Grappling with rental restrictions
Question: Some homeowner associations in my neighborhood have written restrictions into their covenants, conditions and restrictions limiting the owners’ ability to rent out their units, while others have no such restrictions. When I went to sell my unit, the real estate saleswoman told me she has a duty to warn all other salespeople and prospective buyers of the rental restriction. She said she needed my permission to include a warning in sales advertisements and with listing services that the buyer should plan to occupy the unit as this homeowner association’s CC&Rs regulate and/or cap the number of rentals. To offset such restrictions and make it less difficult to sell, I was told that some owners offer to “carry back” financing. I can’t afford to do this and have found that rental restrictions in my neighborhood are resulting in lowered sales and asking prices, with some units taking longer to sell. I don’t want any interference or problems with my prospective sale. Can I opt out of the restrictions? Can I refuse to print that disclosure? Can I sue the board for lowering the value of my unit through those restrictions?
Answer: Association rules must follow a very rigid process before they can take effect. Read the CC&Rs for the exact language pertaining to unit rentals in your development. If they exist, review when the rules and regulations regarding renters were enacted and then review Civil Code sections 1357.100 through 1357.150. If those code requirements were not met, it is very likely that the rules are ineffective and unenforceable. Under those circumstances, you probably would not have to give notice of invalid operating rules or nonexistent conditions.
Because operating rules apply to everyone in the association, you are not permitted to “opt out.” Nor are you able to sue the board or the association for allegedly lowering the value of your unit by enacting the rental restrictions. What you can do is ensure the rules were properly enacted and, if so, obey them or enlist the majority of owners to vote to remove the restrictions. There is no real proof that limiting the number of rentals in a given complex is good or bad.
If the restrictions are valid, you may only have to make a statement that the association has “rental restrictions.” Providing a copy of the association’s governing documents, including the rules and regulations, would also serve as notice. The seller has no duty to interpret any documents, only to make them available if requested as part of the sales contract and/or agreement. The buyer, on the other hand, should investigate, perform due diligence and read all the sale documents.
Whether you decide to “carry back” an unpaid portion of the sales price as a second trust deed is something to discuss with your tax advisor.
Send questions to P.O. Box 10490, Marina del Rey, CA 90295 or e-mail noexit@mindspring.com.