Apple II Condominium Case Explained: Understanding Illinois Condo Restriction Categories

Apple II Condominium Case Explained: Understanding Illinois Condo Restriction Categories

In 1995 the Illinois Court of Appeals issued its decision in Apple II Condominium Ass’n v. Worth Bank and Trust Co., 277 Ill. App. 3d 345 (1995) establishing a framework for analysis of the validity of restrictions imposed within a condominium.  Though this analysis was conducted within the confines of a rental amendment that had been approved by the owners, the analysis is also relevant to other types of restrictions and to a review of restrictions unilaterally adopted by an association’s board of directors.

The Two Categories of Condo Restrictions

In Apple II, supra, the Illinois Court of Appeals separated condominium restrictions into two categories: (1) Category One Restrictions; and (2) Category Two Restrictions.  This particular analysis arose out of the Court’s adoption of a similar approach used by the Florida Appellate Court in Hidden Harbour Estates, Inc. v. Basso, 393 So.2d 637 (Fla. App. 1981).

Category One: Declaration-Based Restrictions

Under this analysis, Category One Restrictions consisted of those restrictions “dealing with the validity of restrictions found in the declaration of condominium itself.”  Category One Restrictions are “clothed with a very strong presumption of validity and will not be invalidated absent a showing that they are wholly arbitrary in their application, in violation of public policy, or that they abrogate some fundamental constitutional right.”

Category Two: Board-Enacted Rules

Category Two Restrictions consisted of those restrictions involving the “validity of rules promulgated by the association’s board of directors or the refusal of the board of directors to allow a particular use when the board is invested with the power to grant or deny a particular use.”  Under Category Two Restrictions, the board of directors must show that “the use it wishes to prohibit or restrict is ‘antagonistic to the legitimate objectives of the condominium association.’”  In conducting this review, courts will consider whether the restriction will “promote the health, happiness and peace of mind of the unit owners.”

Why the Court Distinguished the Two Categories

In the Court’s view, there were several reasons for creating a distinction between Category One and Category Two Restrictions.  The Court relied, in part, upon the Florida decision Seagate Condominium Ass’n v. Duffy, 330 So.2d 484 (Fla. App. 1976), for the proposition that, with respect to rental restrictions, “associations have a legitimate right to adopt such restrictions to promote the residential character of their communities.”  Further, the Court stated:

It is obvious that different condominium associations have different concerns and that restrictions suitable for one community . . . will not necessarily be suitable for another.  It is also clear that the Condominium Property Act is designed to encourage associations to be self-governing and that it is the members themselves who are in the best position to make determinations regarding restrictions.  Apple II, supra, at 350.

Accordingly, under Apple II, supra, a “higher level of deference is necessary when courts review decisions made by self-governing bodies such as condominium associations.”

Lastly, the Court rejected the owners’ contention that the restriction at issue should not be enforced against current owners and should, instead, only be enforced against prospective purchasers.  In rejecting this argument, the Court stated:

As purchasers of the condominium property, the Harmons are charged with knowledge of the Condominium Property Act and that the Declaration governing their Unit was subject to   amendment. . . . In the absence of a provision either in the Amendment or in the original Declaration, condominium owners do have vested rights in the status quo ante.  Apple II, supra, at 349.

Key Takeaways

Based on the above analysis, the Apple II court upheld a rental restriction that had been voted on and approved by the condominium owners and allowed the rental restriction to be enforced against an owner who had always used their unit for investment purposes.  While one takeaway from this decision is that owners should be aware that rental restrictions are subject to amendment, the bigger issue is the establishment of the framework within which all restrictions will be evaluated.  Restrictions that are adopted by the community as a whole will have a presumption of validity and will be difficult to overturn.  Restrictions unilaterally adopted by the board of directors, however, must withstand a more stringent analysis, and in such instances, the board itself bears the burden of demonstrating the utility and benefit of the restriction.

 

Matthew W. Heron is a Member at Hirzel Law, PLC, where he concentrates his practice in real estate, community association law, condominium law, real estate litigation, and zoning and land use.  Mr. Heron also has extensive experience in a variety of litigation matters, including insurance coverage, non-compete agreements, automotive supplier disputes, and breach of contract. He may be reached at 312-552-7669 or mheron@hirzellaw.com.