Can a condo board establish a rental cap in the building’s rules and regulations, or is a by-law update required?

The starting point in answering this question lies with an understanding of the governing documents of the association and how they can each be amended.

Highest in order of these is the Declaration & Bylaws (collectively referred to here as the Declaration since the Bylaws are typically incorporated within or made an exhibit to the Declaration).

Next come the Rules & Regulations. Any provision in the Rules & Regulations which directly conflicts with a provision within the Declaration is superseded by the Declaration.

The Declaration can only be amended by the requisite majority approval of the ownership, as set forth therein. Rules & Regulations, however, can be amended by Board vote and without the approval of the owners.

In Illinois, one of the seminal cases regarding the implementation of leasing restrictions is Apple II Condominium Association v. Worth Bank & Trust Co. In that case, the court held that associations may prohibit leasing by either Board action or ownership approval, depending on the terms of their Declaration. However, in 2016, the Illinois Appellate Court ruled in Stobe v. 842-848 West Bradley Place Condominium Association that any reference to the possibility of leasing in an association’s Declarations must be read as creating an implied right to lease, even if no such right was expressly stated in the Declarations. So, in order to determine whether your Board of Managers (Board of Directors) is authorized to pass the rental restrictions in question, you must carefully review your Declarations.

If it expressly gives owners the right to rent out their units, then the Board definitely may not institute conflicting leasing restrictions by way of a new Rule and must instead obtain the approval of the ownership to amend the Declaration. And if it makes passing references to leasing issues, then the Board probably will not be able to institute leasing restrictions by way of a new Rule. But if it is completely silent on the matter of rentals, then a Rule restricting leasing may be approved and enforced by the Board.

For further details on this, or any other issue related to Condo Law, contact Erwin Law at 773-525-0153, or visit www.erwinlawfirm.com

THIS ERWINLAWANSWER IS DATED AS OF 04/30/2019 AND IS SUBJECT TO CHANGES IN THE APPLICABLE LAWS, AS MAY OCCUR FROM TIME TO TIME. THE READER SHOULD KEEP THIS IN MIND AND SHOULD ALWAYS VERIFY THAT THIS ANSWER HAS NOT BEEN AFFECTED BY RECENT CHANGES IN THE LAW.