CA Appeals Court Holds that Ban on Short-Term Rentals Constituted “Development” and Required a Coastal Development Permit

This post was authored by Amy Lavine, Esq.

A California court held in March that restrictions on short-term rentals constitute “developments” requiring prior approval from the Coastal Commission when they result in changes to the intensity of use or access to coastal lands. Applying this holding, the court found that a homeowners association resolution banning short-term rentals was invalid where it affected an extensive area of beach property that had previously been accessible to short-term renters. Greenfield v. Mandalay Shores Community Assn., 21 Cal. App. 5th 896 (3/27/18).

The appellants in this case owned a house in Oxnard Shores and began renting it out as a short-term vacation rental in 2015. The property was zoned single-family-beach and the zoning ordinance did not include any restrictions on short-term rentals, but in 2016, the homeowners association (HOA) passed a resolution that prohibited the rental of single-family dwellings for less than 30 days. The ban impacted a large residential area with more than 1,400 units and imposed steep fines, with first time violations starting at $1,000 and subsequent offenses incurring penalties of up to $5,000.

After the resolution was passed, the HOA received a letter from the Coastal Commission which explained that the short-term rental ban was a “development” under the Coastal Act and therefore required a coastal development permit. The Commission asked for the HOA’s cooperation so that they could “develop suitable regulations before taking action in the future related to short-term rentals in the community.” Despite this determination from the Coastal Commission, the trial court concluded that the short-term rental ban was not a “development” under the Coastal Act and declined to grant a preliminary injunction as requested by the appellants.

The court reversed on appeal and ordered the trial court to issue injunctive relief preventing the HOA from enforcing its short-term rental ban. Preliminarily, the court noted that the Coastal Act conferred standing to bring injunctions on “any person” seeking to restrain a coastal zone violation, and it further provided that a preliminary injunction “shall be issued” upon a prima facie showing of Coastal Act violations. Under this statutory framework, issues that would normally be significant in determining whether to grant an injunction were relevant. Accordingly, injunctive relief was appropriate in this case even though the typical balancing test for preliminary injunctions might not have weighed in their favor. As the court explained, “Because standing is conferred on ‘any person’ . . . it matters not when appellants started renting to short-term tenants or that appellants can be adequately compensated for economic damages if the STR ban is found to be invalid at trial.”

Regarding the merits of the case, the court emphasized that one of the fundamental purposes of the Coastal Act was to maximize public access to the beach, and on that basis it prohibited not just physical barriers to coastal property but also monetary barriers like the HOAs’s short-term rental ban. The type of “development” covered by the Coastal Act was also broadly defined to require coastal permits for any “change in the density or intensity of use of land,” and prior case law indicated the Act should be given “[a]n expansive interpretation” in order to “accomplish its purposes and objectives.” Under this understanding of the Coastal Act, the court found that the short-term rental ban changed the intensity of use and access to single-family homes, as short-term renters could no longer access rentals in Oxnard Shores, and the resolution was therefore a “development” for which a coastal permit was required.

The court also dismissed the HOA’s argument that the resolution was necessary to address problems caused by increased short-term rentals, such as parking, traffic, and noise. “STR bans,” the court explained, “are a matter for the City and Coastal Commission to address. STRs may not be regulated by private actors where it affects the intensity of use or access to single-family residences in a coastal zone.” The court pointed out the city was in the process of considering zoning amendments to regulate short-term rentals in a manner consistent with the local coastal plan and subject to review by the Coastal Commission, and the HOA’s attempt to bypass this process was sufficient grounds for granting injunctive relief.

Greenfield v. Mandalay Shores Community Assn., 21 Cal. App. 5th 896 (3/27/18)