Can a Homeowners' Association (HOA) tell you who you can rent to and what you can do with your home? "You bet they can," said California's Fourth Appellate District Court of Appeal. Well, not in exactly those words, but the point was there.

Thanks are owed to real estate author and attorney Robert Bruss for bringing attention to the case of Colony Hill v. Masood Ghamaty. The court's discussion in that decision is instructive to those who are or who might find themselves subject to Covenants, Conditions, and Restrictions (CC&Rs) in a planned unit development.

Colony Hill is a common interest subdivision in the area of La Jolla, California. It is governed by CC&Rs that were recorded as amended in 1983. Among the provisions of those documents were #2.6 that specified that each lot be, "… used and occupied for private, single-family dwelling purposes only, and no portion … shall be used for any commercial purpose whatsoever."; and #2.7 which provided that each owner would have the right to lease his or her lot, provided that, among other things, the tenant would be obligated and bound by the CC&Rs and the regulations of the association.

In 2000 Ghamaty became the owner of a four-bedroom, three-bath home in Colony Hill. Ghamaty occupied the home himself, but he also rented rooms in the home. He rented rooms to six different persons over a two-year period. Each renter had the exclusive use of a bedroom and bath, and the nonexclusive use of the living room and kitchen. Other than a cousin who rented for a short period of time, none of the tenants were related to Ghamaty.

In early 2002 the HOA notified Ghamaty that his use of the home violated the CC&Rs requirement that it be used only as a single-family dwelling. The Board demanded that he "return the property to a private single-family dwelling status immediately." Letters went back and forth. At one point, Ghamaty told the Board that he "considers his renters as family." Finally, a suit seeking injunctive and declaratory relief was filed by the HOA. The trial court found in favor of the HOA, finding Ghamaty in violation of sections 2.6 and 2.7 and permanently enjoined him from "renting his unit to multiple renters other than in compliance with the declarations of the Court." Ghamaty appealed.

The appellate court noted that Ghamaty had relied on the San Diego Municipal Code's definition of "family" which is "two or more persons related through blood, marriage or legal adoption … or unrelated persons who jointly occupy and have equal access to all areas of a dwelling unit and who function as an integrated economic unit." Although this definition does allow for unrelated persons to constitute a "family," the appellate court agreed with the trial court that the further conditions were not met by Ghamaty's tenants. In particular, they did not function as "an integrated economic unit." Thus, he was not using the home for single-family dwelling purposes.

The main challenge in Ghamaty's appeal was that the CC&R provision was illegal. But the appellate court disagreed. It noted that Civil Code section 1354(a) provides that "covenants and restrictions … shall be enforceable equitable servitudes [i.e. conditions of use], unless unreasonable … ." It noted that the burden of proving unreasonableness falls to the party challenging the restriction. Moreover, unreasonableness "is to be determined not by reference to facts that are specific to the objecting homeowner, but by reference to the common interest development as a whole." Ghamaty, the court said, did not meet the burden of showing the provision to be unreasonable.

Quoting from an earlier decision, the court observed, "Our social fabric is founded on the stability of expectation and obligation that arises from the consistent enforcement of the terms of deeds, contracts, will, statutes, and other writings. To allow one person to escape obligations under a written instrument upsets the expectations of all the other parties governed by that instrument … ."

Ghamaty's appeal was unsuccessful. The lesson for the rest of us? Read what's in those CC&Rs, and expect that courts will stand behind their enforcement.