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Court Rules that Restrictive Covenant Banning Sex Offenders is Enforceable

Can your HOA’s restrictive covenants or condominium documents ban sex offenders? The ability to ban sex offenders from homeowners associations has become a controversial issue in recent years.  Until recently, many attorneys across the country believed that some type of ban on sex offenders was permissible.  This was largely based on a New Jersy case, Mulligan v. Panther Valley Property Owners Association, 766 A2d 1186 (2001), in which the Court upheld a community association’s sex offender restriction that banned Tier 3 sex offenders from occupying, but not owning, in a homeowners association.  However, in 2022, a Pennsylvania case reached an opposite conclusion.  In Lake Naomi Club, Inc. v. Rosado, 285 A.3d 1 (Pa. Commw. Ct. 2022), the Court held that the public policy of Pennsylvania governing the release of sex offenders barred private community associations from enforcing a sex offender ban, as local counties and municipalities could not enact such a ban.  The decision in Lake Naomi Club, Inc. v. Rosado was concerning for community associations, as it posed a threat to the self-governance model of private community associations. This stark dichotomy between jurisdictions has intensified the debate, raising questions about the balance between maintaining community safety through restrictive covenants and individual liberties of sex offenders.

However, in Lake Holiday Property Owners Association, Inc. v. John Koempel, No. 23-MR-17 (Cir. Ct. LaSalle Co.) (January 30, 2024), a recent Illinois case that our firm participated in, that will be discussed below, a court rejected the rationale of the Pennsylvania courts.  The Illinois court held that restrictive covenants banning any type of sex offender from residing in the community were enforceable.  While the Illinois trial court ruling is subject to appeal, it is encouraging for community associations that the rationale of the Pennsylvania courts has not been extended to other jurisdictions, and that the freedom to contract of the owners and self-governance model of community associations remained intact.

Facts

In 2008, the Lake Holiday Property Owners Association adopted restrictive covenants, which were recorded in 2009, that contained the following restrictions on sex offenders:

No registered sex offender may be permitted to reside within Lake Holiday Subdivision or approved as a member of Lake Holiday Property Owners Association.  No conveyance or attempted conveyance of any interest in and to any residential lot within Lake Holiday Property Owners Association to a registered sex offender shall be considered to transfer to any owner, tenant or other persons purporting to acquire an interest in said property the right to enter upon the roadways or otherwise utilize any of the common property within Lake Holiday Subdivision.  This restriction as to any specific transfer of property may be modified or rescinded by the Board of Directors of Lake Holiday Property Owners Association, but said rescission shall not be deemed effective unless in writing and recorded with the Recorder of Deeds of LaSalle County subsequent to consideration by the Board and a determination that the person so applying is in their judgment no longer constitutes a danger to the community based upon the facts and circumstances existing at said time.  This Covenant shall not be utilized at any time by the Board of Directors of Lake Holiday Property Owners Association to discriminate against purchasers or lot owners on the basis of race, sex, national or ethnic origin or other improper purposes.  The Board of Directors of Lake Holiday Property Owners Association, or any committee to which authority is delegated with regard to the enforcement of this Restrictive Covenant, shall be personally immune from any liability for enforcement.

John Koempel purchased a lot and became a member of the Lake Holiday Property Owners Association on April 4, 2012.  On December 22, 2021, Koempel pled guilty to the offense of possession of child pornography, which required Koempel to register as a sex offender. The homeowners association brought a claim for declaratory relief in early 2023, requesting that the Court rule that Koempel was no longer permitted to reside in the community because of his sex offender status.

Analysis of Sex Offender Ban in Restrictive Covenants

The trial court started its analysis with the general proposition that unambiguous restrictive covenants must be enforced as written. See Chiurato v. Dayton Estates Dam & Water Company, 2017 IL App (3d) 160102, ¶ 39.  The court held that restrictive covenants will be upheld if they are “reasonable, clearly defined, and do not violate public policy.”  See Sherwood v. Rigsby, 221 Ill. App.3d 260, 261 (3rd. Dist. 1991).

After setting forth the general rules related to enforcing restrictive covenants, the court analyzed the owner’s argument that restrictions banning sex offenders from residing in a community violate Illinois public policy and abrogate constitutional rights to use property. Specifically, Koempel argued that the Sex Offender Registration Act, 730 ILCS 150/1 et seq., and the Sex Offender Community Notification Law, 730 ILCS 152/101 et seq., and other related statutes directly restrict where sex offenders live or work within communities and that the restrictive covenants violated these public policies set forth in these statutes by creating additional burdens on sex offenders.  The court agreed that these statutes express a legislative intent to protect the public, including children from sex offenders.  However, the court held that the sex offender statutes were not the exclusive method of protecting the public or that they were intended to preempt the adoption of restrictive covenants governing the use of property by sex offenders.

The trial court also analyzed the decision in Lake Naomi Club, Inc. v. Rosado, 285 A.3d 1 (Pa. Commw. Ct. 2022) and indicated it was not binding authority on an Illinois court, but that there were also several other distinctions between the cases. First, restrictive covenants banning sex offenders existed before Koempel’s conviction, and Koempel was aware of the restrictive covenants prior to purchasing.  In the Lake Naomi case, the restrictive covenants banning sex offenders were adopted after the owner’s conviction.  Second, the court held that there was no binding appellate decision in Illinois that articulated the public policy related to sex offenders, like the Pennsylvania case, and acknowledged that this was a case of first impression in Illinois.

The court addressed the constitutional arguments raised by the owner and held that nothing precluded the enforcement of the restrictive covenant banning occupancy by sex offenders.  First, the court held that restrictive covenants were a private contract, and that the private community association was not a state actor exercising any police powers, so any alleged constitutional protections did not apply.  The court further held that owners have a choice as to whether they want to live in a community that has restrictions on sex offenders and that they have “…ample alternatives and may just decline their membership in the community.” Scott v. York Woods Cmty. Ass’n, 329 Ill. App. 3d 492, 501, 768 N.E.2d 847, 855, 263 Ill. Dec. 766, 774, 2002 WL 819185 (2d Dist. 2002).  The court also noted that the community association was not requiring Koempel to sell the property, that Koempel’s other family members could still reside in the property, and that Koempel had the option to rent the property, so the restrictive covenants did not completely preclude Koempel from making any type of use of the property.  Finally, the court held that the defendant was not able to identify any law that indicated that sex offenders were part of a protected class or that the application of the restrictions would violate any potential protections.  Accordingly, the court held that the restrictive covenants banning occupancy by sex offenders were enforceable.

Conclusion

While the decision in Lake Naomi Club, Inc. v. Rosado, 285 A.3d 1 (Pa. Commw. Ct. 2022) was concerning for community associations, it is encouraging that the rationale of that case has been rejected by at least one other court.  Even though Lake Holiday Property Owners Association, Inc. v. John Koempel, No. 23-MR-17 (Cir. Ct. LaSalle Co.) (January 30, 2024) is not binding precedent, the key takeaway from this case is that courts generally enforce restrictive covenants as written, as private contracts, and that occupancy restrictions banning residency of sex offenders may be enforceable.  This case was also interesting, as unlike the New Jersey restriction, the restrictive covenant did not differentiate between the different tiers of sex offenders.  Given that case law involving restrictions related to sex offenders will continue to evolve in the future, community associations need to consult with a qualified community association attorney to explore potential options if they desire to amend their governing documents or enforce bylaws that prohibit occupancy by sex offenders.

Kevin Hirzel is the Managing Member of Hirzel Law, PLC and concentrates his practice on community association law, condominium law, Fair Housing Act compliance, homeowners association law and real estate law. Mr. Hirzel is a fellow in the College of Community Association Lawyers, a prestigious designation given to less than 175 attorneys in the country. Mr. Hirzel has been recognized as a Super Lawyer’s Rising Star in Real Estate Law by Super Lawyers Magazine, a Leading Lawyer in Condominium & HOA law by Leading Lawyers Magazine, and as a Best Lawyer in Real Estate Law by U.S News and World Report’s Best Lawyers Publication. Hirzel Law, PLC represents community associations, condominium associations, cooperatives, and homeowners associations in Michigan and Illinois. He may be reached at (248) 478-1800 or kevin@hirzellaw.com.

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kevin@hirzellaw.com

Kevin Hirzel is the Managing Member of Hirzel Law, PLC. Hirzel Law has offices in Farmington, Grand Rapids, and Traverse City, Michigan with a fourth office location in Chicago, Illinois. Mr. Hirzel focuses his practice on condominium law, homeowners association law, and real estate law. He is a fellow in the College of Community Association Lawyers (“CCAL”), a prestigious designation given to less than 175 attorneys in the country. Mr. Hirzel formerly served on the CCAL National Board of Governors and is a former member of the Community Associations Institute’s (“CAI”) Board of Trustees, an international organization with over 40,000 members worldwide that is dedicated to improving community associations. Mr. Hirzel has been recognized as a Leading Lawyer in Michigan by Leading Lawyers, a distinction earned by fewer than 5% of all lawyers licensed in Michigan. He has been named a Michigan “Rising Star” in real estate law by Super Lawyers Magazine, a designation is given to no more than 2.5% of the attorneys in Michigan each year. Mr. Hirzel was also named as a “Go-To-Lawyer” in condominium and real estate law by Michigan Lawyer’s Weekly. Hirzel Law was also voted the best law firm in Metro Detroit in the Detroit Free Press Best of the Best awards. He is the Co-Chairman of the State Bar of Michigan’s Real Property Law Section Committee for Condominiums, PUDs & Cooperatives. Mr. Hirzel has authored numerous articles on community association law for publications such as the Michigan Community Association News, Michigan Real Property Review, Macomb County Bar Briefs and the Washington Post. He is also the author of the first and second editions of “Hirzel’s Handbook: How to operate a Michigan Condo or HOA”, which is available for purchase on amazon.com. Mr. Hirzel has been interviewed on community association legal issues by various media outlets throughout the country, such as CBS, CNBC, Common Ground Magazine, Community Association Management Insider, the Dan Abrams Show on SiriusXM Radio, the Detroit News, Dr. Drew Midday Live on KABC Radio, Fox Business News, Fox News, HOALeader.com, the Law & Crime Network, Michigan Lawyer’s Weekly, NPR, WWJ News Radio and WXYZ. Mr. Hirzel is a dynamic speaker and frequently lectures on community association law throughout Michigan, as well as nationally at the CAI National Law Seminar, and is a two-time winner of the best manuscript award at the CAI National Law Seminar.

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