If you’re on the board of a California homeowners association (HOA), chances are you’ve fielded concerns about short-term rentals (STRs) in your community. The rise of platforms like Airbnb and Vrbo has made STRs more common—and more controversial. Many HOAs are asking: Can we regulate or even ban short-term rentals in our community? And if so, how?
The answer lies in two key California laws—Civil Code sections 4740 and 4741—and one landmark case: Brown v. Montage at Mission Hills.
Civil Code § 4740 makes one thing crystal clear: HOAs cannot enforce new rental restrictions against owners who bought their property before the restriction was adopted—unless they expressly agreed to such a restriction in the original CC&Rs when they purchased. In other words, any new rental restriction only applies prospectively.
Civil Code § 4741, enacted more recently, further limits HOAs by banning “unreasonable” restrictions on rental rights. For example, an HOA cannot impose a cap that prevents more than 25% of units from being rented, and it cannot prohibit rentals of more than 30 days. In effect, it protects the right to engage in longer-term leasing, while allowing some regulation of STRs.
The 2021 case Brown v. Montage at Mission Hills provides a practical illustration of how these laws work. In that case, a homeowner challenged the HOA’s attempt to enforce a short-term rental ban adopted after he had purchased his property. The court sided with the homeowner, holding that Civil Code § 4740 barred the HOA from applying the new rental restriction to him. The key takeaway? Rental restrictions adopted after a homeowner takes title generally cannot be enforced against that owner.
For HOAs, this case is a wake-up call. You can create and enforce reasonable STR restrictions—but only for owners who buy after the rule goes into effect, or who agreed to that restriction in the original CC&Rs. Otherwise, you risk legal challenges and costly litigation.
If your HOA is considering limiting or banning STRs, here are a few tips:
• Review your CC&Rs and existing rules. Are there already provisions that limit rentals? Were they in place when current owners bought in?
• Be prospective. New rules should apply only to future purchasers, unless your CC&Rs already include STR restrictions.
• Stay reasonable. Avoid outright bans on all rentals or rules that violate Civil Code § 4741.
• Consult legal counsel. Every community is different, and rental regulations can trigger significant legal exposure if mishandled.
Our firm helps HOAs across California create short-term rental policies that are clear, enforceable, and compliant with the latest legal requirements. Whether you’re updating your CC&Rs or drafting a new operating rule, we can help ensure your HOA strikes the right balance between protecting property values and respecting homeowners’ rights.