Jul 22, 2016

Chicago Associations blocking short-term rentals should report rental restrictions to limit short-term rental licenses

As of June 22, 2016, the Chicago City Council has adopted an ordinance that it applies to short-term and shared housing rentals. Among others, this ordinance applies to Chicago residents who may wish to rent their condominium units on a short-term basis using online home sharing, short-term-rental websites and other platforms that have become popular in recent years. The city ordinance requires owners wishing to rent to apply for and obtain certain licenses. Part of this application process involves confirmation that the owner’s unit is not located in a condominium property that restricts short-term rentals. The city plans to maintain a list of buildings that do not allow short-term rentals and will check that list before issuing licenses to rent. However, an Association must report its restriction status—the city will not investigate for you. This list requires Associations to report their status as rental restricted by submitting an affidavit form available from the city’s Department of Business Affairs and Consumer Protection.

In the event that your Governing Documents, which would include your Declaration, Bylaws and Rules and Regulations, contain restrictions or prohibitions on Unit Owners’ abilities to rent their properties on a short-term basis, you may be able to request that the City of Chicago add your property to a list of prohibited buildings under this new ordinance.

For properties to be considered for placement on this prohibited building’s list, the city will require an affidavit from a responsible party that swears that the building has a restriction or prohibition on short-term rentals. An Association should check with its qualified legal counsel before submitting this affidavit to be sure that the Governing Documents do prohibit or limit short-term rentals before signing an affidavit to that affect.

This new ordinance will also place additional requirements on unit owners who are selling their properties. If a Unit Owner is aware that their property is part of a building on the prohibited buildings list, the Unit Owner must disclose that when leasing their unit or selling their unit to a third party. We assume that this will be, functionally, added to a set of disclosures that will be exchanged between seller and buyer at the time of closing and will likely not involve a great burden on Associations as the disclosure requirement seems to be the selling owner’s responsibility. But this is subject to change.

Please contact us if you have any questions or wish to discuss this update.

This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.

Client alert authored by:
James R. Stevens, Principal