Description
As explained below in more detail, if the owners in a community association voted to amend its governing documents to limit the number of units a person or group of persons could own and/or to limit the number of votes an owner of multiple units would have, such rule would not be enforceable.
California Civil Code Section 711 states that:
"Conditions restraining alienation, when repugnant to the interest created, are void."
Under Civil Code Section 711, conditions restraining alienation (i.e., conditions affecting the transferability) of real property are closely scrutinized by the courts to determine whether the restraint is reasonable. Courts will uphold reasonable limitations on the transfer of real property, but will strike down unreasonable ones. In determining whether a particular restriction on selling a unit in a community association is an unreasonable restraint on alienation, a court will weigh the justification for the restraint against the restriction’s impact on the unit owner’s property rights.
Presently, California law permits a unit owner to sell his or her unit to whomever he or she wants, even to someone who already owns another unit at the Association. Therefore, a restriction limiting the number of units a person may own (which, in effect, limits to whom a unit owner can sell his or her unit) would be considered a restraint on alienation. Unfortunately, there are only a handful of cases applying Civil Code Section 711 to the governing documents of homeowner associations, and none of them directly address this type of restriction. As such, there is no way to state with certainty how a court would interpret such a restriction if this matter were tried in court. Notwithstanding the lack of established case law in this area, a court is likely to find that such a restriction is unreasonable, and, therefore, strike it down, because the justification for the restraint does not outweigh the restriction’s impact on the transferability of a unit.
The arguments made most frequently to justify limiting the number of units which one person or group of persons may own is that if a person or group of persons owns multiple units, he/she/they can wield too much control in issues voted on by the members, such as the election of directors and assessment increases, and it is likely to increase the number of rentals at the Association. However, a court is likely to find that there are less intrusive means available to an association to limit the impact on voting and to discourage rentals, or to regulate rentals more effectively. For instance, an association’s governing documents may be amended to delete the cumulative voting provisions, to prevent more than one co-owner of a unit from serving on the board of directors at any time, and to enhance the leasing restrictions (e.g., imposing a rental cap or requiring that owners own their units for a period of one or two years before they are eligible to rent their units).
Also, from a practical standpoint, such a restriction would be difficult to enforce. That is, if the Association discovered that an owner owned more than the prescribed number of units, the Association’s primary recourse would be to sue the owner for violating the Association’s governing documents. It is questionable whether a court would force the owner to sell his unit. It is also likely to be very expensive to litigate such an action. Moreover, a person could simply "get around" such a restriction by taking title to units in the names of different entities.
Once a pattern of clear and consistent enforcement of uniform architectural standards is established, and these standards are communicated to the owners in a reasonable and understandable way, it will be easier for the Board to maintain the uniform appearance of its building exteriors.
