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.
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