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Association Alliance Meeting Seminar Conference


Congratulations. You just bought yourself a home…

in a condominium

in a planned unit development (PUD)

with a Homeowner’s Association (HOA) watching over everyone like a vulture while nibbling away at the monthly fees.

Cue music from your most terrifying horror flick, because obtaining financing when an HOA may be involved can seem like life in a B-rated horror movie. We may scream while HOA managers gleefully, chant, “Double, double, toil and trouble, Broker burn and Borrower bubble.” Does something wicked this way come?

It may seem like it sometimes. When a Loan Processor tries feverishly to secure documents to submit to an Underwriter, HOA documents, more often than not, arrive in the mail and not by overnight delivery either. It’s often the case, even for a “rush” order, fees paid in advance which a Broker may have had to provide a check from his/her/their own office to secure. Documents may take weeks to arrive, even though they’re the first to be ordered. It’s enough to keep the nails of Loan Processors worn down to nubs, nail slivers noisily chomped away like the clacking of linotype machines.

Is it really that bad? I, for one, have seen some HOA’s who left me feeling like an elephant hanging off the edge of a cliff with its tail tied to a petunia with used dental floss. But there have been changes in the works, courtesy the State of California, that have changed the financial-political landscape somewhat. If you want to buy or sell property in Elmer PUD Estates, you should know about them.



No, but you’d think they might use them for insulation which… metaphorically… they do.

HOA documents can appear so voluminous they could compete with The Mahabharata. Exactly what Lenders require varies from Lender to Lender according to their interpretation of mortgage guidelines. Documents can include such things as:

  • Covenants, Conditions, & Restrictions (CC&R’s)
  • Articles of Incorporation forthe HOA
  • Bylaws and Amendments
  • Rules and Regulations
  • HOACorporation Minutes
  • Plat Maps, Plans, Land Surveys, and Permits where applicable.

Sometimes these documents can include such things as Financial ReportsReviewsAuditsContractsBidding, and any other operational document related to how the HOA is constituted and maintained. I have yet to see any Underwriter requiring that level of documentation. But calls for documents like CC&R’sBylaws, and Rules happen frequently. Some CC&R’s are particularly voluminous. How crazy does this get? As a temp in large Lender offices, I’ve self-consciously tip-toed past some desks with CC&R’s literally stacked to within a foot of the ceiling. There’s a special reason why a Lender will most want to examine those CC&R’s.



HOA’s have at times limited how many units may be rented out at a given time. Not only do they have limits, but loan programs have limits as well. Fannie Mae and Freddy Mac allow up to 30% of units in an HOA to be “Non-Owner-Occupied,” or rental units. FHA allows a much higher limit at 65% but caps at 50% the concentration of FHA loans throughout the HOA. It becomes apparent that HOA’s will want to minimize the number or rentals in a complex. It makes the properties more attractive to Buyers who just want to settle down to a ho-hum life of property taxes, HOA fees, and possible monthly mortgage payments.

For most loan programs, that’s not a problem. But it may potentially become an issue for Veterans Administration (VA) loan programs, given this provision:

(Authority: 38 U.S.C. 3703(c)) (6)

“Leasing restrictions. Except as provided in this paragraph, there shall be no prohibition or restriction on a condominium unit owner’s right to lease his or her unit. The following restrictions are acceptable: (i) A requirement that leases have a minimum initial term of up to 1 year; or (ii) Age restrictions or restrictions imposed by State or local housing authorities which are allowable under §36.4809(e) or §36.4854(b)(5)(iv). (d) Rights of action. The owners’ association and any aggrieved unit owner should be granted a right of action against unit owners for failure to comply with the provisions of the declaration, bylaws, or equivalent documents, or with decisions of the owners’ association which are made pursuant to authority granted the owners’ association in such documents. Unit owners should have similar rights of action against the owners’ association.”

But exactly what are those state & local restrictions in “item ii?” That might be open to interpretation.

Enter AB 3182, amending the Davis-Stirling Common Interest Development Act that had passed in 2012. Common Interest Developments (CID’s) pertain directly to HOA’s. AB 3182 pertains to §4741 of the California Civil Code. Here are some provisions:

  1. Governing documents (CC&R’sBylaws, and Rules) shall not prohibit or unreasonably restrict rental of a unit. What is considered “reasonable” might be open to debate. Butthe law offers some more specificity.
  2. Thenumber of rental units in a CID/HOA may not be less than 25% of all units.
  3. Minimum lease terms cannot exceed 30 days.6 month or annual leases are no longer valid, even if they previously existed. In other words, former leases can’t be grandfathered in. Leases have to be redrawn as month-to-month leases.
  4. HOA’s must amend CC&R’s and other governing documents to conform to this law by December 31, 2021(2 months away).
  5. AnyHOA who violates this law becomes liable to an applicant or other effected party for actual damages plus a fine of up to $1,000.

The State of California passed AB 3182 specifically for the purpose of increasing the availability of rental housing. In many cases, this results in expanding qualifications to an often disqualified public that badly needs help.



An injured party may feel like David going against Goliath without knowing how to use a sling: inadequate for the task of bringing a lawsuit against the better-funded and legally savvy HOA, even if such a suit is deemed a “protected activity.” In fact, this can turn into a battle-royale with a retaliatory “Strategic Lawsuit Against Public Participation (SLAPP) and may even involve an “anti-SLAPP” motion. Such a scene played out in Third Laguna Hills Mutual v. Joslin (2020). Joslin, the owner, had rented his unit in a senior community to non-seniors who disturbed the neighborhood by playing loud music. Who won in court? The Homeowner.

Admittedly, SLAPP and anti-SLAPP actions can be tricky to navigate and really demands handling by a competent Attorney. Although a Homeowner in an HOA is responsible for misbehavior of Tenants (and when Tenants violate HOA rules, the HOA’s go after the Homeowners), issues of definition and applicability of enforcing CC&R’s to the public interest also come into play.

To assure compliance with AB 3182, HOA Managers as well as the people they’re supposed to serve, need to engage some form of monitoring. But there’s more than that rental cap at stake. Most Tenants want to comply with the rules but don’t get to see those proud precious policies manifest in the CC&R’s. Tenants often don’t know about their significance either. Educating such Tenants about these provisions is part of professionalism, a degree to which some HOA’s may not have achieved yet but should.

While tracking may involve setting up lists on a first-come-first-serve basis, some are turning to sending letters to Homeowners when that 25% rental cap has been reached. A Homeowner who wants to rent out a unit can put his/her/their name on the list; and when the Tenant moves out, the Homeowner drops to the bottom of the list again. While such a system may equitably distribute rental rights, it may also deny a continuity of tenancy.

There may be a loophole in the legal gobbledygook of some CC&R’s, particularly when it comes to “Accessory Dwelling Units” (ADU’s). A detached building may serve as an ADU. So can a section of a home, a basement, or a room over a garage. Such a home may still be “Owner-Occupied,” abbreviated in the real estate world as, “OO”, which Lenders sometimes describe as “oh-oh.” But the Owner still receives compensation as rent. How this may affect a Homeowner’s ability to rent part of the property may depend not only on that rental cap, but also provisions in the CC&R’s for ADU’s. Consultation with an Attorney is certainly a prudent thing to do.

When it comes to selling, the onus for providing documents to affect sale of property under an HOA falls as much upon the Seller  as the HOA according to the California Civil Code:

  • §4525provides that the Seller of a property located within an HOA must provide necessary documents to a prospective Buyer.

  • §5205 provides that the HOA must make these documents available to members (in this case, the Seller) for copying and inspection.


Here are some other new laws that also favor the housing-hungry public, especially Homeowners. These can also impact HOA’s to varying degrees:

AB 38 Disclosure must be made to new Buyers whether the property they want to buy is in a high-risk fire area. This takes the form of a 1-page document signed at closing. Real estate Brokers can obtain this information in the Natural Hazard Disclosure report that they purchase as a means of discovery with copies submitted to Escrow and the Buyer.

AB 1079 expands the Right of First Refusal. In the Great Recession of 2008, a lot of properties went to foreclosure and an embarrassingly public auction in front of the County Courthouse. If a Buyer wins a property at such an auction, and doesn’t plan to live there, the Tenant who does could buy that property up to 15 days after the auction and can do so with a mortgage. With passage of AB 1079, that Tenant has 45 days to come up with money to match the Buyer. If the Tenant does so, the Buyer loses and the Tenant has bought a home. More than that, if during that same 45 day period, another person who never was a Tenant can also win the property if that person coughs up more money than the Buyer.

AB 1885 is an expansion of the Homestead Exemption. Any Homeowner can apply for a homestead. What that does is protect the Homeowner from losing a property if he/she/they must file for bankruptcy. Previously the homestead exemption was $300,000: an amount that creditors cannot touch. With AB 1885, the amount doubled to $600,000. That leaves some condo units completely untouchable, allowing a bankrupt Homeowner to stay in the home.

Proposition19, approved by California voters in 2020, expands a key provision for Californians over 55 years of age. If they buy a new home, they can take their property tax rate with them instead facing a reassessment that costs them more in property tax. With Proposition 19, that same couple can do this 3 times instead of 1.

AB 2345, the State Density Bonus Law Amendments is a rather complex law that revises a number of provisions to increase the density of housing to help alleviate the state’s housing crisis.

AB 1851 is the antithesis of NIMBY (Not In My Back Yard) laws by allowing a “Yes In God’s Back Yard” (YIGBY). Faith-based organizations often have large parking lots and local residents have often preferred parking lots to units that take homeless people off the streets. Now these faith-based entities can build affordable housing on those parking lots. Such housing may follow the model that homeless shelters use. They could also effectively form corporations like an HOA.


Often a Homeowner or a Seller may need to consult an Attorney for assistance when it comes to renting units involving “the big bad  HOA.” One must be able to know with reasonable certainty that plans for use of a property are sound and not an action that leads the individual into a legal quagmire. It calls for a team of professionals:

It calls for an Attorney ready to hand for navigating the often complicated legal landscape.


It calls for a Broker who understands the workings of HOA’s enough to interact with them as necessary to secure financing.

It calls for a Broker who can also act as a Property Manager if called upon to do so.

You need Mariella Agrusa of iRealty Shop. She’s not just a real estate Broker. As a former member of the Orange County BAR Association as a real estate Broker, she has regular connections with Attorneys throughout Orange County and can refer you to the right people. She’s not only a member of the Pacific West Association of REALTORS®, fully licensed by the California Department of Real Estate, she’s also licensed with the Nationwide Multistate Licensing System (NMLS), attesting to her expertise for securing financing. As a Broker, she’s also in a position to manage rental properties.

Give Mariella at iRealty Shop Start putting your plan together, not just to buy or sell real estate, but to put together a long-term plan to optimize your position as a Homeowner, whether you wish to rent property as an investor or find a home where you can hang your hat in peace. 


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