May 9, 2016
Board lacked authority to impose leasing restriction
David M. Bendoff
The Illinois Appellate Court has invalidated a rule adopted by the board of a condominium that imposed a leasing restriction.
Stobe v. 842-848 West Bradley Place Condominium Association, decided by the First District of the Illinois Appellate Court on Feb. 3, 2015, confirms the position I have taken in this column that the board of managers of a condominium does not have the authority to adopt rules that restrict leasing of units when the association’s declaration of condominium permits leasing.
In Stobe, the association’s declaration did not expressly permit leasing of units, but did provide that “(no) unit shall be leased or subleased for hotel or transient purposes for terms less than six months.” Nonetheless, the board adopted a rule that provided that “no more than 30 percent of the units could be leased at any one time.”
A unit owner filed suit asserting that the board’s rule impermissibly conflicted with the condominium declaration. The trial court agreed, and the association appealed.
On appeal, the appellate rejected dicta in the Apple II case concerning the ability of a board to restrict leasing of units by rule. Dicta is essentially a court’s editorializing on an issue not before the court, and is not binding. Rather, the appellate court in Stobe held that “because the declaration has spoken on the matter of leasing, any augmentation or diminution of (an owner’s) right to lease their unit must be accomplished through an amendment to the declaration, not a rule promulgated by the board.” An amendment to the declaration requires unit owner approval; whereas a rule can be adopted by the board alone.
The appellate court also distinguished the decision in 175 East Delaware Place v. Hinojosa, where the board’s prohibition of bringing additional dogs into the premises by way of rule was upheld as valid. In Hinojosa, the declaration was silent on pet ownership.
The Stobe decision does, however, provide a potential narrow opportunity for a board to adopt a rule to restrict a right granted by a declaration. If the leasing provision in the declaration had specifically stated that “it was subject to further regulation by the board,” the court may have considered the reasonableness of the rule. However, that too is dicta, and should not be relied on as any sort of binding authority. Associations that rely on the dicta do so at a peril, as an appellate court may reject it. But since it is in the Stobe opinion, it deserves mention.
Based on the above significant holding, associations should take notice that the board cannot adopt a rule that conflicts with the declaration on any matter (not just leasing), and the board may only impose use restrictions by way of rule if the declaration does not speak to the matter. Although this case involved a condominium, it would seemingly apply to other types of associations.
Many associations have restricted leasing and the keeping of pets by way of rule adopted by the board, when they should have amended their declaration with unit owner approval. Those associations that have done so should consult with their legal counsel, as enforcement of an invalid rule may put the board and association in jeopardy.
It is important to note that the last couple of years have produced numerous Illinois appellate court decisions affecting associations. These cases represent another layer of information that the board of an association must be aware of and consider in governing the association.
David M. Bendoff is an attorney with Kovitz Shifrin Nesbit in the Chicago suburbs. Send questions for the column to him at CondoTalk@ksnlaw.com. The firm provides legal service to condominium, townhouse, homeowner associations and housing cooperatives. This column is not a substitute for consultation with legal counsel.
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