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Short-term condo leases may be illegal

Q. A number of owners in our association lease their units, or a room in their unit, for weekends or other short terms, as a vacation rental. Can associations stop this practice?

A. Short-term leases of all or a portion of a unit is a growing trend. However, this practice violates the provisions of many association declarations. Most declarations include language that establish a minimum term for a lease, or prohibit the hotel or transient use of a unit, or prohibit leasing less than an entire unit.

In addition, some municipalities have ordinances that prohibit vacation rentals without a license, and there are impediments that can often make it difficult to obtain a license.

There are a variety of remedies available to an association to combat vacation rentals that violate its covenants. This can include levying of fines, or taking legal action against an owner who refuses to voluntarily stop the practice. The board of the association should consult with counsel as to the specific language in your 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.

Q. I am an owner of a unit in a new industrial condominium association. Having been on the board of the condominium where I live, I was looking at the language of the declaration for our industrial condominium concerning insurance, and it is very different from what is in the declaration for the association where I live. I thought the insurance language of Section 12 of the Illinois Condominium Property Act was applicable to all condominiums. Is it?

A. Section 12 of the Illinois Condominium Property Act specifically states the requirements of that section may be varied or waived in the case of a condominium community in which all units are restricted to nonresidential use. That would explain why the insurance provisions of the declaration for your industrial association don't mirror Section 12.

Q. A unit in our condominium association is for sale, at a price well below market value. The board wants to buy the unit, "flip it," and use the gain on the sale to fund the woefully inadequate reserve account. Our declaration states something to the effect that the association won't conduct any business for profit, and we are a nonprofit corporation. Can the board do this proposed "flip" of a unit?

A. I would not consider this one-time transaction to constitute conducting a business for profit by the association. Of course, the proposed purchase and sale of a unit is subject to the affirmative vote of not less than two-thirds of the votes of unit owners, at a meeting duly called for that purpose, under the Condominium Property Act. So the decision to participate in the transaction is not one the board can make by itself. The board should also discuss the income tax implications with the association's accountant before it proceeds.

• 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.

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