Vendor Portal
Author: Mark Ainely | Partner GC Realty & Development & Co-Host Straight Up Chicago Investor Podcast
Even in a tight market, condo and townhome owners are still moving on to their next home. Instead of selling their first place, a lot of them are deciding to rent it out long term. Some bought with that plan from day one. Others stumbled onto the math and realized it works.
Either way, most owners don't think about the extra rules that come with renting a unit inside a Homeowners Association (HOA), and we see people get burned because they don't know what they don't know. They line up a tenant, sign a lease, and only then find out the association is at its rental cap, there's a waitlist, or the board has to approve the tenant first. Meanwhile they're carrying the mortgage and assessments on an empty unit. Also potentially signing a lease with a tenant with terms they cannot uphold as the Landlord.
At GC Realty we manage 1,500 units across Chicagoland, and a lot of them are condos and townhomes inside associations with their own leasing rules. Some let you rent with a registration form and a move in fee. Others cap rentals, run a waitlist, and approve every tenant. In this article I'll walk through where your right to rent comes from, how caps and waitlists work, what a board can and can't require, and what to check before you move out and list your unit.
This Is a Newer Problem
Up until the early 2000s, most associations had few leasing restrictions. Caps were rare, and renting out your unit usually did not even require providing management a copy of the leasee. There were flat out fewer hoops to jump through.
In the early 2000’s HOAs just got tired of dealing with Landlords and the additional layers that brought to the operation of the HOA. Every time a landlord rented to a tenant who brought problems into the building, whether it was noise, damage to common areas, extra occupants, or ignored rules, the other owners felt it. Associations eventually realized they could protect the people who live there by amending their declarations to limit rentals and set standards for tenants. The goal was to make sure one unit with a problem tenant doesn't take away the quiet enjoyment of everyone else in the building.
Associations also learned that rented units take more of their time. Chasing absentee owners, tracking who is living where, and fielding complaints about tenants is real work for a volunteer board and its management company. So they started charging move-in fees, requiring lease copies and registration forms, and asking for more information about who is occupying the unit. Part of that covers the cost of their time. The rest is transparency, so the board knows what a landlord is doing on the property.
Know Your Number Before You Deal With the Board
Before you fill out a single association form, find out what your condo should actually rent for. Our team will put together a free rental analysis for your Chicago condo using current leasing data from the buildings and neighborhoods we lease in every week. You'll get a realistic rent range, how long it should take to lease, and a heads up on anything in your association's leasing rules that could slow you down.
Key Takeaways
Your right to rent a Chicago condo comes from the association's declaration, not from the board's rules.
If the declaration allows leasing, a board generally can't impose a rental cap by rule alone. It takes a declaration amendment voted on by the owners.
Rental caps and waitlists are legal when adopted the right way, and in some buildings the wait can run a long time.
A board that approves tenants still has to follow fair housing law, including source of income protections.
Read the declaration, any amendments, and the current rental count before you buy, not after you close.
Where Your Right to Rent Actually Comes From
Every Illinois condo association runs on a stack of documents. At the top is the Illinois Condominium Property Act. Under that is the declaration, which is recorded against the property. Then the bylaws, and at the bottom the rules and regulations the board can adopt on its own.
That order matters. Illinois courts have long allowed associations to restrict or even ban leasing by amending the declaration, going back to Apple II Condominium Association v. Worth Bank and Trust in 1995. An amendment requires a vote of the owners, usually a supermajority set by the declaration itself.
What a board can't do is skip that vote. In Stobe v. 842 to 848 West Bradley Place Condominium Association, a Chicago case decided in 2016, the board passed a rule capping leased units. The appellate court threw it out. Because the declaration already gave owners the right to lease, any change to that right had to come through a declaration amendment, not a board rule.
I have sat on HOA boards three times in my life and every time was when I started to hear rumors of putting a cap on rentals. I wont go into it here but caps on rentals or outright banning rentals can be a huge detriment to long term sale prices.
There's an exception worth knowing. A board rule may hold up if the declaration says nothing about leasing, or if it expressly lets the board regulate leasing. So if your board tells you about a cap, ask one question first. Is it in the declaration, or is it a rule? If it's only a rule, it's worth having an attorney look at it before you accept it.
How Rental Caps Work in Practice
Most caps are written as a percentage of units or a fixed number of units that can be leased at one time. Associations adopt them for a few reasons. Lenders look at the ratio of owner occupied units when they decide whether to finance purchases in the building. Owners also worry about wear on common areas and a building that feels more like an apartment complex than a condo.
When you read the leasing section, look for these details.
Grandfather clauses. Many amendments let owners who were already renting when the cap passed keep renting until they sell.
Hardship exceptions. Some declarations allow a temporary lease for a job relocation, military deployment, or an estate that can't sell right away. Typically this will allow for 1 year right to rent and I have seen additional exceptions made.
Minimum lease terms. Twelve months is common. Short term rentals are often banned outright, and Chicago lets associations add their building to the city's prohibited buildings list for short term rentals.
Subletting and roommates. Some declarations limit who can occupy the unit, not just whether it can be leased.
In 2012 I took advantage of getting a Hardship exemption in a Condo Association in Glen Ellyn where my wife had a condo prior to us moving in together. I wanted to rent it for a year or two because we were not able to sell it for what she owed due to the Great Financial Crisis. In 2009 prices dropped dramatically across the area and Glen Ellyn and this Association were no exception. The problem this HOA had was since no rentals were allowed anyone that did not know they could seek a hardship exception either let the bank foreclose or did a fire sale setting crazy low sale comps leaving the rest of us with limited options.
As a side note, I did sell the condo to my wife 5 years earlier, not realizing how much of a problem it was going to become for me.
Waitlists
Once a building hits its cap, the next owner who wants to rent goes on a waitlist. Usually it's first come, first served. When a leased unit sells to an owner occupant or a landlord stops renting, the next name on the list gets the slot.
In a building with a low cap and few sales, that wait can stretch for years. Read the rules on what happens when your turn comes up. Many associations give you a short window to sign a lease before the slot moves to the next owner. Some drop you from the list if you sell or decline the slot.
My advice is simple. If there's any chance you'll want to rent, get on the list the day you close. Get your position confirmed in writing by management, and check in on it every few months.
Board Approval, Registration, and Fees
Even buildings with no cap usually have a leasing process. Expect some combination of a tenant registration form, a lease rider that makes the tenant follow the association's rules, proof of renters insurance, and move in and move out fees with an elevator reservation. Illinois law also requires owners to deliver a copy of the signed lease to the association, no later than the date of occupancy or 10 days after signing, whichever comes first.
That lease rider matters more than most owners think. Illinois law lets an association go after a tenant who breaks the rules, up to and including an eviction case. If your tenant is a problem for the building, it becomes your problem fast.
Where boards get into trouble is screening. A board that approves or rejects tenants is still bound by fair housing law. Illinois protects source of income, so a board can't turn away a tenant because they pay with a Housing Choice Voucher. About 10% of the units we manage are leased to CHA voucher holders, and a condo board doesn't get to opt out of that protection. In Cook County, the Just Housing Amendment also limits how criminal history can be used. If a board's requirements look like they cross those lines, push back in writing.
A good tip here for all Chicago Landlords is to be sure you find out all of these steps, documents, and fees prior to going live on Zillow or the MLS so you can disclose the expectations to the future tenant. In many cases we see Landlords pass some or all of the fees involved in the process onto the future resident.
Chicago Landlord Law Still Applies to Your Unit
Getting through the association is only half of it. In most cases a rented condo in Chicago falls under the Residential Landlord and Tenant Ordinance, so the city's rules on security deposits, required disclosures, and notices apply on top of whatever the association requires. The association's rules don't replace the RLTO, and the RLTO doesn't override the declaration. You have to follow both. If you're outside the city but still in Cook County, the county's RTLO likely applies instead. We break down the differences in our RLTO vs RTLO article.
My Checklist Before You Buy or List a Condo Rental
Read the leasing section of the declaration and every recorded amendment. Today’s investors are lucky to have AI read them for you. Back in my day….
Ask management in writing for the cap, the current number of leased units, and the waitlist length.
Find out whether any leasing restriction was adopted by amendment or only by board rule.
Get the full leasing packet, including the registration form, lease rider, and fee schedule.
Build the move fees and the extra time for board approval into your vacancy assumptions.
Run the rent against your assessments and taxes before you close, not after.
Disclose in the marketing anything that will affect the tenant in the process.
FAQ
Can my condo board stop me from renting my unit? Only if the declaration allows it. A valid leasing restriction or rental cap generally has to be in the declaration or a recorded amendment approved by the owners.
Can the association change the rental rules after I buy? Yes, if the owners vote to amend the declaration. Many amendments grandfather owners who are already renting, so check the exact language.
Can the board reject my tenant? Some declarations give the board approval rights, but the board still has to follow fair housing law, including source of income protections.
Do I have to give the association a copy of my lease? Yes. Illinois law requires it by the date of occupancy or 10 days after signing, whichever comes first.
Can I rent my Chicago condo on Airbnb? Many declarations ban short term rentals, and Chicago lets associations put their building on the city's prohibited buildings list.
Don't Go At This Alone!
Condo leasing in Chicago has two sets of rules running at once, the association's and the city's. Our team at GC Realty deals with both every week across ~1,500 units in Chicagoland. We read the declaration, handle the board paperwork, screen tenants the right way, and keep you compliant with the RLTO from lease signing to move out.
What gets me up in the morning and keeps me going for 12 hours a day is the ability to add value for local area investors in Chicago and beyond. Those who connect with me often hear me say that our goal is to bring value to everyone we come in contact with. In return, they will one day hire us for tenant placement or property management, refer us to someone they know, or leave a review about our services. We would love all three, but we are happy whenever we get the opportunity to help.
Related resources
