When you purchase a home in a development tract, whether it be a single family dwelling or condominium, the transfer of title includes covenants, conditions and restrictions (CC&Rs) and bylaws of that development or community. A Homeowners Association (HOA) is a legal entity created to manage a community of single family dwellings or condominiums and has the responsibility to enforce the CC&Rs and bylaws. It is common for the community to have regulations and restrictions regarding the use of your home as a rental property.
CC&Rs and What Homeowners Associations May Regulate
A definition of CC&Rs is in the California HOA Bluebook, "Declaration of Covenants, Conditions and Restrictions (often simply called the “declaration” or the “CC&Rs”) CC&Rs describe the rights and obligations of the homeowners’ association and of each owner. CC&Rs vary widely in content and length, but usually cover the following topics: (1) the boundaries of the common area and of each unit or lot; (2) the owner usage restrictions, typically including common area use restrictions, pet regulations, and alteration controls; (3) the maintenance responsibilities of the association and the individual owners; (4) the allocation of association operating costs among the owners, and the mechanism for collecting owner payments; (5) the dispute resolution procedure; (6) the enforcement powers; and (7) the rights and protections of mortgage lenders."
The Purpose of Bylaws
HOA bylaws are governing guides for the community. Bylaws are supposed to cover things like how many people are on the board, how often you have meetings and where, and what constitutes a quorum.
The Court's Position on HOA Rental Restrictions
What an HOA can restrict should be reviewed state by state. In California, there are California Civil Code Sections 711 and 1354, which have been interpreted by the courts as to invalidate unreasonable restraints on the use of land and that barring unreasonableness, the CC&Rs are enforceable. A seminal case in California is "City of Oceanside vs. McKenna," which said that a 100 percent limitation on rental units was not unreasonable given the development is comprised of low-income housing.
Rental restrictions may include: minimum lease terms, mandatory lease provisions obligating all residents including renters to comply with the CC&Rs, granting the HOA the power to evict any tenant who does not comply with the CC&Rs, a maximum percentage of the community to be used for rental at any given time, and a prohibition against an owner renting a unit multiple times during the year.
Contesting HOA Rules Regarding Rental Restrictions
If the development does not provide for open renting at the time you desire to do so, there should be an application to contest that community rule. All HOAs have mechanisms for contesting the rules in the CC&Rs, which then usually is decided by a majority vote of the membership. Introduce your proposed amendment at a board meeting. Some states have a mechanism for the owner of a property in a development with an HOA to contest HOA decisions or mandates. Please contact your state government to find out if your state has such a mechanism.