Illinois Condo Board Leasing Rules Invalid If They Conflict With Declaration
Members within a condominium association often question whether a condominium association’s board of directors can adopt a rule that directly conflicts with the association’s declaration. The question often arises when a condo board seeks to adopt a rule that is either more restrictive or less restrictive than certain language contained in the declaration, such as restrictions pertaining to the leasing of units. In Stobe v. 842-848 W. Bradley Place Condo. Ass’n, 2016 IL App (1st) 141427, Plaintiffs, Kenneth R. Stobe and Herbert R. Gottelt (together, the “Plaintiffs”), filed a complaint against 842-848 West Bradley Place Condominium Association (“Association”) alleging that a certain rule adopted by the association’s board of directors (“Board”) that restricted the leasing of units was improper. The owners argued that the rules conflicted with language contained in the declaration, which permitted leasing. During the proceedings before the trial court, the Plaintiffs filed a motion for summary judgment against the condominium association, which the trial court granted. The appellate court affirmed the trial court’s ruling. This case serves as an important reminder that, to the extent language within a condominium’s declaration and rules conflicts, the language contained in the declaration will control.
Case Background
The Declaration and Bylaws governing the condominium association were recorded in September 2005. Approximately one month after the recording of the association’s Declaration and Bylaws, Plaintiffs purchased their unit in the association. Upon purchasing their unit, the Plaintiffs continuously leased their unit to tenants. In 2007, other unit owners within the association became concerned that a low owner-occupancy rate would hinder future condominium sales and financing. Due to these owners’ concerns, the condo board provided all unit owners with proposed rules and regulations (“Rules”). The rules stated that no more than 30% of units could be rented at any one time. In July 2010, the board unanimously adopted the Rules, which contained the leasing restriction.
In September 2012, the condo association advised Plaintiffs that it intended to enforce the Rules, specifically the leasing restriction, and evict Plaintiffs’ tenants. In November 2012, the board held a special meeting regarding Plaintiffs’ “rent violation.” At the special meeting, the board imposed fines on the Plaintiffs and voted to take action to evict the Plaintiffs’ tenants.
The Plaintiffs filed a complaint against the condominium association in the Circuit Court of Cook County, Illinois, seeking a judgment declaring that the board lacked the authority to restrict the number of units that could be leased. The Plaintiffs alleged that the Rules adopted by the board, specifically the leasing restriction, conflicted with the Declaration, which allowed all unit owners to rent their units. Plaintiffs further alleged that such a limitation on leasing could only be implemented by amending the declaration, which required the approval of at least 75% of the unit owners.
During the trial court proceedings, the Plaintiffs filed a motion for summary judgment. In response to Plaintiffs’ motion for summary judgment, the condominium association argued that the Illinois Condominium Property Act, as well as the declaration, authorized the board to adopt the Rules pertaining to the leasing restriction. The condominium association further argued that the Rules were consistent with the language of the Declaration. Following a hearing, the trial court initially agreed with the Association and denied Plaintiff’s motion for summary judgment. However, Plaintiffs proceeded to file a motion for reconsideration, which the trial court granted. In its ruling, the trial court found that when the condo association’s governing documents were considered as a whole, “the declaration intended that the Board would not be authorized to modify leasing restrictions.” The condominium association then appealed.
The Appellate Court ruled that the Condo Association’s Rules were unenforceable as they conflicted with the Declaration
On appeal, the condo association argued that the trial court erroneously entered summary judgment in favor of the Plaintiffs because “the bylaws authorized the Board to implement rules limiting leasing and the Board’s rule does not conflict with the declaration.”
In interpreting a condominium declaration, the appellate court stated that it will do so “according to the principles of contract interpretation” and that “the primary rule of interpretation is to give effect to the drafting parties’ intent.” In addition, the court stated that when resolving controversies involving a condominium owner’s rights, “courts must construe the declaration, bylaws and any relevant provisions” of the Illinois Condominium Property Act, as a “whole.”
In its analysis, the court cited the Illinois Condominium Property Act. Specifically, the court cited 765 ILCS 605/18.4(h), which provides, in relevant part, as follows:
Powers and duties of board of managers. The board of managers shall exercise for the association all powers, duties and authority vested in the association by law or the condominium instruments except for such powers, duties and authority reserved by law to the members of the association. The powers and duties of the board of managers shall include, but shall not be limited to, the following:
(h) To adopt and amend rules and regulations covering the details of the operation and use of the property, after a meeting of the unit owners called for the specific purpose of discussing the proposed rules and regulations… However, no rule or regulation may impair any rights guaranteed by the First Amendment to the Constitution of the United States or Section 4 of Article I of the Illinois Constitution…nor may any rules or regulations conflict with the provisions of this Act or the condominium instruments.
In this case, the declaration governed the leasing of units. Article VII of the Declaration stated that “no Unit shall be leased or subleased for hotel or transient purposes or for terms less than six (6) months.” Article VII of the Declaration did not grant the Board the authority to adopt additional rules and regulations regarding the leasing of units. As a result, the court found that “the Board lacked authority to promulgate a rule restricting leasing because the rule conflicts with the declaration’s intent.” The court continued by stating that if owners had no right to lease their units, then the expressed limitations on leasing which were contained in the Declaration “would be meaningless.” The court opined that the Declaration’s intent was clear and that unit owners had “the right to lease their units subject to the declaration’s limitations.” Therefore, the court concluded that the Board lacked the authority to regulate the leasing of units beyond the express limitations already contained in the Declaration, and allowing the Board to do so would violate Section 18.4(h) of the Illinois Condominium Property Act.
The appellate court held that “because the declaration has spoken on the matter of leasing, any augmentation or diminution of plaintiffs’ right to lease their unit must be accomplished through an amendment to the declaration, not a rule promulgated by the Board.” Accordingly, the trial court was affirmed.
Why This Case Matters for Condominium Associations and Common Interest Community Associations
Stobe v. 842-848 W. Bradley Place Condo. Ass’n serves as an important reminder for Illinois condominium associations and common interest community associations: to the extent a conflict exists between language contained within a declaration and rules, the declaration controls. Board members must be mindful not to adopt rules that conflict with the declaration, and that will result in increasing or decreasing owners’ rights pertaining to their units. Rather, community associations must follow the proper procedures and amend their declarations, rather than adopting rules that conflict with the plain language of the declaration.
At Hirzel Law, PLC, we regularly advise and assist condominium associations and common interest community associations in amending and enforcing their governing documents, including matters such as leasing restrictions, while also ensuring compliance with the Illinois Condominium Property Act and the Illinois Common Interest Community Association Act. If your condominium association or common interest community association would like assistance in this regard, please contact our office.
