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What You Need to Know About Short-Term Rentals in Illinois Condominiums

Illinois condominium associations have been forced to deal with an increase in short-term rentals over the past 10 years with the increasing popularity of platforms such as Airbnb, HomeAway, and VRBO. The increasing number of short term rentals have created various issues for Illinois condominium associations. In areas where short-term rentals became prevalent, such as Chicago, there was an increase in problems related to late night parties, noise, nuisance, and property damage. Accordingly, in 2016, Chicago enacted its Shared Housing Ordinance in 2016, which was later amended in 2020, in order to regulate short-term rentals.  As of June 1, 2021, all short-term rentals in Chicago must be registered with the city and must operate in compliance with Chicago Shared Housing Ordinance.  In addition to municipal regulation, many condominium associations in Chicago, as well as throughout Illinois, amended their condo bylaws to preclude the use short-term rentals altogether, or to restrict short-term rentals within the condominium. This article will discuss the most typical condo bylaws that restrict short-term rentals in addition to the terms of preclusion in regard to the use of Airbnb and other licensing arrangements within Illinois condominium associations.

 

Common Short Term Rental Restrictions in Illinois Condo Bylaws

Within condominium bylaws, there are a handful of clauses that may act as a prohibition or limitation on short-term rentals within a condominium. The most typical condo bylaws that restrict short-term rentals are as follows:

    1. Business or Commercial Use Restrictions. A short-term rental restriction that prohibits a condominium unit from being used for business or commercial purposes.
    2. Express Short-Term Rental Restrictions. A restriction on renting, which often includes the following: A) A rental cap limiting the number of rentals; B) A minimum rental period; and/or C) A requirement that the condominium or homeowners association be notified of any rentals.
    3. Nuisance Restrictions. A restriction that bans activities that constitute a nuisance or annoyance.
    4. Illegal Activity Restrictions. A restriction that requires owners from engaging in anything that would be illegal, which may include violating municipal ordinances, such as the Chicago Shared Housing Ordinance.

Condominium associations must enforce the condo bylaws as written.  As such, if a condominium association is experiencing a short-term rental problem, it should consider amending the condo bylaws to include one or all of the above types of provisions to prevent short-term rentals.

 

Is Airbnb / VRBO a License or Short Term Rental in Illinois Condo Bylaws?

In Wood v. Evergreen Condo. Ass’n, 2021 IL App (1st) 200687, ¶ 9 the Illinois Court of Appeals addressed whether or not the use of Airbnb violated rental restrictions contained in a condominium declaration. In the Wood case, an owner of a condominium in Chicago was fined by the association for using the Airbnb platform to rent out her unit. She was also the president of the board for the condominium association. After receiving a fine notification, and being removed as the president of the board, the plaintiff sought a declaratory judgment from the Circuit Court of Cook County that using the Airbnb platform to “rent” out her unit did not violate the condominium declaration that barred all rentals less than 30 days. Her primary argument was that she was only granting a “license” to the user(s) of her condo under Airbnb’s own terms of service. The trial court agreed with the plaintiff that using Airbnb to rent out her condominium unit did not violate the condominium declaration’s prohibition on renting for less than 30 days, but still ruled in favor of the condominium association. The reason for the trial court’s decision was that the condominium declaration also included an express prohibition on all commercial activities. The appellate court sustained the trial court’s decisions and found that the general ban on commercial activities precluded the plaintiff’s use of her unit as a short-term rental or as a short-term Airbnb license

Similarly, while not a condominium association case, on March 17, 2022, the First District Appellate Court, relying on the Wood decision, held that short term rentals of a single family residence using the VRBO platform violated the Village of Barrington Hills’ zoning ordinance that barred “commercial uses” of single-family detached dwellings in a particular residential district. See Wortham v. Vill. of Barrington Hills, 2022 IL App (1st) 210888, ¶ 2. Again, although this is a zoning case, this is the second that restricted the right of a homeowner to use a residence as a short-term rental after it was deemed a “commercial use.”

 

Conclusion

As indicated above, the language of the condominium declaration will determine whether short-term rentals are restricted within a condominium.  The Wood case provides a good reason for all Illinois condominium associations to take a hard look at the rental restrictions in their condominium bylaws to make sure that they are worded in the best possible way to avoid confusion, or even worse, litigation.  Specifically, condominium associations should consider updating their condominium instruments to preclude the use of Airbnb, or other licensing arrangements, or expressly define the term “rental” to also include licensing arrangements as well.

Moreover, some municipalities, such as Chicago,  regulate or ban short-term rentals and some others require certain applications and fees be paid if any residence is to be rented out on a short-term basis, and those regulations should be reviewed.[1] The condominium bylaws should, at the very least, identify that if a unit is going to be rented out as a short-term rental that it be done in accordance with all local or state regulations that would apply. Having a condominium attorney provide the board with an opinion as to what is and what is not allowed under both the condominium instruments and the law for the local municipality is a worthwhile exercise for all condominium boards in Illinois.  Similarly, if the condominium bylaws are being violated, a condominium attorney can assistant in taking appropriate enforcement action, including, but not limited to obtaining an injunction to prevent further short-term rentals.

Adam Toosley is a member at Hirzel Law, PLC and focuses his practice on real estate litigation, zoning and land use, construction, and financial services litigation. Over the course of his career, he has represented property owners, landlords, condominium associations, lenders, and all parties in the construction chain, handling all aspects of real estate-related disputes, including construction defect cases, payment and landlord-tenant disputes as well as real estate foreclosures, mechanic’s lien cases and fraud and business tort claims in state and federal court as well as in mediations and arbitrations throughout the United States. He is licensed in both Michigan and Illinois. He can be reached at (312) 626-4535 or at atoosley@hirzellaw.com.

 

[1] In 2017, Senate Bill SB1735 was filed by Sen. Antonio Muñoz, which, if passed, would provide that units of local government cannot enact or enforce regulations that have the express or practical effect of prohibiting short-term rentals. A similar bill was filed by Rep. Michael J. Zalewski in the House of Representatives in 2019. That bill has not been passed by the State of Illinois as of the date of the publication of this article.
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