On February 3, 2015, the Illinois Appellate Court ruled in the case of Strobe v. 842-848 West Bradley Place Condominium Association that a condominium board may not adopt a rule restricting unit leasing if the declaration recognizes a unit owner’s right to lease without restriction.
In the Strobe case, the board adopted a rule limiting leasing to 30% of the units. The plaintiff unit owners brought a declaratory lawsuit seeking a judicial ruling as to whether the board has the authority to restrict leasing to 30% of units since the declaration allowed leasing without restrictions. The trial court agreed with the plaintiffs and struck down the board’s leasing restriction rule, reasoning the declaration allowed leasing and thus any change to that provision required a declaration amendment. The appellate court affirmed and held that leasing restrictions must be adopted via a declaration amendment with unit owner approval rather than a rule and regulation which requiring only board approval.
The Strobe court left open the possibility of leasing restrictions being properly adopted by rule if the declaration is completely silent on leasing or if the declaration contains language that specifically provides that leasing issues are “subject to further regulation by the board.” Such language would arguably give the board the right to restrict leasing via passage of a rule. We note, however, that this language within the decision was simply dicta, which is language by the court that is considered authoritative but non-binding. Accordingly, it remains to be seen whether said language within a declaration stating “subject to further regulation by the board” is sufficient for a board to pass a rule unilaterally rather than a via a declaration amendment.
Before the Strobe case, some condo boards made the business decision to adopt leasing restrictions by rule rather than a declaration amendment, notwithstanding the possibility of challenge or judicial review of the restriction itself. However, as of February 3rd, leasing restrictions adopted via rule inconsistent with the declaration are invalid.
We recommend that boards have legal counsel review any leasing restrictions adopted by rule for validity.