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By: Frank Olah
In the past few years, online booking sites such as Airbnb have predominated the short-term vacation rental market. As a result, many of California’s traditional vacation destinations have seen a surge in short-term rental (STR) activity causing cities and municipalities to issue rules in an effort to regulate this new type of market without alienating full-time residents.
For communities located in California’s coastal zone, the Coastal Commission has assisted with the development of Local Coastal Program (LCP) vacation rules. It has been the Commission’s position that rules affecting short-term vacation rentals in the coastal zone must be done in the context of a LCP and/or be authorized pursuant to a coastal development permit (CDP).
The coastal zone is an enormous area larger than the State of Rhode Island that varies from several hundred feet to five miles on land and includes a three-mile-wide band of ocean. Implementation of California’s Coastal Act (Pub. Resources Code § 30000 et seq.) policies is accomplished through LCPs that must be prepared by the 15 counties and 61 cities located in the coastal zone, which are then submitted to the Commission for approval. An LCP includes a land use plan. Development in the coastal zone may not commence until a CDP is issued by the Commission or a local government that has a certified LCP.
Unsurprisingly, the influx of Airbnb renters in common interest developments has raised the question of whether and to what extent HOA Boards may regulate or outright prohibits STRs. Generally, California HOA’s have the right to restrict short-term rentals, set minimum rental periods, and impose reasonable fees; and the Board’s decisions are entitled to deference by the courts.(See, Watts v. Oak Shores Community Assn. (2015) 235 Cal.App.4th 466.)
However, the issue has arisen as to whether HOA’s located in coastal zones under the Commission’s jurisdiction may similarly regulate STRs. This year California’s Second District Court of Appeal found that HOA’s located in the coastal zone do not enjoy similar discretion and deference. In Greenfield v. Mandalay Shores (2018) 21 Cal.App.5th 896, the court held that the decision to ban or regulate short term rentals, such as Airbnb’s, must be made by the City and the Coastal Commission, and not the HOA.
In Greenfield, owners in the Mandalay Shores Community Association, located in the Oxnard Shores Coastal Zone, sought to enjoin enforcement of the HOA’s resolution banning STRs because they argued the ban constituted a “development” under the Coastal Act requiring a CDP and the HOA had failed to obtain the permit before adopting the ban.
The court observed that for decades non-residents had rented beach houses at Oxnard Shores on a short-term basis. The certified LCP for the City of Oxnard did not address STRs. In 2016, the City announced it was considering drafting a STR ordinance to regulate the licensing and operation of STRs. In June 2016, Mandalay Shores, a mutual benefit corporation, adopted a resolution banning STRs for less than 30 days and imposed significant fines on homeowners who violated the ban. In August 2016, the Commission notified Mandalay Shores that the STR ban was a “development” requiring a CDP.
The issue before the Greenfield court therefore was whether such a STR ban constitutes a “development” under the Coastal Act requiring HOA’s to obtain a CDP. “Development” is broadly defined to include any “change in the density or intensity of use of land.” Courts have given that term an expansive interpretation, not restricting it merely to activities that physically alter the land or water.
The court then analogized the STR ban to a locked gate or posting “no trespassing” signs to prevent access to a beach. The court reasoned that one of the goals of the Coastal Act is to maximize public access to the beach. By banning short-term vacation rentals, an HOA created a “monetary barrier” to the beach.
The court found that the STR ban changed the intensity of use and access to the homes in the Oxnard Coastal Zone because before the ban, STRs were commonplace in Oxnard Shores. Just to be sure there was no misunderstanding, the court held: “STR bans are a matter for the City and Coastal Commission to address. STRs may not be regulated by private actors where it affects the intensity of use or access to single-family residences in a coastal zone. The question of whether a seven-day house rental is more of a neighborhood problem than a 31-day rental must be decided by City and the Coastal Commission, not a homeowner’s association.”
The Greenfield court relied on the fact that the STR ban at issue affected 1,400 units that had historically been used for short-term rentals. While this fact may limit application of the case to new developments or those which did not historically have STRs, the Coastal Commission’s policy is to require cooperation from the HOAs in obtaining CDPs according to the local coastal plan where the HOA is situated in a coastal zone. Therefore, HOAs contemplating STR bans must work with their local government and the Commission to develop suitable regulations or risk litigation by HOA members hoping to cash in on Airbnb’s popularity.
If you need help with this or any other HOA related question, Frank Olah practices HOA law in California and Washington and is a member of Freeman Mathis & Gary’s HOA National Practice Section. He can be reached at [email protected]. For information regarding governmental regulation of STRs, please contact Dana Maine in Freeman, Mathis & Gary’s Government Law National Practice Team at [email protected].