Stobe v. 842-848 West Bradley Place Condominium Association ( 2016 )

2016 IL App (1st) 141427
THIRD DIVISION
February 3, 2016
No. 1-14-1427
IN THE
APPELLATE COURT OF ILLINOIS
FIRST JUDICIAL DISTRICT
KENNETH R. STOBE and HERBERT R. GOTTELT, ) Appeal from the
) Circuit Court of
Plaintiffs-Appellees, ) Cook County.
)
v. ) No. 2012 CH 41716
)
842-848 WEST BRADLEY PLACE CONDOMINIUM )
ASSOCIATION, ) The Honorable
) Kathleen G. Kennedy
Defendant-Appellant. ) Judge, presiding.
JUSTICE LAVIN delivered the judgment of the court, with opinion.
Presiding Justice Mason and Justice Fitzgerald Smith concurred in the judgment and
opinion.
OPINION
¶1 Plaintiffs Kenneth R. Stobe and Herbert R. Gottelt own a condominium at 846 West
Bradley Place. Defendant, the 842-848 West Bradley Place Condominium Association,
supervises the condominium building. When defendant's board (Board) adopted a rule limiting
the amount of units that could be leased at any one time, plaintiffs commenced this action,
asserting that the Board's rule impermissibly conflicted with the condominium declaration.
Specifically, plaintiffs argued that the declaration granted unit owners the right to lease their
No. 1-14-1427
units. Ultimately, the circuit court entered summary judgment in their favor. Defendant now
appeals.
¶2 I. BACKGROUND
¶3 The declaration and bylaws governing defendant's 13-unit condominium building were
filed on September 23, 2005. Certain provisions in the declaration were expressly "subject to the
rules and regulations" of the Board or specified that "[t]he Board or the Association may
prescribe such rules and regulations" regarding a given subject as they deemed fit. The
declaration also referred to the Board's discretion to take certain actions. To amend the
declaration, however, that document required an affirmative vote of the unit owners.
¶4 Additionally, article VII of the declaration governed the "sale, leasing or other alienation"
of units and contained certain limits on transfers and lease terms. That article stated, among other
things, that if a proposed tenant of any unit agreed to the terms of the declaration, the Board's
rules, and the Illinois Condominium Property Act (Act) (765 ILCS 605/1 et seq. (West 2004)),
the Board had no right of first refusal. Article VII further stated that "[n]o Unit shall be leased or
subleased for hotel or transient purposes or for terms less than six (6) months," and specified
limitations on the lease or sublease of parking spaces. While other provisions in the declaration
expressly referred to the Board's authority to promulgate further rules and regulations on a given
subject matter, article VII did not do so with respect to leasing. With that said, article VII did not
expressly state that owners had the right to lease their units either.
¶5 Furthermore section 3.08 of the bylaws states that "[t]he Board shall exercises [sic] for
the Association all powers, duties, and authority vested therein by the Act, and Declaration, or
these Bylaws, except for such powers, duties, and authority reserved thereby by the members of
the Association." The same section states:
2
No. 1-14-1427
"The powers and duties of the Board shall included [sic], but shall not be limited
to, the following:
***
(b) to administer, manage, and operate the Property, including the
Common Elements, and to formulate policies therefor;
***
(j) to adopt rules and regulations, with written notice thereof to the Unit
Owners, governing details of the administration, management operation, and use
of the Property, including the Common Elements."
¶6 Plaintiffs purchased their unit approximately one month after the aforementioned
documents were filed. From that time forward, they leased their unit to tenants. In 2007, other
unit owners became concerned that a low owner-occupancy rate would hinder future
condominium sales and refinancing. Following the Board's investigation into mortgage and
lending guidelines, the Board provided unit owners with proposed rules and regulations, which
stated, in pertinent part, that no more than 30% of units could be rented at any one time. The
Board unanimously adopted this measure following a meeting on July 6, 2010. Plaintiffs,
however, believed the Board's action was unauthorized.
¶7 In September 2012, defendant advised plaintiffs that it intended to enforce the leasing
restriction and evict plaintiffs' tenants. Two months later, the Board held a special meeting
regarding plaintiffs' rent violation. The minutes stated that while "a 50% owner occupancy rate
may be sufficient from FHA standards, the Board believes it must look out for the interests of
those hoping to obtain conventional financing, which often stipulate greater requirements." The
minutes cited the Board's concern that future sales or attempts at refinancing would otherwise be
3
No. 1-14-1427
jeopardized. The Board then decided to impose $6,600 in retrospective fines against plaintiffs,
attach a lien to their unit and evict their tenants.
¶8 Consequently, plaintiffs filed a complaint seeking a judgment declaring that the Board
lacked authority to restrict the amount of units leased. Specifically, plaintiffs argued that the
Board's rule impermissibly conflicted with the declaration, which allowed all unit owners to rent
their units subject to certain limitations enumerated therein. Plaintiffs further argued that such a
limitation on leasing could only be implemented by amending the declaration, which required
75% of the unit owners' support. Subsequently, plaintiffs moved for summary judgment. In
response, defendant argued that the Act, as well as the condominium documents, authorized the
Board to implement the challenged rule. Defendant also argued that the rule was entirely
consistent with the declaration.
¶9 Following a hearing, the circuit court initially entered judgment in favor of defendant.
The court found the "unit owners' right to lease their units must be explicitly granted or denied in
the condominium documents." Thus, the Board's rule did not conflict with the declaration. Upon
plaintiffs' motion for reconsideration, however, the court entered summary judgment in their
favor. The court found that when considered as a whole, the declaration intended that the Board
would not be authorized to modify leasing restrictions.
¶ 10 II. ANALYSIS
¶ 11 On appeal, defendant asserts the circuit court erroneously entered summary judgment in
favor of plaintiffs because the bylaws authorized the Board to implement rules limiting leasing
and the Board's rule does not conflict with the declaration.
¶ 12 A court should grant summary judgment only where the pleadings, admissions on file,
depositions and affidavits present no genuine issue of material fact, so that the movant is entitled
4
No. 1-14-1427
to judgment as a matter of law. Ridenour v. Carl Sandburg Village No. 7 Condominium Ass'n,
402 Ill. App. 3d 532, 535 (2010). In addition, we review an order granting summary judgment de
novo. Carney v. Donley, 261 Ill. App. 3d 1002, 1005 (1994). Thus, we may affirm the judgment
on any basis, regardless of the circuit court's reasoning. Antonacci v. Seyfarth Shaw, LLP, 2015
IL App (1st) 142372, ¶ 21.
¶ 13 We interpret condominium declarations according to the principles of contract
interpretation. Toepper v. Brookwood Country Club Road Ass'n, 204 Ill. App. 3d 479, 487
(1990);15 Am. Jur. 2d Condominiums & Cooperative Apartments § 38 (2014). The primary rule
of interpretation is to give effect to the drafting parties' intent. La Salle National Trust, N.A. v.
Board of Directors of the 1100 Lake Shore Drive Condominium, 287 Ill. App. 3d 449, 455
(1997). To resolve controversies involving a condominium owner's rights, courts must construe
the declaration, bylaws and any relevant provisions of the Act as a whole. Ridenour, 402 Ill.
App. 3d at 536.
¶ 14 Section 18.4(h) of the Act governs the powers and duties of the Board:
"The board of managers shall exercise for the association all powers, duties and authority
vested in the association by law or the condominium instruments except for such powers,
duties and authority reserved by law to the members of the association. The powers and
duties of the board of managers shall include, but shall not be limited to, the following:
***
(h) To adopt and amend rules and regulations covering the details of the
operation and use of the property, after a meeting of the unit owners called for the
specific purpose of discussing the proposed rules and regulations. *** However,
no rule or regulation may impair any rights guaranteed by the First Amendment to
5
No. 1-14-1427
the Constitution of the United States or Section 4 of Article I of the Illinois
Constitution, nor may any rules or regulations conflict with the provisions of this
Act or the condominium instruments." (Emphasis added.) 765 ILCS 605/18.4(h)
(West 2004).
¶ 15 We find the Board lacked authority to promulgate a rule restricting leasing because the
rule conflicts with the declaration's intent. As stated, the declaration expressed certain limitations
on leasing. If owners had no right to lease their units, the enumerated limitations would be
meaningless. Additionally, the article on leasing did not specify that it was subject to further
regulation by the Board, unlike other provisions in the declaration that did. While this omission
would not alone require a determination that owners' possess leasing rights, the declaration's
intent is clear when considered in its entirety: Unit owners have the right to lease their units
subject to the declaration's limitations.
¶ 16 We also reject defendant's assertion that the declaration would have expressly removed
the Board's authority to act with respect to leasing restrictions had that been the drafters' intent.
The question, however, is whether the Board has been granted authority, not whether authority
has been taken away. Under the Board's approach, the Board could do anything it pleased so
long as the declaration did not expressly forbid it. Furthermore, the bylaw granting the Board the
authority to adopt rules regarding the use of the property does not warrant a different conclusion.
We presume that the bylaws' drafters were aware of section 18.4(h) of the Act, which provides
that a board's rules cannot conflict with the condominium instruments. Thus, the bylaws did not
purport to give the Board unfettered discretion to regulate the use of the property.
¶ 17 The appellate court's decision in Apple II Condominium Ass'n v. Worth Bank & Trust Co.,
277 Ill. App. 3d 345, 346 (1995), does not further defendant's position. There, the issue was
6
No. 1-14-1427
whether a condominium association, rather than its board, could amend its declaration to prohibit
unit owners from leasing their units more than once during ownership. Id. at 346-47. The
amendment also authorized the board to grant six-month extensions. Id. at 347. When the board
denied a one-year extension to the beneficial owners of a unit, the owners challenged the
amendment. Id. Although the association, rather than the board, had implemented the restriction,
the owners nonetheless argued that the board lacked authority to restrict the rental of units. Id.
¶ 18 First, the reviewing court found that absent a provision in an amendment or the original
declaration, condominium owners' have no right to maintain the status quo. Id. Specifically,
condominium purchasers are charged with knowledge of the Act and in turn, knowledge that a
declaration could be amended. Id. at 348-49. The court also noted that section 18.4(h) of the Act
authorizes a board to implement rules regarding use of the property. Id. at 349.
¶ 19 Adopting Florida case law, the reviewing court then found there were two categories of
use restrictions: (1) restrictions in the declaration, and amendments thereto; and (2) restrictions
promulgated by the board. Id. at 350 (quoting Hidden Harbour Estates, Inc. v. Basso, 393 So. 2d
637, 639 (Fla. Dist. Ct. App. 1981)). While the first category of restrictions enjoys a strong
presumption of validity, regardless of how reasonable the restriction may be, the second category
does not. Apple II Condominium Ass'n, 277 Ill. App. 3d at 350-51. Instead, the board must show
that the use it wishes to restrict is antagonistic to the association's legitimate objectives. Id. at
351. Because the restriction before it fell within the first category, the court found it was entitled
to deference absent an affirmative showing that the amendment was wholly arbitrary, against
public policy or in violation of a constitutional right. Id.
¶ 20 Unlike Apple II Condominium Ass'n, here, we are faced with a restriction implemented
by defendant's Board, not an amendment to the declaration. Any legal discussion regarding board
7
No. 1-14-1427
restrictions in that case was arguably dicta. To the extent this dicta was persuasive, it was
equally distinguishable. The court did not address a situation where a rule promulgated by the
board conflicts with the declaration. If a board lacks the authority to implement a particular type
of rule under any circumstances, a court need not consider whether the rule would have been
reasonable. Furthermore, the process upheld in Apple II Condominium Ass'n, is precisely the
process that plaintiffs advocate for here: a vote by unit owners on an amendment to the
declaration.
¶ 21 We are also unpersuaded by defendants' reliance on Board of Directors of 175 East
Delaware Place Homeowners Ass'n v. Hinojosa, 287 Ill. App. 3d 886 (1997). There, the
condominium board adopted a rule prohibiting unit owners from bringing additional dogs onto
the premises. Id. at 888. Neither the declaration nor the bylaws addressed pet ownership. Id. at
888, 891.
¶ 22 On appeal, the reviewing court found that because the declaration was silent on the issue
of dog ownership, the board's rule did not create a conflict. Id. at 891; see 765 ILCS 605/18.4(h)
(West 2004). The reviewing court also considered section 18(k) of the Act:
"The bylaws shall provide for ***:
***
(k) Such restrictions on and requirements respecting the use and maintenance of
the units and the use of the common elements, not set forth in the declaration, as are
designed to prevent unreasonable interference with the use of their respective units and of
the common elements by the several unit owners." 765 ILCS 605/18(k) (West 2004).
The court found that while this statute gives an association the authority to create restrictions in
the condominium instruments, thereby cloaking such restrictions with a presumption of validity,
8
No. 1-14-1427
the statute did not provide that restrictions are unenforceable merely for being absent from the
bylaws. Board of Directors of 175 East Delaware Place Homeowners Ass'n, 287 Ill. App. 3d at
891. Moreover, the board's rule was reasonable. Id. at 891-93.
¶ 23 In contrast, the declaration before us is not silent on leasing. As stated, the declaration
contemplates that owners have the right to lease their units subject to the limitations specified in
the declaration. Because the Board lacked the authority to implement a rule that conflicts with
that right to lease, we need not consider whether the rule was otherwise reasonable, as the court
was required to do in Hinojosa. We further note that contrary to defendant's disingenuous
argument, no one has suggested that the Board's rule fails merely for being omitted from the
bylaws.
¶ 24 III. CONCLUSION
¶ 25 The declaration, when considered with the bylaws and the Act, clearly intended that
owners have the right to lease their units, subject only to specific limitations. Although the
declaration did not expressly state this intention, it did not need to, as this is the only reasonable
inference to be drawn under these circumstances. Because the declaration has spoken on the
matter of leasing, any augmentation or diminution of plaintiffs' right to lease their unit must be
accomplished through an amendment to the declaration, not a rule promulgated by the Board.
Accordingly, the circuit court properly entered summary judgment in favor of plaintiffs.
¶ 26 For the foregoing reasons, we affirm the circuit court's judgment.
¶ 27 Affirmed.
9