Short-term rentals in associations

I responded to a question concerning short-term leases in a recent column. However, the practice is so widespread that I want to address it in greater detail.

For a variety of reasons, the short-term rental, also referred to as "vacation rental," of units in associations has exploded. These short-term leases are for periods as short as one day, and can create issues for associations. Foremost is the security issue posed by transient occupants, the identity of whom may be unknown to the association, and who have access to otherwise locked common areas of a building, like a common entrance for multiple units. Often, other residents just don't care for the property they call home to be treated like a hotel.

Three scenarios are most typical. In each there is no actual written lease, and the occupant of the unit is a stranger to the unit owner.

First, a unit owner who does not reside in their unit leases out their unit in short-term transactions. Next, the unit owner is out of town themselves for a few days, and leases out their unit while the owner is away. Third, a unit owner who does reside in their unit leases out a room or rooms in their unit in short-term transactions.

Often unbeknown to the unit owner, the short-term rental of their unit, or individual rooms in their unit, may violate any number of provisions in the association's declaration. If the unit is in a condominium, these transactions can also violate the Illinois Condominium Property Act if a copy of the lease is not provided to the association by the owner.

Let's examine some of the provisions in association declarations that may be violated by short-term rentals. A common provision in a declaration states that no unit shall be leased by any unit owner, or occupied by an occupant, for hotel or transient purposes. A frequent companion to that language is a provision that requires leases to be for a minimum term, like six months or a year. Another common covenant prohibits leasing of less than the entire unit, which prohibits the leasing of individual rooms in the unit.

Almost every declaration for a residential property requires that units be used as a single family residence and for no other purpose. Courts have found that such language implies a certain degree of long-term or stable occupancy of the residence, rather than it being used as a hotel.

The declaration that requires all leases to be in writing would be violated by these short-term leases where there is no written lease. Failure of the owner to provide the condominium association with a copy of the lease would violate Section 18(n)(I) of the Illinois Condominium Property Act. That section provides, in relevant part, that "the unit owner leasing the unit shall deliver a copy of the signed lease to the Board……. not later than the date of occupancy or 10 days after the lease is signed, whichever occurs first."

Evidence of the short-term rental of a unit is fairly simple to gather. Most common, the activity is evidenced by the transiency of the occupants of the unit, and the suit case in their hand. This activity may be witnessed first- hand, or by an association's general video surveillance cameras. Information posted by owners on websites that advertise short-term rentals provide substantial evidence. A string of permission to enter forms, required by many associations with a doorman, leaves a great paper trail.

There are a variety of remedies available to an association to combat vacation rentals that violate the governing documents. This can include levying of fines, or taking legal action against an owner who refuses to voluntarily stop the practice.

The board of an association dealing with short-term rentals needs to review the specific language in its declaration to determine if it contains language that would bar these short-term rentals, or if some revision or rules need to be adopted to address the issues. An association without leasing limitations in their declaration may be able to impose restrictions on short-term leasing by way of rules adopted by the board.

• David M. Bendoff is an attorney with Kovitz Shifrin Nesbit in the Chicago suburbs. Send questions for the column to him at CondoTalk@ksnlaw.com. The firm provides legal service to condominium, townhouse, homeowner associations and housing cooperatives. This column is not a substitute for consultation with legal counsel.