The Sharing Stick in the Property Rights Bundle: The Case of Short Term Rentals & HOAs

Abstract

Property owners are now more than ever exercising the “sharing stick” in their metaphorical bundle of property rights. This article examines the right to share one’s property with others as a branch, stemming from the inclusion stick, that itself grows out of the exclusion right held by property owners, along with the legal consequences of that characterization. The right to share, like other rights, can be given up when an owner joins a common interest community (CIC). However, when owners enter CICs and agree to HOA governance, they retain whatever residual parts of their ownership bundle they do not give up. Recent CIC and HOA cases examined in this article illuminate the existence of a “right to share,” where the default rule is that owners of real property have the right to engage in short term rentals unless they have expressly alienated that right through some private agreement. It will only be abrogated upon identifiable language in the initial CIC agreement making such diminishment of the right possible. The issues in several recent cases discussed here, regarding whether homeowners associations can create or enforce rules through their CC&R’s that prohibit short term rentals, are in essence asking whether the association and community are empowered to limit the sharing stick in the bundle. The primary questions discussed relate to whether, when, and how an association can impose limitations or prohibitions on short term rentals under existing authorities where such express substantive authority is not clearly, expressly given, and when the CIC must instead seek to undertake extraordinary measures like amendment to a CIC’s declaration in order to empower an HOA to so limit where it could not before. This Article concludes that the judicial interpretation of scope of CIC and HOA authority in relation to short term rentals demonstrates the strength of the sharing right. However, these cases also reveal that this sharing right may be consensually limited if the initial CIC declaration or valid subsequent amendments grant the proper HOA authority to do so.