After heated debate for months in the City Council, Chicago finally adopted its short-term and shared housing rental ordinance on June 22, 2016. The final version of the ordinance affords condominium and homeowners associations protections against the growing number of short-term vacation rentals, through platforms such as AirBnB and HomeStay, that have association Boards concerned about security, damage, and the quality of living when vacation rentals are prevalent in the building.

Under the Ordinance, not only must the rental platforms be licensed, but the City intends to track short-term rental units, nuisance complaints, and Ordinance violators by requiring that any unit owner or tenant who wishes to rent a unit on a temporary basis register with the City. In order to do so, the unit owner or tenant must sign an attestation that his or her association has no prohibitions in its governing documents on vacation or transient rentals. Therefore, if your covenants do not already contain a ban on short-term vacation rentals and the community favors such a prohibition, the Board should consider an amendment to the Declaration that memorializes the ban.

If the Association’s governing documents contain a ban on short-term rentals, an association can, at the discretion of the Board, request that the City add the building to the “Prohibited Building” list. This list is intended to create a blanket prohibition against all short-term rentals in the building that the City can rely on to reject short-term rental registration applicants who attempt to circumvent the attestation process. In order to have your building included on the Prohibited Building list, the City of Chicago will require an Association representative to complete an affidavit which, after having been notarized, must be submitted to the City of Chicago Department of Business Affairs and Consumer Protection. That Department intends to implement the list in late July or early August.

Once the Prohibited Building list is operational, the City will reject registration applicants who attempt to list units and require that the listing platforms remove units located in a Prohibited Building. Further, the listing platforms will be required to refer to the Prohibited Building list regularly and proactively remove any listings in order to continue to operate in the city.

In addition, the City intends to maintain a list of Prohibited Units that, for one reason or another, do not qualify for short-term rentals. That list will also be used to prohibit certain units from registering with the City and appearing on the listing platforms, such as AirBnB. Of note, one basis for banning a unit from short-term rental registration is numerous nuisance complaints. The Ordinance mandates that the listing platforms establish a 24-hour hotline that can be reached by dialing the City’s 311 non-emergency line to report any violations or quality-of-life issues that may be related to short-term rental. Therefore, if your association plans to allow a limited number of short-term rentals, the hotline affords protection from obnoxious vacationers who are not invested in the quiet enjoyment of your community.

Finally, unit owners selling or legitimately leasing their units long-term within “Prohibited Buildings” must disclose that status to the buyer or tenant and receive a written receipt of acknowledgment. Therefore, an Association can continue to allow leasing under the provisions of its governing documents, but still add the building to the Prohibited Building list to ban short-term or vacation rentals.

It is also important to note that most associations already have the ability to enforce a “no vacation rental” policy since many governing documents already contain a prohibition of short-term vacation rentals. The Ordinance will now act as an additional mechanism by which an association can enforce an existing ban on vacation rentals.

Although the City has established numerous protections to condominium and homeowner associations, your Board will need to take action to reap the benefits of what the Ordinance provides. If you would like Kovitz Shifrin Nesbit to review your governing documents to determine whether they already provide for a ban on short-term rentals, so that your Association may be added to the Prohibited Building list, our office would be happy to do so.

Please contact Kovitz Shifrin Nesbit today at 855-537-0500 or visit www.ksnlaw.com.