For several years now, the “sharing economy” has been having a significant impact on how we live our daily lives. From Uber to AirBNB to Lime, these new approaches to traditional industries have left their mark on modern society. I have previously noted in this blog several concerns that savvy real estate investors should take note of before participating in this novel paradigm when it comes to ventures such as VRBO or AirBNB .
The law of real property can rely on several centuries of precedent to mitigate rapid change. Still, the real estate industry has not been immune to the effects of these shifts. Many local jurisdictions have felt the sting that the explosive expansion of the popularity of short-term rentals has left on their land use restrictions. Several of the more flamboyant examples of these situations have been previously reported in this blog.
As we have thus observed, paradoxical results can occur when hoary legal institutions collide with innovative business models. For decades, the Coastal Act has been relied on here in California as a safeguard against overdevelopment in the delicate environment of this vast region stretching from Oregon to the Mexico border. In spite of the unambiguous objectives of this legislation, however, a recent decision coming out of the Court of Appeal for the Second District has incongruously relied on the Coastal Act to set aside an attempt to prevent the intensive uses resulting from short-term rentals from proliferating within this sensitive area.
In 2016, the Mandalay Shores Community Association (“MSCA”), the homeowner’s association for the Mandalay Shores development located within the Oxnard Coastal Zone, adopted a rule banning home rentals of less than 30 days for the purpose of protecting residents from the parking, noise and trash problems generated by this intensive use. A couple who had been engaging in short-term rentals in Mandalay Shores since 2015 challenged this rule in court as a violation of the Coastal Act, seeking an injunction against that prohibition. The trial court denied the injunction, holding that MSCA’s bar was not “development” requiring a coastal permit under the Coastal Act and was validly imposed.
On appeal, however, a panel of the Second District took issue with MSCA’s actions. To begin with, the court noted that, notwithstanding MSCA’s efforts to limit these rentals, a primary purpose of the Coastal Act was to “maximize public access” to beaches. The court then cited a number of cases for the view that the term “development,” as used in the Coastal Act, was intended to be interpreted broadly. Included in that authority was Surfrider Foundation v. Martins Beach I, LLC (2017) 14 Cal. App. 5th 238, in which the First District ruled that closing and locking a gate that had allowed public access to a beach over private property for years was a “development” for purposes of the Act.
Relying on this authority, the appellate court concluded that MSCA’s adoption of the short-term rental ban was “development” under the Coastal Act. As such, the court ruled that such a ban was outside the scope of MSCA’s powers and was a matter for the local municipality and the Coastal Commission to address, reversed the trial court’s denial of injunctive relief, and ordered the trial court to enjoin the MSCA’s ban, thus allowing short-term rentals in Mandalay Shores to resume. Since then, the California Supreme Court has denied review of this matter.
In addition to the absurdity of using the Coastal Act to expose beachside residential communities to the intensive uses of short-term rentals, other remarkable takeaways can be drawn from this case. For example, this has been one of the few cases in which the powers of a homeowners’ association has been curtailed. At oral argument, one of the justices even commented that it sounded as though MSCA had appointed itself “Emperor of the Beach” in imposing fines for violations of the ban. And if the Surfrider case is accepted by the U.S. Supreme Court, the expansive view of “development” as defined by the Coastal Act could be significantly curtailed, which might well have an impact on the ultimate result in this case. As always: Stay tuned
The case is Greenfield et al. v. Mandalay Shores Community Association, Case No. B281089.