RESEARCH Business Government
CONDOMINIUMS
Courts rarely consider implications of condo association policies

Mark Reutter, Business Editor
(217) 333-0568; mreutter@uiuc.edu

5/1/02

CHAMPAIGN, Ill. — The rapid increase in condominium housing around the country raises questions about the prevailing law that gives condominium associations wide latitude in controlling the behavior of its members.

"Condominiums exist as an odd hybrid – private property of a sort, governed by private agreements made legitimate only by enabling statutes and court decisions not firmly grounded in the law of property, the law of contract or any other particular body of law," David E. Grassmick wrote in the current issue of the University of Illinois at Urbana-Champaign Law Review.

The state of Florida, for example, permits condo associations virtually limitless authority to place restrictions on condo leasing in the name of "controlling the character of the community."

Examining the case law in other states, Grassmick concluded that few courts have considered the public policy implications of allowing the owners' associations to regulate and control their membership through rule-making.

The hands-off approach of the courts has the effect of giving the developers who build condominiums – and invariably write the rules that govern the associations – a tool to dodge the provisions of the Fair Housing Act.

"The most basic type of discrimination the Fair Housing Act and the 1988 amendments sought to prohibit was a simple refusal to rent," noted Grassmick, a third year Illinois law student and editor at the law journal. While a landlord can refuse to rent an apartment to someone who cannot afford the rent, he cannot refuse to rent to someone considered in some way incompatible with other residents of the building or complex.

But, Grassmick noted, the "character of the community" argument is exactly what condo associations use to justify their restrictions. "The conflict has been portrayed as one of individual property rights versus the needs of the community," while the real dispute may involve rules "designed not to regulate the color of one’s draperies, but the color of one's skin or the size of one’s family."

The issue has taken on added significance, he continued, because rental housing is being torn down or converted to condos in "gentrifying" urban areas, forcing many minority and poor residents to leave the community or try to find condo accommodations.

Some experts predict that rental housing will continue to shrink, and that condos will eventually hold a monopoly on housing within low price ranges.

Condos are a relatively new phenomenon. The first U.S. condos were established in Puerto Rico in the 1950s, but it was not until 1961 that Congress authorized the Federal Housing Administration to insure condominium mortgages.

By 1969, every state had enacted laws permitting condominiums under pressure from real estate interests that found that selling individual units was more profitable than renting them.