Effective January 1, 2012, S.B. 150 amends Sections 1368 and 1373 of the Davis-Stirling Common Interest Development Act and adds California Civil Code 1360.2. to prohibit a homeowner's association (HOA) from restricting an owner's right to rent or lease out their residential unit, "unless that governing document, or amendment thereto, was effective prior to the date the owner acquired title to his or her separate interest." In other words, beginning January 1, 2012, an owner in a common interest development (condominium, townhome, or house subject to rules promulgated by an HOA) is exempt from any prohibition in a governing document (e.g., CC&Rs) dated prior to December 31, 2011 against renting or leasing a residential unit, unless: (1) that prohibition was in effect before the owner acquired title to his or her unit; or (2) the CC&Rs are subsequently amended and the prior owners consent to be bound by the amendment.

It should also be noted that transferring title to another via a quitclaim deed, probate, trust, or other non-taxable event that is exempt from property tax reassessment will not enable the transferee to be considered a "new" owner under the law.

HOAs should be aware that not all rental restrictions appear to be prohibited. It appears, that an HOA through its governing documents (bylaws and/or CC&Rs) may still implement some reasonable rental restrictions. For example, the HOA may require a written lease, the HOA may require a term of not less than one month, the HOA may implement occupancy restrictions so long as they are not discriminatory, and the HOA may also require that any written lease agreement contain language that the tenant agrees to abide by the HOA's rules and regulations. However, it does appear that as of January 1, 2012, HOAs will not be permitted to: (1) prohibit a new owner from leasing his or her unit, (2) require a waiting period after purchase of the unit before the new owner can lease his or her unit, or (3) limit the number of units within the development that can be leased.

California Civil Code §1360.2 also adds two new requirements on the owners of residential units in a common interest development. First, it requires the seller of a residential unit subject to an HOA to disclose to any prospective purchaser any prohibition(s) in the governing documents against renting, or leasing, that go into effect as of January 1, 2012. Second, it requires that any owner who plans to rent or lease his or her unit, give the HOA "verification of the date the owner acquired title" to and "the name and contact information of the prospective tenant or the tenant’s representative."