Scott Brady is co-owner and principal of Progressive Association Management, a CACM-member HOA management company serving 228 communities and nearly 15,000 homeowners throughout Southern California. Since founding the association management division in 2020, Scott has grown the company into the fastest organically growing association management firm in California by limiting manager workloads, providing full back-office support, and holding every team member accountable to documented daily service standards. |
Some associations embrace short-term rentals in their communities while others ban them entirely. The complaint against short-term rentals (STRs) is that there could be four different tenants in the course of a single month, and they often treat the property as “party central” during their stay, since most STRs are located near theme parks or popular destinations like beaches, mountains, or lakes. But some owners love STRs because they typically lease for much higher rates than long-term rentals, which increases the overall value of the property.
Even cities have taken notice and acted. Some hotels dislike the competition, and neighbors don’t enjoy living next to what amounts to a mini-hotel. Unfortunately, no matter how strict the rules, some tenants simply cram the unit with guests and ignore the complaints of those around them.
So what are the actual rules and restrictions when it comes to short-term rentals in an HOA?
What Governs STRs in an Association
The CC&Rs govern short-term rentals in an association. State laws are neutral on STRs, but if they are permitted by the local jurisdiction, only the CC&Rs can limit their use within an association. The board cannot simply add a restriction to the community’s rules and regulations. It must be embedded in the governing documents, which typically requires a supermajority vote of all owners, or 66% plus one vote.
That is not always easy to accomplish, but if that percentage of owners is opposed to STRs or wants to limit the number or set specific rules for those that are permitted, those restrictions must be in the CC&Rs. A community can ban STRs entirely, cap the number allowed, or impose strict rules such as guest registration requirements, minimum stay lengths, and loss of owner amenities if tenants do not comply.
How Local Government Plays a Role
It is important to note that local government supersedes the decision-making of the board. If STRs are already banned or restricted by the city, the board does not need to address it separately.
In Newport Beach, for example, short-term rentals are only permitted in areas close to the pier and on the peninsula. Owners must apply for a city permit at a cost of $250 and pay a 10% transient occupancy tax on gross income, the same as hotels. In nearby Huntington Beach, the minimum stay is 30 days, which effectively limits STRs in the city. Many cities have banned or restricted STRs due to voter concerns, hotel industry pushback, and general owner dissatisfaction.
Grandfathering and State Law
If a community votes to restrict STRs in cities that allow them, only future buyers are affected. Current owners are “grandfathered” in. You cannot deprive an existing owner of property rights they purchased with the intention of exercising, such as operating a short-term rental.
The state has also weighed in on rental limitations more broadly. California previously saw associations attempt to prohibit all rentals or cap them at 5% to 10% of total units. California law now sets the allowable rental percentage at 25% and supersedes whatever the CC&Rs may say on the matter.
Owner Responsibility for Tenant Behavior
For all rentals, short or long term, the owner is legally responsible for tenant behavior, and the courts have upheld this standard. If a tenant violates the rules and regulations of the association or its governing documents, the owner is fined or their amenities are restricted, which in turn restricts the amenities available to the tenant. The tenant may be the one causing the problem, but the owner pays the penalty.
If you have questions about how STR restrictions work in your community or how your association is being managed, we are here to help.
