Maureen Megowan's Blog


Rights of Condo Owners to Rent in California

A new law impacts the ability of investors in condos who intend to rent their units.

A unit owner in a common interest development is exempt from any prohibition in a governing document against renting or leasing the unit, unless that prohibition was in effect before the owner acquired title to the unit. An owner’s right to rent under this law does not terminate for certain transfers of title, including probate, spousal, parent-to-child, adding a joint tenant, and other transfers exempt from property tax reassessments. For sales transactions, an HOA must disclose any prohibition in the governing documents against renting or lease (C.A.R.’s standard form Homeowner Association Information Request (revised 11/11)). For rental transactions, a unit owner must give the HOA verification of the owner’s acquisition date, and the name and contact information of the prospective tenant. This law does not apply to rental prohibitions in effect before 2012.
Senate Bill 150 (codified as Cal. Civil Code § 1360.2) (effective January 1, 2012).


Many condominium homeowners associations passed resolutions prohiting rentals of units if the percentage of non-owner occupied units falls below a specific percentage. late in 2011.  This was done because many lenders, including Fannie Mae and FHA will not approve of a new loan if the percentage of non-owner occupied units is above the limits below: This is why it is imperative that an investor buying a condo to rent carefully review the HOA disclosure documents prior to the close of escrow to determine if there are any existing limitations on rental of units in the project.

Lenders follow guidelines from the Federal Housing Administration, Fannie Mae and Freddie Mac for condo mortgages.

Among Fannie Mae's requirements:

  • More than half of the condo units must be owner-occupied.
  • No owner may own more than 10 percent of the units.
  • No more than 15 percent of owners can be delinquent on condo dues.
  • All amenities must be completed if the development is more than 12 months old.
  • Buyers who make a down payment of less than 25 percent will pay an additional 0.75 percent of the loan amount at the closing or a higher interest rate of about 0.25 percent.

Read more: How to jump through condo-lending hoops

For more information about Palos Verdes and South Bay Real Estate and buying and selling a home on the Palos Verdes Peninsula, visit my website at . I try to make this the best real estate web blog in the South Bay Los Angeles and the Palos Verdes Peninsula. I would love to hear your comments or suggestions.

Comment balloon 2 commentsMaureen Megowan • December 26 2011 08:44PM


Hi Maureen, thanks for the update.  Geez one more law to remember.  Happy Selling :D!

Posted by Sophia Lin, Sunnyvale CA Real Estate Specialist (Intero Real Estate Services) almost 7 years ago

In Florida the buyer has 3 days to review condo docs. As well as the association has to provide a question and answer sheet. Certain areas have lots of rules, other don't. In Destin in most instances rentals are not a problem.

Posted by Bill Reddington, Destin Florida Real Estate (Re/max Southern Realty) almost 7 years ago

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