Rental Restriction Pitfall: Hardship Exception

By: Kimberly M. Sutter, Esq.

Associations that adopt rental restrictions as part of the Declaration have provisions that commonly contain language that includes a hardship exception. Most hardship exceptions allow for an owner to approach the board and ask for an exception to the rental prohibition for a specific time period, normally between six and twenty-four months. These hardship exceptions are granted based on the facts presented by the owner and a vote of the board of directors. By nature, these types of exceptions are more subjective in nature than objective. The subjectivity of these decisions was recently challenged by a homeowner on whether it is reasonable to allow exceptions to be granted on an entirely subjective basis.

In a case out of Illinois, Studiger v. Honeytree Townhouse Improvement Ass’n, the court found that it was unreasonable that the Association had not adopted objective criteria for the Board to follow in making the decision of whether to grant a hardship exception. (2014 Ill. App.3d 130821 (Ill.Ct.App. 2014) unpublished). This case is not controlling to Associations in Ohio, but it provides us a tool to use in crafting rental restrictions and the policies that go along with them. Depending on what is required in your governing documents, objective criteria may be set forth in an amendment to the governing documents; or it may be set forth in a policy or rule adopted either by the Association or the Board.

Adopting specific criteria for hardship exceptions removes the subjectivity and gives the owner a guide for what types of hardships will be granted on a regular basis. It makes the application more of a formality in those instances. Giving specific criteria removes the cloud of unreasonableness from the rental restriction further insulating it from attack by owners.

Some considerations the Board might consider adding to their policy may include loss of job, length of ownership, ability to sell property on the open market, reasonableness of attempts to sell property, relocation/purpose of relocation, delinquency history, and/or whether the owner voluntarily chose to leave the Association, and whether the decision was not a necessity.

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