Covenants, Conditions and Restrictions (CC&Rs)

Prince said, “In Illinois, condominium CC&Rs are generally entitled the ‘Declaration of Condominium Ownership’. Non-condominiums are generally referred to as a ‘Declaration of Covenants’. In either case, the bylaws are generally either built into the Declaration or attached to it and are generally included when speaking about CC&Rs. The CC&Rs create the association and include provisions about how the property in the Association may be used and will be operated. The CCRs are generally very broad and cover a wide-range of issues, including obtaining insurance, paying assessments, voting rights, leasing and enforcement.”

Yes, the CCRs can amended by two-thirds of the Board to fix errors and omissions in the documents. Prince said that this happens often and usually occurs when there are changes in the law pertaining to associations. The CCRs can only be amended this way to the extent necessary to fix the errors and omissions and cannot be used to make substantive changes.

Covenants, conditions and restrictions are terms of art that are used for the type of provision at issue. A covenant is a promise. A condition is how something will be executed. A restriction is a limitation on the use of property.

The CCRs are the legal backbone for how the property within the Association will be used. The provisions of the CCRs are meant to be more constant (they are difficult to change) while the rules and regulations are meant to more easily change with the times. Where the CCRs are general in nature, rules and regulations are generally more specific and detailed. The rules and regulations need some link to the CCRs and can- not contradict them.

Owners can always challenge the governing documents even decades after a provision was adopted. A board has to show that a rules and regulation addresses an issue that is antagonistic to a purpose of the association and must be reasonable in its application. to be enforceable. In contrast, a provision in the CCRs are presumed valid unless they are wholly arbitrary, violate a constitutional right or are against public policy. Interestingly, the burden is on the asso- ciation to show that a rule is legitimate and enforceable while the burden is on the challenger to show that a provision in the CCRs is invalid. As part of enforcing either document, the board will have to show strict com- pliance with the association’s processes and procedures.

This depends, in large part, on the governing documents. If the governing documents authorize a rules or violations committee the board may create one to assist in its enforcement efforts. A majority of the committee’s members must be board members. If any of this is not present, the association does not have a committee. Instead, it has a commission which is an advisory body that can take no action on behalf of the association. In the event there is a properly constituted committee, it can issue fines. The ability to appeal the decision to the board is based on whether the CCRs or rules and regulations provide for such an appeal. Prince believes that an appeal provides additional due process, which is upon favorably by a court.

Fines are generally spelled out in the association’s enforcement policy, which is part of its rules and regulations. In some policies there are specific fines for certain types of violations. Other policies use escalators, increasing the fine for each subsequent violation. Additional policies, will include a broad range that the board can use in levying a fine. The board must be reasonable and consistent in doing so; like situations should have like fines. To do otherwise, brings with it risks of selective enforcement and discrimination.

Prince said, “Associations are prohibited from using fines to punish owners. They are also prohibited from using fines as a revenue generating measure. Fines are supposed to represent the harm caused to the association by the violative behavior.”

Board actions are supposed to occur at open meetings or portions of meetings open to the members. If an owner is unable to attend a meeting, he or she can request meeting minutes, but those re generally only made available after they have been approved at the next meeting. Board can publish draft minutes or distribute a list of actions in its newsletter or on its website. By and large boards try to provide as much information as possible while protect- ing individuals privacy rights and the interests of the association, provid- ing transparency. However, boards have to make sure that their efforts to be transparent do not negatively impact the association.

The law does not state how an association is supposed to notify the members of a new rule being adopted. Commonly, a board will send out a signed resolution to the members after its adoption. If it does not do so, it is susceptible to being challenged by the members due to lack of notice. A condominium board has to send a notice of meeting for a members meeting to discuss a proposed rule along with the proposed rule 10 to 30 days before it can adopt a rule at its next board meeting. The Common Interest Community Association Act does not contain a corollary provi- sion. Thus, common interest community associations often adopt rules on little to no notice, as long as it complies with the notice requirements under its governing documents.

Illinois law does not address this issue. Typically, new rules become effective when they are adopted. In some cases, the board will give an effective date to the rules when they are distributed to the owners.

If a board fails to enforce the association’s rules and regulations the association can be sued. Generally, the individual board members will be sued for breach of fiduciary duty as well. Additionally, while the governing documents will generally include a provision which states that the failure to enforce in one instance does not waive enforcement in other instances, courts are less likely to allow an association to enforce a rule that has not been enforced historically without some notification to the members that the association will begin enforcing it anew. If a board does not intend to enforce a rule, it should remove the rule to avoid any issues

ADR is an alternative to filing and fighting lawsuits. It is meant to be a cost effective method of resolving disputes between the parties. A lot of disputes are handled through the American Arbitration Association rule. However, other methodologies can be used as well. Where mediation tries to get both sides to agree to a settlement, in an arbitration the neutral third-party looks at all the facts and decides who wins the case. If a party is dissatisfied with the arbitration award (the ruling) they can only reject the award and litigate the case if there is a showing of impropriety during the arbitration process

Choosing who will act as the arbitrator or mediator for ADR is an ordeal unto itself. Often the arbitration provision will state exactly how the arbitrator or arbitration panel will be put together. Selecting the arbiter or the panel is the subject of negotiation amongst the parties. For mediation, the parties have to actually agree to submit to the process with either party being able to walk away at any time.

The costs of ADR are generally split evenly by the parties. However, the agreement between the parties can state specifically who pays what.

Yes, as long as the provisions are not against public policy a restriction in the CCRs can limit the transfer of property. Most often, we see CCRs that include a right of first refusal, which allows the association to stand in the shoes of a would be purchaser. Boards likely cannot limit how an owner can alienate (sell or transfer his or her property) in a rule and regulation.

The CCRs can contain a wide array of architectural controls detailing specifically how a home can and cannot be built and what can be added to the property. There is no ‘one size fits all’ approach to architectural controls. What works for one association may be completely unreasonable in another.

 Boards have the ability to require renovations to protect the life and safety of the residents as well as the property within the association. It cannot use its authority arbitrarily, but it can act in the best interest of the association to limit harm. It can also require that contractors meet certain reasonable standards, such as being properly licensed and carrying the appropriate types of insurance.

This is also dealt with on a case by case basis. The CCRs usually do not address a specific time period to be a temporary structure. This can be addressed in the association’s rules. If a playset is fastened to the ground or dug in, it is more likely to be permanent than temporary. A plastic playset that is put out on the lawn and can be removed on a moment’s notice may not even be a temporary structure for the purposes of the CCRs.

Several years ago the General Assembly approved the Solar Rights Act. It has since been renamed the Homeowner Energy Policy Statement Act. It prohibits an association from completely banning solar energy systems. Instead, the board can adopt restrictions on where the system can be placed and how they can be installed. However, the rules cannot, in their application, prohibit the installation of a system. A board has a firm deadline after receiving its first request to adopt a policy and record it with the declaration. It also has a firm deadline to approve any request.

Prince said “You can only grant variances to the rules if there is flexibility in the rules themselves. Boards should be as reasonable as possible when dealing with hardship requests. However, if a board does not enforce the association’s rules other owners could assert claims for breach of fiduciary duty.

An encroachment occurs when someone builds something on the common elements or the common areas. Generally, encroachments occur when an owners adds an improvement to the property. Often, the declaration will contain a provision waiving encroachments caused by the developer’s construction of the association. If the encroachment is a developer installed encroachment, there is generally nothing to do. If the encroachment occurred because of an owner’s construction on the property, the board has a duty to other owners to have the encroachment removed as it limits other’s use of the common elements and areas. It should send a letter to the owner to seeking the removal of the encroachment. If that does not work, it likely will need to litigate the issue.

Association liability for insufficient lighting and other hazards caused by its policies and requirements is generally limited to instances where it knows of a dangerous condition and fails to take action to alleviate it. If a person trips and falls, in part, because of insufficient lighting, the association will likely be sued by the injured person.

A recent Illinois Supreme Court case stated that an association has inherent authority to adopt rules and regulations and enforce them regarding the common elements and common areas. The court specifically permitted an association to issue speeding tickets if it has adopted rules on the topic. However, if an association has a speeding restriction, it will have a duty to enforce that restriction. Its failure to do so can lead to liability.

The Supreme Court of Illinois has made it clear that the association does not have authority to issue citations to third parties who do not own or reside in the association. Instead, associations can fine the owners of the unit who the visitors were going to see.

Associations are able to completely ban owners from putting displays on the common areas and common elements. When it comes to owner displays on their own lots, associations need to be reasonable and not promote or hinder any specific religious holiday. For example, having a restriction that only addresses Christmas lights may be discriminatory as there is no like provisions for other non-Christian holidays. Often, we see well-crafted provisions that require all holiday decorations to be removed within 30 days after the holiday.

Owners have the right to exercise their rights to freedom of speech, which would include the right to advocate for the candidates and issues of their choosing. Associations are able to adopt restrictions on the time, place and manner in which political signs can be displayed. However, it cannot regulate the content of the political signs. Reasonableness is the key to the time, place and manner restrictions.