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Leased Units

Started by TaraS • 22 replies • 2310 views

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TaraS (Illinois)
Posts: 6
Posted:
I live in Illinois and our board is currently trying to implement a rule limiting the number of leased units at any one time to 10%. My husband and I have been planning on renting out our unit and now have to be worried about meeting this 10% cap each time a lease is up. Is this legal? There was no vote of the members just a notice that there was a new rule being adopted to change the leasing permissions. We probably would not have bought in this subdivision if this rule was originally in place, and it does not seem right that some people will be allowed to rent and others will not be based on some arbitrary percentage decided by the board. Any help would be appreciated. Thank you!
KerryL1 (California)
Posts: 14,550
Posted:
We seem to have very few posters from Il here, and this issue may be governed by state laws. Meantime read your governing documents--your covenants (ask, CC&Rs, declaration) and other governing documents to see if they help you understand this situation.
TimB4 (Tennessee)
Posts: 21,059
Posted:
Tara,

Typically for an Association to have rental limitations, the language needs to be contained within the CC&Rs. However, every State is different and, until challenged through the courts, rental limits in other documents could be enforced.

Rental limits in condominums is seen more often than within Associations.

Things you should ask your Board concerning the policy:

Grandfathering - since my unit was purchased prior to the policy being in effect, will you be grandfathered?

Hardships - Are there allowance for hardship waivers to the policy? What will the Association consider as a hardship (specifically) and how does one go about obtaining a waiver?

Rotation - What policy and procedure is in place to rotate the ability to rent once the 10% cap is reached?

Lease length - will the Association only allow a specific length of lease (12 month vs. 6 month or 24 months)? How will that lease length be utilized when deciding the rotation of the ability to lease?

Enforcement - how will the Association enforce such a limitation if someone won't stop renting so another may rent?

Authority - What section of the CC&Rs or State statute authorizes the Board to establish a rental cap?

Amending Documents - Will the Board be attempting to limit rentals by amending the CC&Rs (as this is where such limitation should be) or will the Board be amending a different document? If a different document will be amended (Bylaws, etc.) has the Board sought legal opinion to see if such a limitation would be in conflict with the CC&Rs and open the Association to potential litigation when trying to enforce any rental limitation? May I see that legal opinion?

Here is some more info:

Lease restrictions limit condo owner's options
October 25, 2012 from the Chicago Tribune

Association Restrictions on Leasing from an IL attorney site

Hope this helps,

Tim
TaraS (Illinois)
Posts: 6
Posted:
Thanks everyone.

I should have been more specific. Leasing units is permitted in our Covenants. In order to amend this we need the 67% vote. However, they are trying to adopt a "rule" to cap the rentals at 10%. I feel like this is a slippery way of avoiding having a vote. How would they be able to tell certain people they cannot lease when per the Covenants, we are allowed to?
TimB4 (Tennessee)
Posts: 21,059
Posted:
Quote:
Posted By TaraS on 05/08/2015 12:39 PM
How would they be able to tell certain people they cannot lease when per the Covenants, we are allowed to?

That would be a legal question.

If the rule is in conflict with the CC&Rs, the CC&Rs control (must be what is followed).

However, the Board will most likely enforce such limits based on the rule until someone challenges the rule and the issue is resolved by mutual agreement or by a court ruling.

This is why I suggested that you ask the Board the questions I posted earlier.

TaraS (Illinois)
Posts: 6
Posted:
OK Thanks Tim, you were very helpful!
KerryL1 (California)
Posts: 14,550
Posted:
Along with Tim's help, Tara, is there anything in IL law that requires the Board's rules changes to go out for 30 days for Owners' comments before the new rules are implemented? (There is such a requirement in CA).

I agree with you that the Board is trying to bypass your CC&Rs, and you need an attorney's opinion to see if they can get away with it!
TaraS (Illinois)
Posts: 6
Posted:
Hi Kerry! Thanks for your input, I am very fired up about this. We got something in the mail basically saying these are the new rules that will go into effect May 28. If you have questions come to the board meeting on this date.

Per our covenants, it specifically states, "a unit owner may, without restriction under the declaration, sell, give, devise, lease or otherwise transfer his entire unit." Under the same article it states, "The Board of Managers may adopt rules and regulations, from time to time, not inconsistent with the provisions of this article."

I feel like this rule is such a blatant inconsistency with our covenants. The second you start restricting the leasing rights it in inconsistent and should require an amendment.
KerryL1 (California)
Posts: 14,550
Posted:
MY feeling is that Your Board can't make this change without an amendment to your covenants. But I'm not in the legal professions. Ny sense is to get legal advice before the board implements this "rule." Alternatively, take other owners with you to the Board meting on May 28.

In addition, write the questions Tim suggests to the Board before that 5/28 meeting. Also ask if the board has a s written opinion for the HOA attorney.
AnnH5 (Florida)
Posts: 304
Posted:
I agree- it sounds like the Board is arbitrarily making up rules instead of going through the process of asking for a member vote to amend the CCRs. If you have a property manager, you might want to contact them to inform of your concerns (and create a paper trail/record).
TaraS (Illinois)
Posts: 6
Posted:
Thanks everyone, I appreciate the input!
NpS (Pennsylvania)
Posts: 4,216
Posted:
Quote:
Posted By TaraS on 05/08/2015 1:34 PM
Per our covenants, it specifically states, "a unit owner may, without restriction under the declaration, sell, give, devise, lease or otherwise transfer his entire unit." Under the same article it states, "The Board of Managers may adopt rules and regulations, from time to time, not inconsistent with the provisions of this article."


IMO, "without restriction" means without restriction. The 10% cap is a restriction. Board cannot add a restriction without a vote of the HOs.
Sikubali jukumu. Read all posts at your own risk.
KerryL1 (California)
Posts: 14,550
Posted:
Good eye, NpS! "Without restriction" is clear as can be!
TaraS (Illinois)
Posts: 6
Posted:
Good point! This is what I was thinking as Well. I don't think they will legally be able to enforce this.
DH9 (Illinois)
Posts: 4
Posted:
TaraS, how did this turn out for you? Any update? Currently dealing with same declaration language and same rental cap issue.
PitA
Posts: 1,416
Posted:
Quote:
Posted By NpS on 05/08/2015 4:05 PM
Posted By TaraS on 05/08/2015 1:34 PM
Per our covenants, it specifically states, "a unit owner may, without restriction under the declaration, sell, give, devise, lease or otherwise transfer his entire unit." Under the same article it states, "The Board of Managers may adopt rules and regulations, from time to time, not inconsistent with the provisions of this article."


IMO, "without restriction" means without restriction. The 10% cap is a restriction. Board cannot add a restriction without a vote of the HOs.

Nail has been driven with ONE blow of the hammer.
JeffT2 (Iowa)
Posts: 880
Posted:
Some court cases in Illinois found that the board may create rules that restrict rentals, without going through the amendment process. My guess is that your board is following the conditions in those cases.

The following is from an article by an Illinois law firm:

"A rule adopted by the board requires written notice to all owners and can be adopted at an open board meeting after a meeting of owners...

"Clearly, the best way to restrict or eliminate leasing is for owners to support an amendment to the covenants rather than rely on a board amendment...

"Under the principles of Apple II and Hinojosa, a rule to limit or restrict leasing rights must (a) be in the best interests of the association, (b) be nondiscriminatory, (c) be applied even handed-ly and not create a hardship, (d) not restrict any owner’s rights under the First Amendment or any other constitutional or public policy provision, (e) be binding on all present and future owners, (f) not be antagonistic to the legitimate objectives of the association, and (g) be intended to promote the health, happiness, and peace of mind of the owners."

Here is a link to the full article:

http://www.ksnlaw.com/blog/no-lease-restrictions-condominium-owners/

Note that your board's rule could be seen as violating (f), since your docs say “without restriction”.
DH9 (Illinois)
Posts: 4
Posted:
Thanks, JeffT2. Indeed, I have done a lot of research and am familiar with the cases, including those two. Apple II is probably what they are relying on, however, the board cannot implement a rule that contradicts the declaration or the bylaws. So, as you point out at the end of your message, the idea here is that the rule is invalid due to the declaration language. It's strange that the Apple II court even got into the discussion and holding for rules and regulations - it was beyond the scope of the facts because the association had properly amended the declaration; a rule/reg was not even at issue. In any case, a new court looking at a rule/reg matter would probably see the distinction with Apple II (and other cases) and apply very well-settled law that rules/regs cannot contradict the declaration or bylaws.

So I was really curious what happened with TaraS and her situation.
DH9 (Illinois)
Posts: 4
Posted:
Very important Illinois appellate court decision invalidating a leasing cap resolves this issue. Stone v. 842-848 Bradley Place Condo Association.
DH9 (Illinois)
Posts: 4
Posted:
Stobe (not stone).
LarryB13 (Arizona)
Posts: 4,099
Posted:
Quote:
Posted By DH9 on 02/24/2016 2:57 AM
Very important Illinois appellate court decision invalidating a leasing cap resolves this issue. Stone v. 842-848 Bradley Place Condo Association.

Case can be found at http://c.ymcdn.com/sites/www.hoamemberservices.com/resource/resmgr/Case_Decisions/Stobe_v._842-848_W._Bradley_.pdf

NpS (Pennsylvania)
Posts: 4,216
Posted:
From Strobe decision:

"We find the Board lacked authority to promulgate a rule restricting leasing because the rule conflicts with the declaration's intent. As stated, the declaration expressed certain limitations on leasing. If owners had no right to lease their units, the enumerated limitations would be meaningless. Additionally, the article on leasing did not specify that it was subject to further regulation by the Board, unlike other provisions in the declaration that did. While this omission would not alone require a determination that owners' possess leasing rights, the declaration's intent is clear when considered in its entirety: Unit owners have the right to lease their units subject to the declaration's limitations.

"We also reject defendant's assertion that the declaration would have expressly removed the Board's authority to act with respect to leasing restrictions had that been the drafters' intent. The question, however, is whether the Board has been granted authority, not
whether authority has been taken away. Under the Board's approach, the Board could do anything it pleased so long as the declaration did not expressly forbid it. Furthermore, the bylaw granting the Board the authority to adopt rules regarding the use of the property does not warrant a different conclusion. We presume that the bylaws' drafters were aware of section 18.4(h) of the Act, which provides that a board's rules cannot conflict with the condominium instruments. Thus, the bylaws did not purport to give the Board unfettered discretion to regulate the use of the property."
Sikubali jukumu. Read all posts at your own risk.
TimB4 (Tennessee)
Posts: 21,059
Posted:
Keep in mind that this thread started almost a year ago.
It was reactivated asking for an update.

The court opinion provided by Larry is dated 2016.

In my opinion, old threads should not be reactivated as what was good advice a year ago may be bad advice today.

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