AIRBnB RENTALS
QUESTION: Wondering if Davis-Stirling addresses Airbnb and how associations can deal with problems created by short-term rentals.ANSWER: No it's not addressed by the Act and yes you can do something about the problem.
Growing Problem. For those unfamiliar with Airbnb, it is a website for people to rent out their homes or even rooms on a short-term basis, whether it be a night, a weekend or a week. The service has become popular with tourists seeking lodging outside of hotels. Airbnb was founded in 2008 and in seven short years has grown to a $20 billion company with over 800,000 listings.
The problem with Airbnb short-term rentals was recently the subject of a front page article by the Los Angeles Times, "Homes as Inns Put New Pinch on Housing." The reporter observed that landlords have discovered they can make more money renting their houses a few days at a time rather than months at a time. This has led to "a whole cottage industry" that cities are struggling to regulate because of the negative impact it's had on the rental market. Long-term, stable renters have been pushed out by transient renters. Many municipalities now require short-term rentals obtain a license and pay a transient occupancy tax the same as hotels.
Impact on HOAs. Homeowner associations also suffer problems related to transient renters such as security issues, rules enforcement problems, higher maintenance costs, and increased administrative expenses because they require greater supervision. To meet the challenge, one association restricted short-term rentals and imposed a fee on landlords to offset the expenses they created.
Lawsuit. An unhappy landlord promptly sued the association over the restrictions and fees and lost. (Watts v. Oak Shores.) He appealed, and again lost. Thanks to his aggressive litigation, we now have favorable case law on the subject and he has a bill for $1.2 million in legal fees.
Published. We reported on the case three weeks ago. This past week, the court reclassified the case from unpublished to published, which means it can now be cited as case law. The court's three major rulings are significant: (i) association's have the right to restrict short-term rentals, (ii) boards can impose a reasonable fee to offset expenses associated with renters, and (iii) courts should defer to boards on decisions related to the maintenance, control and management of common areas.
Prohibiting Short-Term Rentals. If associations want to prohibit short-term rentals, they should be able to do so without the necessity of amending their CC&Rs. Most already have provisions in their CC&Rs that give them the authority they need. The first, found in many documents, prohibits owners from using their units for hotel-like operations. The second prohibits owners from running a business in the development. The third is the nuisance provision found in all governing documents. And, finally, most documents give boards broad powers to adopt rules and regulations for the benefit of the membership.
RECOMMENDATION: Associations wanting to restrict short-term rentals and/or impose fees on landlords should have legal counsel review their documents and make recommendations. To read the court's decision, see Watts v. Oak Shores.
