California Caps HOA Rental Restrictions at 25%

Civil Code § 4741 sets a statewide floor under every California homeowners association's power to restrict rentals. Subdivision (a) bars any governing-document provision that "prohibits, has the effect of prohibiting, or unreasonably restricts" the rental or leasing of separate interests, accessory dwelling units, or junior accessory dwelling units. Subdivision (b) goes further: an association cannot adopt or enforce a rule capping rentals below 25 percent of the development's separate interests, though a board may set a higher ceiling if it chooses. Subdivision (c) preserves one carve-out: associations may still prohibit transient or short-term rentals of 30 days or less.

Under subdivisions (d) and (e), accessory dwelling units and junior accessory dwelling units are not counted toward the separate-interest total, and a unit that is owner-occupied does not count as a rented unit when a board calculates its percentage. Compliance was mandatory statewide on and after January 1, 2021, regardless of whether a board had actually updated its CC&Rs, and subdivision (f) required every board to amend a noncompliant declaration no later than July 1, 2022, without a membership vote, after giving at least 28 days' general notice under Civil Code § 4045.

A willful violation exposes the association to the owner's actual damages plus a civil penalty of up to $1,000 under subdivision (g). The companion statute, Civil Code § 4740, grandfathers owners: a rental prohibition binds an owner only if it (or an amendment) took effect before that owner acquired title, and it requires an owner, before renting, to give the association written verification of the acquisition date along with the tenant's name and contact information. Section 4741 was last amended by Stats. 2021, Ch. 360, Sec. 6 (AB 1584), effective January 1, 2022.

An association that keeps or enforces a rental ban, a cap below 25 percent, or an unreasonable rental restriction in its CC&Rs after January 1, 2021 is violating § 4741(b) outright, and a board that never amended its declaration by the July 1, 2022 deadline is separately noncompliant. A member who proves a willful violation can recover actual damages plus a civil penalty of up to $1,000, and can continue renting under a grandfathered right if their title predates the restriction under Civil Code § 4740.