BILL ANALYSIS
AB 1927
Page 1
ASSEMBLY THIRD READING
AB 1927 (Knight)
As Amended April 20, 2010
Majority vote
HOUSING 9-0 JUDICIARY 9-0
-----------------------------------------------------------------
|Ayes:|Torres, Arambula, |Ayes:|Feuer, Tran, Brownley, |
| |Bradford, Eng, Gilmore, | |Evans, Hagman, Knight, |
| |Knight, Saldana, | |Huffman, Monning, Nava |
| |Torlakson, Tran | | |
| | | | |
-----------------------------------------------------------------
SUMMARY : Seeks to prohibit no-rental policies in common
interest developments (CID) unless two-thirds of CID association
members approve a no-rental policy through a written ballot.
Specifically, this bill :
1)Makes legislative findings and declarations that, among other
things, the rights of common interest development owners to
rent or lease their property should be protected by the State,
and that owners of units within a CID should, through the
exercise of a democratic decision-making process, determine
what is best for their communities.
2)Provides that a governing document of a CID that is amended,
adopted, or recorded on or after January 1, 2011, shall not
prohibit the rental or lease of a separate interest in the
CID, unless that prohibition is approved by a vote of the
owners of separate interests with voting power in the CID.
3)Requires that, notwithstanding any conflict with the governing
documents, a vote to establish any prohibition on renting of a
separate interest shall be by means of a written ballot and,
unless the governing documents in effect as of February 17,
2010, require a different percentage, shall be approved by not
less than two-thirds of the voting power of the owners of
separate interests in the CID.
4)Requires the owner of a separate interest to provide to a
prospective purchaser a statement describing any provision
contained in the governing documents that prohibits the rental
or lease of all or any of the separate interests in the CID,
AB 1927
Page 2
as well as the applicability of such a provision.
FISCAL EFFECT : None
COMMENTS :
Background: There are over 41,000 CIDs in the state that range
in size from three to 27,000 units. CIDs make up over four
million total housing units which represents approximately one
quarter of the state's housing stock. CIDs include
condominiums, community apartment projects, and housing
cooperatives and planned unit developments. They are
characterized by a separate ownership of dwelling space coupled
with an undivided interest in a common property, 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 a homeowners'
association (HOA). CIDs are governed by the Davis-Stirling Act
as well as the governing documents of the association including
bylaws, declaration, and operating rules. CIDs are governed by
volunteer boards of directors who are elected by the members of
the HOA and are responsible for interpreting the governing
documents and state law. Except when CIDs are first developed,
no state agency provides ongoing oversight of these communities.
In order to amend the governing documents, a HOA must follow the
procedure outlined in the governing documents or if the
governing documents are silent, the process provided in state
law. State law and most governing documents require that a
majority of members vote to approve an amendment to the
governing documents.
Some CIDs have restrictions on rentals which take a variety of
forms including: limiting the total number of rentals in a CID
to a set percentage, requiring a minimum amount of time for
leases, prohibiting rental of a unit until the unit has been
owner-occupied for at least a year or prohibiting renting or
leasing outright. Additionally, in some cases HOAs adopt rules
which do not flatly deny rentals but require owners renting
their separate interest to follow specific policies. For
example, a HOA may require owners who rent their separate
interest to include a clause in their lease agreement requiring
renters to abide by the rules of the HOA as a condition of
AB 1927
Page 3
residence.
Purposes of the bill: According to the author, this bill is
intended to protect the property right of a CID owner to rent
their unit if such a right existed for them at the time they
purchased the unit. An owner of a property whose rights to rent
that property were not restricted when the unit was purchased
should not have the rights abridged during their term of
ownership, without express permission. According to the sponsor
of the bill, preservation of the right to rent one's home is
particularly important to individual homeowners in the current
stressful real estate market. A prohibition on rentals in an
association could create a hardship for a homeowner who must
move because of a change in employment, and the owner cannot
sell so he/she must rent the unit.
Related legislation: In 2008, AB 2259 (Mullin) would have
prohibited a CID from restricting the right of an owner to rent
or lease his/her separate interest if the owner had that right
at the time of purchase, unless the owner waives the right to
lease or rent. AB 2259 was vetoed by the Governor. The veto
message is below:
This bill would allow a homeowner in a common interest
development (CID) to retain the right to rent or lease his or
her unit, if the right existed at the time of ownership
unless the owner relinquishes those rights in writing.
The supporters of this bill stress that the bill will protect
the property rights of the owners of property within a CID
governed by a home owner association (HOA) by preserving the
conditions under which the property was purchased. This view
stresses that these conditions are essentially a contract
between the buyer and the HOA. However, the converse of this
argument is that owners have their property rights limited
when they are prevented from renting or leasing their
property when they are restricted by this law and the
subsequent actions taken by HOAs.
This bill alters the basic tenets under which CIDs and HOAs
are formed and operated. While my support of property rights
is unwavering, the CID creates a unique community model that
is unlike the standard single family home in a traditional
neighborhood. Property owners and residents that purchase
AB 1927
Page 4
and live in a CID governed by an HOA have agreed to live
under a common set of rules and guidelines governed by a
democratic process. It is best, as current law allows, for
the owner-members of the HOA to determine what is best for
their communities.
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085
FN: 0004048