Most homeowners’ associations within the State of California are common interest developments governed by the Davis-Stirling Common Interest Development Act (“Davis-Stirling”). Davis-Stirling is a state law imposing various rules, regulations and requirements on homeowners’ associations, concerning elections, open board meetings, assessment collections, and other matters. Davis-Stirling is the principal state law governing homeowners’ associations, though other local laws may also apply. Typically, Davis-Stirling is the source of the vast majority of homeowners’ association laws and the most relevant resource to check to determine if a homeowners’ association is in compliance with the law. However, Davis-Stirling is not the sole source of relevant law; the recent case of Greenfield v. Mandalay Shores Community Ass’n (2018) 21 Cal.App 5th 896, serves as a reminder that state laws other than Davis-Stirling may also impact homeowners’ associations.
In Greenfield, the association adopted a resolution (likely an “operating rule”) “barring the rental of single-family dwellings for less than 30 days.” In effect, the association banned short-term rentals of single family dwellings, affecting 1,400 such dwellings, while also threatening to impose incremental fines for violations. The association may have believed that its operating rule was authorized under Davis-Stirling as that law does not explicitly prohibit or even regulate an association’s ability to ban short-term rentals. (See Watts v. Oak Shores Community Association (2015) 235 Cal.App.4th 466 (upholding a short-term rental rule under the facts of that case); Civil Code section 4340 et seq. (setting forth standards for adoption, amendment, or repeal of operating rules, including that they must be consistent with the CC&Rs); but see Civil Code section 4740(a) (stating that an owner is not subject to a provision in a governing document that “prohibits” the rental or leasing of the owner’s separate interest unless the governing document was effective prior to the date the owner acquired title to the separate interest).)
Robert and Demetra Greenfield (“Owners”), who used their single-family residence within Mandalay Shores as a short-term rental, challenged the association’s resolution. Owners did not raise a challenge under Civil Code section 4740, the association’s CC&Rs or for non-retroactivity under Davis-Stirling as may have been expected. Instead, because Mandalay Shores was within the Oxnard Coastal Zone, Owners argued that the resolution violated the Coastal Act of 1976, particularly its goal to “maximize public access to the beach.” Owners argued that the resolution was a “development” under the Coastal Act that would result in a change in the intensity of use or access to land in a coastal zone, and, as such, the association was required to get a coastal development permit prior to adopting the resolution.
In a relatively brief and to-the-point opinion, the court agreed with Owners that the resolution violated the Coastal Act and required a development permit. The court reiterated that the Coastal Act is to be liberally construed to achieve its purpose of maximizing public access to the beach. In reaching its decision, the court relied on a prior case holding that closing and locking a gate that is usually open to allow public access to a beach is a “development” requiring a development permit because it affects access to the beach. By analogy to the present case, the court found that the association’s resolution similarly “changes the intensity of use and access to single-family residences in the Oxnard Coastal Zone. [Short-term rentals] were common in Oxnard Shores before the” ban; “now they are prohibited.”
The court rejected the homeowners’ association’s arguments that it had the independent right to regulate parking, noise and traffic problems caused by short-term rentals. The court disagreed with this argument for properties within the Coastal Zone, noting that these were land use matters for the local governmental authority and the Coastal Commission to address, and such matters “may not be regulated by private actors where it affects the intensity of use or access to single-family residences in the coastal zone.”
While the application of Greenfield is limited to properties and homeowners’ associations within the Coastal Zone, it serves as a useful reminder that homeowners’ associations may be subject to applicable federal, state and local laws in addition to Davis-Stirling. All applicable laws should be reviewed and evaluated prior to the association setting new policies, especially potentially contentious ones such as the burgeoning battleground over short-term rentals.
Brian C. Hanley is an attorney practicing in California and Nevada, and is a principal in the Porter Simon law firm located in Truckee, with offices in Reno and Tahoe City. He practices primarily in the areas of real estate, business, estate planning and homeowners’ association law. Brian may be reached at email@example.com or at the firm’s web site www.portersimon.com.
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