Real Estate & Property Law

LEASE LIMITATION PROVISIONS ? WHAT IS THE LEGISLATURE DOING IN CALIFORNIA?

AB 2259, introduced by Assembly Member Mullin, most recently amended the ASSEMBLY on MARCH 28, 2008, places limitations on enforcing lease limitation restrictions. The bill, if approved by the Assembly and Senate and signed into law, would amend Section 1368 of the Civil Code (which relates to disclosures upon sale) and would add Section 1360.2 to the Civil Code which would provide protection to owners who are in opposition to leasing restrictions by giving them vested rights (explained below) that except them from approval of rental limitation restrictions by the necessary percentage of members.

The legislature put this language right in the bill: ?SECTION 1. The Legislature finds and declares that the rights of common interest development owners to rent or lease their properties, as the rights existed at the time they acquired them, should be protected by the State of California, and the rights of subsequent owners should be governed by the status of those rights at the time they acquire them.? Of course, they are talking about lease limitation restrictions in this bill, but this wording signifies many lawmakers? mindset, i.e., that restrictions in the documents should be frozen in time for each owner, which is in direct opposition to a long string of appellate case findings that uphold amendments to the documents based on the premise that when an owner purchases in an HOA, they do so with the understanding that the documents can be revised and changed by a majority or supermajority of owners.

More specifically on the issue of each Owner?s rights, the bill says: The right of an owner in a common interest development to rent or lease his or her separate interest, as vested at the time the ownership began, shall not be restricted during the duration of ownership, except as provided in subdivision (b).? Do you see what this means? The word ?vesting? means that each Owner would be protected as their rights to lease cannot be changed after purchase.

The only exception would be that an owner could waive their ?vested right? described above, under Section (b) of the statute, which says: ?(b) An owner of an interest in a common interest development may waive the right related to the renting or leasing of an ownership interest vested in the owner at the time ownership commenced, pursuant to procedures established by the common interest development to facilitate the a waiver.?

This means that the HOA could adopt procedures giving owners the option to waive their rights. Such a waiver could be written in as a ?grandfathering? of all current owners which is sometimes done, though not all attorneys agree that it should be done. It would seem to resolve the issue of any owner who does not want to be subject to the restriction. Watch the bill, it may change. At this time it is not an outright prohibition on leasing restrictions but that could change. There are many that oppose the bill, including the CAI California Legislative Action Committee. Others are proposing amendments.

This is a controversial bill, on a controversial topic. Watch my website (http://www.californiacondoguru.com) for updates on the blog, and check out the current article about "Lease Limitatiion Amendments - Are They Legal In California?" Also, I will be doing an E-Newsletter on the subject so go to the website and sign up to receive it ? its free! And it might be an indicator that if a Board is considering proposing such an amendment, now might be a good time. The bill if signed into law will change things.

Full post as published by California Condo & HOA Law on April 29, 2008 (boomark / email).