Short-term rentals are the focus of the September 2016 Condo Association News. A government commission in California is throwing grenades by demanding beachfront Home Owner’s Associations in the region allow short terms. This demonstrates at least one government’s interest in directly dictating policy in this space. Finally, the Washington Post covers the issue of more and more Associations facing special assessments due to deferred maintenance. Enjoy the September 2016 Condo Association news roundup!
Wendy Leung, Ventura County Star, September 13, 2016
The battle over and legal landscape of short-term rentals took a turn for the confusing in California when a governmental body, the California Coastal Commission, ordered the Mandalay Shores HOA in Oxnard, California, to rescind a regulation the HOA passed banning short-term rentals. The Commission believed the restriction violated the California Coastal Act and demanded the HOA repeal the regulation. There is ongoing litigation related to the decisions. The city in which the community in question is located does not have any ordinances banning – or allowing – short-term rentals.
This is an interesting situation because it addresses a key question related to the popularity of short-term rentals, like Airbnb or VRBO: what happens when local governments “force” the allowance of short-term rentals, even when a HOA’s CC&Rs say otherwise. This situation is a little different because the HOA in question passed a regulation, not a bylaw. It is also unique because the Coastal Commission is not a traditional local or state body. Instead it is a special government organization which has additional jurisdiction over the coast. You can learn more about the Commission here.
The biggest loser in this situation is the HOA. They almost certainly passed the regulation for the ban of short-term rentals because it was the will of the community. Now they have a governmental body threatening to fine them, and they are resorting to legal action to gain clarity – which is neither cheap nor fast.
Erika I. Ritchie, OC Register, September 9, 2016
On the other side of the short-term rental debate, the city of Dana Point, California, approved short-term rentals within the city by a narrow vote of 3-2 of the City Council. A big driver for Dana Point was pressure from the California Coastal Commission noted in the previous news clip. The ordinance that was passed also spells out regulations and bans large and disruptive rentals, like big parties and weddings. The ordinance also allows HOAs which ban short-term rentals to be exempted. There is some lack of clarity as to how that exemption functions, given the previous article where a HOA was forced to reverse their regulation. I emailed the city asking if they could comment on the exemption for HOAs, but they did not respond at the time of publication.
While this ordinance seems to be constructed with HOAs in mind, it shows the demand and push to legalize companies like Airbnb. While Condo Associations and HOAs may have some protections due to their status under their State Condo Acts, I believe it is only a matter of time before we see change at the state level. Associations need to make sure they’re thinking about strong policies for short-term rentals sooner than later.
Bill Turque, Washington Post, September 18, 2016
The Washington Post did a deep dive on the vicious cycle that forms when Condo Associations cannot raise enough money to carry out necessary major projects, leading to increased general assessments or special assessments. This rising cost to live then leads to delinquency, which can hurt FHA eligibility, lead to foreclosures, and generally depress property values.
This is an all too common story in Condo communities across America. Many new communities do not carry out the requisite reserve studies or engineering assessments required to ensure that they are preparing for the future. Then at about the 20-year mark, all of the systems in a Condo that have 20-30 year lifespans before rehabilitation (facades, garages, asphalt, roofs, etc.) start to fail at once, creating a very nasty situation. Along the way, Boards may be disengaged, Owners apathetic, and the next thing you know, it’s a disaster.
Make sure your community is engaged and preparing for the future. Don’t let it happen to you.
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