Occupancy Restrictions in Common Interest DevelopmentsDecember 26, 2006Common Interest Development Committee Legislative CommitteeThe following is for study only and has NOT been approved by the Common Interest Development, Legislative or Executive Committees or the Board of Directors.Issue: Should Homeowner Associations be limited with respect to adopting restrictions on the number of non-owner occupied units in a complex?Action: If C.A.R. is to sponsor a bill in 2007, it must act at this meeting.Options: 1.Sponsor legislation requiring HOA’s that adopt restrictions on the number of non-owner occupied units in a complex to: 1).Adopt the restrictions at a “public” meeting of the unit owners; 2). Adopt written findings and declarations concerning such restrictions which are recorded; 3). Limit restrictions to be no stricter than the FNMA underwriting guidelines2. Study this issue further soliciting input via an email survey from members of this committee3. Sponsor legislation prohibiting homeowner associations from adopting and enforcing any restriction that imposes a limitation on the number of properties that can be non owner occupied.4. Supportlegislation outlined in option 45. OtherStatus/Summary: During the past year, several local associations of REALTORS® have asked C.A.R. to investigate this issue. The Common Interest Development Committee considered this matter at the January 2006 directors meeting and concluded that more research was necessary and a “work group” was appointed.DiscussionUnder existing law HOAs can adopt “reasonable restrictions”. The “reasonable restrictions” standard is addressed in case law. The definition of which has been considered on a case-by-case basis. It has been argued that such restrictions are discriminatory. Thecourts however have not addressed this issue. It would, however, seem unreasonable under current law for a HOA to adopt restrictions stricter than the FNMA guidelines.It would seem that REALTOR®s as well as unit owners in common interest developments can argue on either side of his issue. Some may want the flexibility to rent units without restrictions while others may prefer an entirely owner-occupied complex. C.A.R has advocated private property rights which includethe right of an owner to “rent” or “not” as the unit owner wishes. Conversely, it is argued that ownership interests are adversely impacted when properties are not owner occupied.During the past year, six local associations of REALTORS® retained a law firm to represent them on this matter before various homeowner associations. In the judgment of some of those associations, there is a significant and developing trend for homeowner associations to adopt restrictions that limit the number of dwellings that may be non-owner occupied (note that in some cases, homeowner associations flip the matter and adopt a restriction that sets a minimum percentage of homes that must be owner occupied).Is it appropriate to impose statutory restrictions on HOAs or simply leave the current law (no “unreasonable restrictions”) in place?Would legislation imposing restrictions on HOAs limiting their flexibility be an “invitation” to HOAsto adopt such restrictions?Would doing nothing be seen as an “invitation to HOAs to act arbitrarily?Is it appropriate for C.A.R. to sponsor or support legislation or study the issue further before proceeding?