Illinois Court Strikes Down HOA’s Amendment to CC&Rs that Sought to Prohibit Owner Leasing of Units

Illinois Appellate Court decision (August 7, 2014). (Note- this decision may be cited as precedent only in the limited circumstances allowed under Illinois Supreme Court Rule 23(e)(1)).

The plaintiff in this action filed suit against her HOA to challenge an amendment to the Association’s restrictive covenants that, in part, prohibited homeowners from leasing their residences. The plaintiff had owned and leased out her property for 26 years prior to adoption of the amendment with no history of problems relating to her tenants and sought a “hardship” exception that was denied following passage of the amendment. The lower court applied the principles of contract law to the case and concluded that the amendment was arbitrary and the HOA appealed.

The appellate court affirmed the lower court’s decision after finding that the amendment that had been adopted by the Association was not “reasonable, clear, or definite” and was thus subject to arbitrary enforcement. The court commented that restrictions on the use of an owner’s property are not favored, courts will enforce them “if they are reasonable, clear, definite, and not contrary to public policy.” The amendment in question purported to: (i) prohibit the rental and leasing of units, but it allowed the Association to do so (in order to recoup money owed to it); (ii) require owner occupancy when there could be countless reasonable circumstances that could prevent same; (iii) subject owners who violated the restriction to sanctions with no means of being able to recoup their losses. Additionally, the amendment did not provide standards for the Association’s review of non-owner occupancy or for review hardship applications.

See case decision:Studiger_v._Honeytree_Townhouse_Improvement_Ass’n_2014_IL_App_(3d)_130821-U_(Ill._App._2014)1