Q&A: Can Board Establish a Rental Cap?

I live in a condo, and the board is trying to establish a rental cap in the building's rules and regulations, instead of making the change in the condo's bylaws. Does the board have the power to do this, or is a bylaw update required? What does state law say in regard to this matter?

—Leery in Lincoln

“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,” says James A. Erwin of the Chicago-based law firm of Erwin & Associates, LLC. Highest in order of those governing documents is your 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 Any provision in the rules & regulations which directly conflicts with a provision within the declaration is superseded by the declaration.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. So in order to determine whether your board of managers (board of directors) is authorized to pass the rental restrictions in question, you must review your declaration. If it expressly gives owners the right to rent out their units, then the board 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. But if it is silent on the matter of rentals, then a rule restricting leasing may be approved and enforced by the board.”    

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