Operating a home-based business has become a reality for many Americans. Appealing factors including little to no startup capital requirements, flexible work schedules, and reduced commuting has given rise to the “side hustle” or freelance economy.


According to a 2017 U.S. Small Business Administration report, there are 29.6 million small businesses with an estimated 50% being home-based. Undoubtedly, some of those home-based businesses will exist within an association, potentially impacting the community.


Here are six issues that should be addressed when discussing home-based businesses within a condominium, homeowners, or townhome association:


1. Association’s Governing Documents


Most Association Declarations explicitly prohibit businesses from operating out of individual Units or on the Association’s premises. It is important to pinpoint this provision within the Association’s Declaration and determine whether it puts a blanket prohibition on home based businesses or simply calls for certain restrictions. The Association may revise their Rules and Regulations in order to implement the restrictions indicated in the Association’s Declaration.


2. Local Municipal Zoning Code and Zoning Requirements


Oftentimes, zoning for certain areas within a municipality will either limit or permit certain businesses to operate out of an otherwise residential area. In the event an Association’s Declaration allows business to be conducted within Units, it is important to determine the pertinent Municipal Codes, Permits, Licenses, and/or Zoning Regulations the business will be required to adhere to.


3. Certain Business Activity


The Association’s Declaration will oftentimes indicate that storing business records, taking phone calls or partaking in communication regarding business matters, and/or keeping a business library are permissible, regardless of prohibitions on business use of the unit.


4. Insurance


Certain businesses carry inherent risks and may compromise the Association’s insurance coverage. If operating a business in permissible pursuant to the Association’s governing documents or municipal code, it is important to check with the Association’s insurance provider on whether such commercial activity is covered.


5. Risks and Nuisances


Certain businesses might lead to an influx of traffic, non-community members coming onto the premise, increase noise and disturbances.


6. Enforcement


It is of the utmost importance for an Association to monitor business activity on the premise as a failure to shut down operation of a commercial activity may give the impression to other members of the community that the Association is willing to “turn a blind eye” to the issue. A failure to enforce the Association’s Declaration and the restrictions of business operations may be considered a breach by the Board of Directors of their fiduciary duty owed to the members of the Association.


If your community has legal concerns regarding home-based businesses, do not hesitate to contact our law firm. Since 1985, KSN has been a legal resource for community associations throughout the Chicagoland area. We have multiple offices including downtown Chicago, Mundelein, and Naperville. Please call 855-537-0500 or visit www.ksnlaw.com.

This article is made available by the lawyer or law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By reading this article you understand that there is no attorney client relationship between you and the article author. This article should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. © 2018 Kovitz Shifrin Nesbit, A Professional Corporation.