policy aim by rewarding the bringing of meritorious claims.

Finally, still other provisions of this nature – regarding having pets (Civ. Code 4715), displaying religious items on an entryway (Civ. Code § 4706), or growing a garden for food (Civ. Code § 4750), for instance – are like this bill and the statute it modifies: silent as to remedies. Presumably, the owner of the separate interest could sue for declaratory relief or an injunction perhaps, and any actual damages suffered, but as to attorney’s fees, the default “American Rule” would apply. Under the American Rule, each side pays for its own attorney fees regardless of who prevails in a legal dispute. Since that bill is likely to be substantial, the prospect of paying it will dissuade many from bothering to try to enforce their rights in the first place. This may be seen as beneficial, since it discourages litigation. On the other hand, it can be viewed as problematic, since it probably means that the underlying policy probably will not be enforced as vigorously as it would be if a one-way fee shifting clause were included.”

Related Legislation:

SB 150 (Chapter 62, Statutes of 2011) — exempted an owner of a unit in a CID from any prohibition on renting or leasing the unit, except when the prohibition was effective on or after January 1, 2012.

AB 1927 (Knight, 2010) — would have established specific procedures for a CID to follow when initially recording or amending governing documents, on or after January 1, 2011, in a manner that prohibits the rental or lease of individual units. This bill was vetoed by Governor Schwarzenegger.

AB 2259 (Mullin, 2008) — would have exempted an owner of a unit in a CID from any prohibition on renting or leasing the unit, unless that provision was effective prior to the date the owner acquired title. This bill was vetoed by Governor Schwarzenegger.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

POSITIONS: (Communicated to the committee before noon on Friday,

July 24, 2020.)

SUPPORT:

California YIMBY (Sponsor)
Bay Area Council
Lake Wildwood Association

OPPOSITION:

Community Associations Institute

The Fairway Tennis Maintenance Association

2 Individuals

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 3182

Author:(Ting)

As Amended Ver:May 7, 2020

Majority vote

SUMMARY:

Requires common interest developments (CIDS) to allow the rental or leasing of a separate interest of a CID.

Major Provisions

1. Provides that any governing document that purports to prohibit the rental or lease of any of the separate interests in a CID to a renter, lessee, or tenant is void and unenforceable.
2. Establishes that an owner of a separate interest in a CID is not subject to a provision in a governing document or an amendment to a governing document that effectively prohibits or unreasonably restricts the rental or lease of any of the separate interests in that CID to a renter, lessee, or tenant.
3. Provides that the governing document of a CID may prohibit short-term rentals or leases lasting less than 30 days.
4. Repeals an existing provision of law which allows rental or leasing prohibitions in a CID's governing document if the document was effective prior to January 1, 2012.

COMMENTS:

California has over 52,000 CIDs which range in size from three to 27,000 units. CIDs make up over 6 million total housing units, which represents approximately one quarter of the state's housing stock. CIDs include condominiums, community apartment projects, housing cooperatives, and planned unit developments. They are characterized by a separate ownership of dwelling units coupled with shared access to common spaces and facilities, restricted by covenants and conditions that limit the use of common area, and the separate ownership interests and the management of common property and enforcement of restrictions by an association.

CIDs are regulated under the Davis-Stirling Act (Civil Code Section 4000 et seq) as well as the governing documents of the association, including the bylaws, declaration, and operating rules. CIDs also have Covenants, Conditions, and Restrictions (CC&Rs) which are filed with the county recorded at the time they are established. Owners in a CID are contractually obligated to abide by the CC&Rs and the governing documents of a CID, which specify the rules regarding how an owner can modify their home. However, the Legislature has passed a number of laws ensuring that homeowners association (HOAs) cannot deny a homeowner's request to install solar energy systems, electric vehicle (EV) charging stations, low-water use plants, and artificial turf. While HOAs are allowed to impose reasonable restrictions on these types of improvements, the governing documents of an HOA cannot prohibit their use.

This bill seeks to amend the Davis-Stirling Common Interest Development Act in order to prevent HOAs from banning the rental or leasing of a separate interest in a common interest development. In 2011, SB 150 (Correa) Chapter 62, Statutes of 2011, prevented CIDs from creating new restrictions on the rental and lease of separate interests in CIDs. However, that legislation left a loophole: it allowed existing rental bans to be grandfathered in if they were in effect before January 1, 2012. This bill would remove the exemption for pre-2012 rental bans and prevent the governing documents of a CID from banning the rental or leasing of a separate interest.

California has been facing a severe housing crisis in recent years and this bill has the potential to help address it by making more housing units available for renters. Specifically, this bill would allow any owner of a unit in a CID to rent out their home provided that the rental period would be more than 30 days. While CIDs could still choose to allow short-term rentals lasting less than 30 days, nothing in this bill would require them to permit short-term rentals. Though existing law has prevented CIDs from creating new policies that prevent renting or leasing since 2012, there is no data available on how many CIDs have existing pre-2012 rental bans in place. Given the significant cost and time associated with constructing new housing, this bill has the potential to bring many more rental units to the state at virtually no cost.

However, the Community Associations Institute - California Legislative Action Committee, a group representing CIDs, points out that the current version of the bill may jeopardize financing opportunities for those looking to purchase a home in a CID. Specifically, loans from government entities like the Federal Housing Authority and the Veterans Administration would not be covered if the owner occupancy rate falls below certain thresholds. These loan opportunities are important for low to moderate income households who might otherwise be unable to afford to purchase a home. Often they require that half of units are owner occupied, but other issues may arise for CIDs if the owner occupancy rate falls below 75 percent. For example, there are reports that homeowners and CIDs face difficulty with the issuance of insurance policies when more than 25% of homes are rented out.

According to the Author:

"We must marshal all available resources to address the housing and homelessness crisis. There are millions of homes across the state that have the potential to be rented to Californians in need of housing but that are prohibited from being leased under outdated homeowners association (HOA) rules. AB 3182 prohibits rental bans in HOAs to allow homeowners who want to rent out their homes."

Arguments in Support:

The bill's sponsor, California YIMBY, writes in support of this bill, "HOAs can currently adopt rules that would ban tenants…prohibitions against tenants act as a prohibition against the production of important types of housing needed to solve California housing crisis, because if that housing cannot be occupied by a tenant, it is unlikely to be built in many cases." Furthermore, the note, "AB 3182 solves this issue by amending the Davis-Stirling Act…to limit the areas where CIDs can ban renters. Specifically, this bill would say that any provision of the governing documents of a common interest development…is void and unenforceable if it prohibits tenants from occupying the home."

Arguments in Opposition:

Community Associations Institute - California Legislative Action Committee, a group representing Common Interest Developments writes in opposition, "AB 3182 will create a couple major issues for associations, especially condominium associations. First, we are concerned it will jeopardize the opportunity for an association to access financing for critical maintenance and infrastructure issues that would otherwise need to be funded by assessment increases. It could also jeopardize the opportunity for first time homebuyers who rely on FHA loans, veterans who rely on VA loans and create issues for seniors seeking to refinance through reverse mortgages…AB 3182 will also increase investment buying within condominium associations because of the ability to rent multiple units."

FISCAL COMMENTS:

None

VOTES:

ASM HOUSING AND COMMUNITY DEVELOPMENT: 5-2-1

YES: Chiu, Gabriel, Gloria, Limón, Maienschein

NO: Diep, Kiley

ABS, ABST OR NV: Quirk-Silva

UPDATED:

VERSION: May 7, 2020

CONSULTANT: Sandra Nakagawa / H. & C.D. / (916) 319-2085 FN: 0002779

Date of Hearing: May 20, 2020

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

David Chiu, Chair

ABPCA Bill Id:AB 3182 (

Author:Ting) – As Amended Ver:May 7, 2020

SUBJECT: Common interest developments: governing documents: rental or leasing of separate interests

SUMMARY: Requires common interest developments (CIDS) to allow the rental or leasing of a separate interest of a CID. Specifically, this bill:

1. Provides that any governing document that purports to prohibit the rental or lease of any of the separate interests in a CID to a renter, lessee, or tenant is void and unenforceable.
2. Establishes that an owner of a separate interest in a CID is not subject to a provision in a governing document or an amendment to a governing document that effectively prohibits or unreasonably restricts the rental or lease of any of the separate interests in that CID to a renter, lessee, or tenant.
3. Provides that the governing document of a CID may prohibit short-term rentals or leases lasting less than 30 days.
4. Repeals an existing provision of law which allows rental or leasing prohibitions in a CID’s governing document if the document was effective prior to January 1, 2012.

EXISTING LAW:

1. Establishes the Davis-Sterling Common Interest Development Act which provides the framework for the regulation of CIDs. (Civil Code Section 4000 et seq.)
2. Provides that an owner of a separate interest is only subject to a prohibition on leasing or renting of a separate interest if a governing document or amendment to a governing document was effective prior to the date the owner acquired their separate interest. (Civil Code Section 4740 (a))
3. Provides that an owner of a separate interest in a common interest development may expressly consent to be subject to a governing document or an amendment to a governing document that prohibits the rental or leasing of any of the separate interests in the common interest development to a renter, lessee, or tenant. (Civil Code Section 4740 (b).
4. Requires that, on or after January 1, 2012, no CID may include provisions or amendments to their governing document which prohibits the rental or lease of separate interests. (Civil Code Section 4740 (f))
5. Establishes that, prior to renting or leasing a separate interest, an owner shall provide the association verification of the date the owner acquired title to the separate interest and specified information on the prospective lessee or tenant. (Civil Code Section 4740(d))

FISCAL EFFECT: None

COMMENTS:

Author’s statement: According to the author, “We must marshal all available resources to address the housing and homelessness crisis. There are millions of homes across the state that have the potential to be rented to Californians in need of housing but that are prohibited from being leased under outdated homeowners association (HOA) rules. AB 3182 prohibits rental bans in HOAs to allow homeowners who want to rent out their homes.”

Background: California has over 52,000 CIDs which range in size from three to 27,000 units. CIDs make up over six million total housing units, which represents approximately one quarter of the state's housing stock. CIDs include condominiums, community apartment projects, housing cooperatives, and planned unit developments. They are characterized by a separate ownership of dwelling units coupled with shared access to common spaces and facilities, restricted by covenants and conditions that limit the use of common area, and the separate ownership interests and the management of common property and enforcement of restrictions by an association.

CIDs are regulated under the Davis-Stirling Act (Civil Code Section 1350 et seq) as well as the governing documents of the association, including the bylaws, declaration, and operating rules. CIDs also have Covenants, Conditions, and Restrictions (CC&Rs) which are filed with the county recorded at the time they are established. Owners in a CID are contractually obligated to abide by the CC&Rs and the governing documents of a CID, which specify the rules regarding how an owner can modify their home. However, the Legislature has passed a number of laws ensuring that HOAs cannot deny a homeowner's request to install solar energy systems, electric vehicle (EV) charging stations, low-water use plants, and artificial turf. While HOAs are allowed to impose reasonable restrictions on these types of improvements, the governing documents of an HOA cannot prohibit their use.

This bill seeks to amend the Davis-Stirling Common Interest Development Act in order to prevent HOAs from banning the rental or leasing of a separate interest in a common interest development. In 2011, SB 150 (Correa) Chapter 62, Statutes of 2011, prevented CIDs from creating new restrictions on the rental and lease of separate interests in CIDs. However, that legislation left a loophole: it allowed existing rental bans to be grandfathered in if they were in effect at the time an individual purchased their unit. This bill would remove the exemption for pre-2012 rental bans and prevent the governing documents of a CID from banning the rental or leasing of a separate interest.

California has been facing a severe housing crisis in recent years and this bill has the potential to help address it by making more housing units available for renters. Specifically, this bill would allow any owner of a unit in a CID to rent out their home provided that the rental period would be more than 30 days. While CIDs could still choose to allow short-term rentals lasting less than 30 days, nothing in this bill would require them to permit short-term rentals. Though existing law has prevented CIDs from creating new policies that prevent renting or leasing since 2012, there is no data available on how many CIDs have existing pre-2012 rental bans in place. Given the significant cost and time associated with constructing new housing, this bill has the potential to bring many more rental units to the state at virtually no cost.

However, the Community Associations Institute - California Legislative Action Committee, a group representing CIDs, points out that the current version of the bill may jeopardize financing opportunities for those looking to purchase a home in a CID. Specifically, loans from government entities like the Federal Housing Authority and the Veterans Administration would not be covered if the owner occupancy rate falls below certain thresholds. These loan opportunities are important for low to moderate income households who might otherwise be unable to afford to purchase a home. Often they require that half of units are owner occupied, but other issues may arise for CIDs if the owner occupancy rate falls below 75 percent. For example, there are reports that homeowners and CIDs face difficulty with the issuance of insurance policies when more than 25 percent of homes are rented out.

Arguments in Support: The bill’s sponsor, California YIMBY, writes in support of this bill, “HOAs can currently adopt rules that would ban tenants…prohibitions against tenants act as a prohibition against the production of important types of housing needed to solve California housing crisis, because if that housing cannot be occupied by a tenant, it is unlikely to be built in many cases.” Furthermore, the note, “AB 3182 solves this issue by amending the Davis-Stirling Act…to limit the areas where CIDs can ban renters. Specifically, this bill would say that any provision of the governing documents of a common interest development…is void and unenforceable if it prohibits tenants from occupying the home.”

Arguments in Opposition: Community Associations Institute - California Legislative Action Committee, a group representing Common Interest Developments writes in opposition, “AB 3182 will create a couple major issues for associations, especially condominium associations. First, we are concerned it will jeopardize the opportunity for an association to access financing for critical maintenance and infrastructure issues that would otherwise need to be funded by assessment increases. It could also jeopardize the opportunity for first time homebuyers who rely on FHA loans, veterans who rely on VA loans and create issues for seniors seeking to refinance through reverse mortgages…AB 3182 will also increase investment buying within condominium associations because of the ability to rent multiple units.”

Prior Legislation:

AB 805, Torres, Chapter 180, Statutes of 2012. This bill reorganized statutes in the Davis-Stirling Common Interest Development Act, the Part of the Civil Code which establishes and regulates common interest developments.

SB 150, Correa, Chapter 62, Statutes of 2011. This bill exempted an owner of a unit in a common interest development from any prohibition on renting or leasing the unit, except in cases where the prohibition was effective on or after January 1, 2012.

REGISTERED SUPPORT / OPPOSITION:

Support

California YIMBY (Sponsor)

Abundant Housing LA

Bay Area Council

Casita Coalition
East Bay for Everyone
Inspired ADUs

3 Individuals

Opposition

Community Associations Institute - California Legislative Action Committee

3 Individuals

Analysis Prepared by: Sandra Nakagawa / H. & C.D. / (916) 319-2085