Appeals court narrows Civil Code 4740: it does not preempt city rental rules
Appeals court narrows Civil Code 4740: it does not preempt city rental rules
2026-09-09 · California · Courts
California's Fourth District Court of Appeal has held that Civil Code section 4740 — the provision owners most often invoke against rental restrictions — does not restrain a city's power to regulate short-term rentals at all.
Parsons v. City of Indian Wells, No. E082591, was filed and certified for publication on August 31, 2026, and modified on September 3 without change in judgment. It is citable authority.1
Justice McKinster wrote for the court, with Presiding Justice Ramirez and Justice Codrington concurring.
What the city did
Indian Wells declared short-term rentals a public nuisance and imposed a 29-night minimum stay, which operated as an effective ban. Ordinance No. 732 then created an exception: members of a common interest development could vote to opt out of the minimum-stay rule.
The Parsons, owners inside a CID, were denied a short-term rental permit. They petitioned for a writ of mandate on two grounds — that the opt-out provision conflicts with and is preempted by Civil Code section 4740, and that it unconstitutionally delegates legislative power to private parties.
The trial court agreed on both, invalidated the ordinance, ordered an unrestricted permit issued, and awarded the Parsons their attorney's fees.
Reversed
The Court of Appeal reversed on every point. Its central holding is quotable and narrow:
Section 4740 “only applies when the governing documents of a CID prohibit rentals by members who purchased their properties before the prohibition became effective. It simply does not address whether a city may ban, restrict, or otherwise regulate STR's by ordinance, or whether a CID may vote to opt out of such a restriction in a manner that does not amend the governing documents.”
There was “no inimical conflict,” the court held, because Ordinance No. 732 “does not require or even encourage a CID to amend its governing documents.”
The court worked through the legislative history of SB 150 (2011, the former section 1360.2) and AB 3182 (2020, which added section 4741 and removed section 4740's pre-2012 and consent exceptions), and found nothing indicating the Legislature meant to insulate common interest developments from generally applicable municipal zoning.
And it limited its own precedent
The same division narrowed the reach of Brown v. Montage at Mission Hills (2021) 68 Cal.App.5th 124, saying it “had no occasion whatsoever in Brown” to decide whether section 4740 applies to the question presented here. The trial court had read Brown more broadly; the Court of Appeal said that reading was wrong.
The delegation challenge failed too. The ordinance's four-parcel minimum and contiguity requirement were rational responses to owners forming “bare-minimum” CIDs to game earlier opt-out rules.
Disposition: judgment and the postjudgment attorney-fee order both reversed; the City recovers costs on appeal.
What it changes for boards and managers
The two regulatory tracks are now clearly separate. Section 4740 governs what a common interest development's own governing documents may do to an owner who bought before a rental prohibition took effect. It says nothing about what a city may do. A board fielding a member's demand premised on “section 4740 overrides the city ordinance” now has published authority pointing the other way.
An association may find itself holding a municipal switch. The structural novelty of Ordinance No. 732 is that it makes the CID membership vote a condition of a city permit. That is a role associations have not traditionally played, and it converts an internal governance question into one with licensing consequences for members.
Boards in jurisdictions with such an ordinance should expect the vote itself to be contested, and should run it with the care they would give any membership vote — because the outcome now determines whether members can obtain a city permit, not merely what the governing documents say.
The “without amending the governing documents” qualifier is the load-bearing phrase. The court repeatedly emphasized that the ordinance did not require or encourage a governing-document amendment. An ordinance drafted to compel an association to amend its declaration would present a materially different preemption question, and Parsons does not answer it.
The fee reversal is a caution. The Parsons won below and had a fee award; both were reversed, and the City recovers costs on appeal. Owners and associations litigating rental disputes on a section 4740 theory should read that as a real cost signal.
Where this leaves the rental restriction rules
Nothing in Parsons disturbs the rest of the framework, and it is worth restating what did not change.
Civil Code section 4741, added by AB 3182, still requires that at least 25 percent of separate interests be allowed as rental or leasable units, and still permits a common interest development to prohibit rentals of 30 days or less. That last provision is the one most associations actually rely on for short-term rental restrictions, and it is untouched.
What Parsons removes is a preemption argument against the city, not an association's own authority.
The local ordinances this now interacts with
Several California jurisdictions have written association rules into their short-term rental schemes, and this decision makes that architecture more secure.
South Lake Tahoe's Ordinance 2026-1203, adopted March 24, 2026 and effective April 23, permits attached condominiums to obtain vacation home rental permits “unless the applicable homeowners association rules prohibit VHRs” — deferring to a power associations already hold under section 4741(c).
The reverse pattern is worth watching too. In Los Angeles, Council File 25-0029-S1 — a vacation rental ordinance that would temporarily allow second homes and investment properties to operate as short-term rentals — has been in committee since 2025 with no council vote recorded as of September 8, 2026. If a city relaxes its primary-residence limit, an association's own restrictions become the only remaining constraint on investor-owned units.
What to watch next
Whether a petition for review is filed. As of the California Supreme Court's September 2, 2026 conference, no action in Parsons appears in the petition conference results — consistent with an opinion certified for publication only two days earlier.
That timing matters for anyone relying on the case: it is published and citable now, and it would remain so unless the Supreme Court granted review or ordered depublication. The court's 2026 record on common interest development petitions has been uniform — every petition denied, and in one case a depublication request refused as well — but a decision this fresh has not yet run that gauntlet.
Related California HOA Topics
- Parsons v. City of Indian Wells, No. E082591 — slip opinion, Court of Appeal, Fourth Appellate District, Division Two (certified for publication August 31, 2026) ↩
- Order modifying opinion, No. E082591M (September 3, 2026) — no change in judgment ↩
- Civil Code § 4741, California Legislative Information — the 25 percent rental minimum and the 30-day short-term rental provision ↩
- City of South Lake Tahoe, Vacation Home Rentals program — Ordinance 2026-1203 and the homeowners association condition ↩
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