HOA Amendment of CC&Rs Restricting Owner Rental Rights was Valid

Idaho Supreme Court decision (June 22, 2015).

This case involved a dispute between a homeowner (“Owner”) and a homeowners’ association (“Association”) over the enforceability of an amendment to the Association’s CC&Rs that imposed a restriction on homeowners’ rights to rent their units. When Owner purchased his unit the CC&Rs contained a “use” restriction which provided that “each lot shall be used for single family residential purposes only, on an ownership, rental or lease basis.” The CC&Rs also contained a provision which allowed for future amendments to the CC&Rs that were approved by not less than 90% of the homeowners. Owner purchased his property in 2003, and there were no issues relative to his renting of the property for short terms until 2012, when he began renting his property for short periods of time as a vacation property. The short-term rentals precipitated complaints from other homeowners about the renters’ conduct which involved misappropriation of produce from another owner’s garden, excessive noise, and parking violations. When efforts by the Association to resolve the issues with Owner proved unsuccessful, in 2013 the Association passed an amendment that changed the permitted use provisions in the CC&Rs. The amendment imposed the following restrictions on rentals:

a. There must be a written agreement with the renter.

b. The written agreement must be approved in advance by the Association’s board.

c. Advertising must be approved by the board.

d. Rental periods had to be a minimum of 6 months.

e. No subleasing permitted.

f. Owner must provide contact information to the board.

g. Board has discretion to grant exceptions and to create house rules for enforcement.

When Owner continued to rent his unit after passage of the amendment, the Association’s board adopted rules that imposed a $300.00 per day fine for violations of the short-term provision and a $100 per day fine for violations of the advertising provision. After the Association notified Owner that he was in violation of the amended CC&Rs, Owner filed suit against the Association seeking to invalidate the amendment. The trial court granted summary judgment in favor of the Association and awarded the Association costs and attorney fees. Owner appealed the trial court’s judgment contending that the Association’s amendment to the CC&Rs was an invalid restriction on Owner’s use of his property and the Association should not have been awarded costs and attorney fees.

Owner contended that the 2013 amendment to the CC&Rs was invalid because it added new burdens on homeowners as opposed to merely amending an existing burden. Thus, the issue addressed by the appellate court was whether a new restriction on rental activity may be reasonably added under a general amendment provision of an association’s CC&Rs, or whether such a new restriction is per se unreasonable. The appellate court found that: (i) when Owner purchased his property, he was bound by the Association’s CC&Rs as a whole and, included in the CC&Rs was a provision that allowed homeowners to amend the CC&Rs; (ii) preventing the Association from amending its CC&Rs would not give effect to the amendment provision in the CC&R; and (iii) allowing Owner to avoid compliance with the amendment provisions contained in the CC&Rs would be inconsistent with the bargain he made when he purchased his unit. In response to additional arguments made by Owner, the appellate court also found that the amendment was not enforced against Owner in an arbitrary or discriminatory manner, and the Association was entitled to recover its costs and attorney fees, including those incurred in connection with the appeal, as the prevailing party in an action concerning enforcement of the Association’s CC&Rs.

See case decision: Adams_v._Kimberley_One_Townh