HOA rules for home business are becoming more important as more people look for ways to earn income from home. Some homeowners want to run a full-fledged business, while others just want the option to work remotely without issues. The question is whether an HOA can restrict or prohibit these activities.
The Rise of Home Based Businesses in Associations
The popularity of home businesses has increased over the years. According to the U.S. Small Business Administration, more than half of all small businesses in the United States are home-based. This trend grew even more during the COVID-19 pandemic when millions of workers turned to remote work or started side businesses at home.
This shift has blurred the line between residential and commercial activity inside communities. Many older HOA and condo CC&Rs were written before remote work and home-based businesses became widespread. Because of this, their restrictions may not address today’s realities.
The benefits of a home business are clear. It provides convenience by eliminating commutes, reducing expenses, and allowing people to balance work and family life more effectively. Many homeowners see this as a practical way to increase income and flexibility.
But HOA home business arrangements can be complicated. Living in an HOA means following community rules, and those rules may not always allow business activity.
Are HOA Rules for Home Business Legal?
Can HOA prevent home business? The answer is yes, associations generally have the power to regulate or restrict businesses operating within the community.
Associations exist to protect property values and preserve the residential character of neighborhoods. A full-fledged business with customers, deliveries, and employees is very different from someone simply using their home office to work on a computer.
In Illinois, the Illinois Common Interest Community Association Act (765 ILCS 160) and the Illinois Condominium Property Act (765 ILCS 605) give associations broad authority to create and enforce rules. If the governing documents include a restriction on business activity, homeowners must follow it. Courts have consistently upheld these types of restrictions when they are reasonable and included in the governing documents.
Commercial Use of House in an HOA
Illinois courts have clarified how “commercial use” language in CC&Rs applies to home businesses. In Bd. of Managers of Village Square I Condo. Ass’n v. Amalgamated Trust & Savings Bank (1986), the Illinois Court of Appeals ruled that operating a babysitting business from a condo unit was in violation of the commercial use restriction.
The court supported the association’s request for an injunction. It showed that boards may take legal action when owners operate businesses in violation of their governing documents.
On the other hand, in Neufairfield Homeowners Ass’n v. Wagner (2015), the Court of Appeals allowed a small daycare business to continue because the HOA’s declaration specifically permitted personal businesses, provided they did not result in the public “frequenting” the property.
The court decided that seven or eight cars coming and going each day did not rise to the level of persistent commercial activity. These cases highlight how much the exact wording of governing documents matters when deciding if a home business is permitted.
Can You Run a Business Out of Your Home in an HOA?
The answer depends on both state laws and the HOA’s governing documents. State laws in Illinois give associations the power to restrict activities that impact the residential nature of the community. Governing documents typically include restrictions on commercial activity.
That means homeowners can’t automatically assume that running a business from their home is allowed. While online-based businesses that require no customer visits may be overlooked, businesses that bring traffic or cause disturbances are more likely to be restricted. Owners must check the governing documents before starting any business activity.
It is also important to consider zoning ordinances. Some HOA or condo CC&Rs only prohibit illegal activity, which means local zoning laws become the deciding factor.
In Chicago, for example, Municipal Code 4-6-270 requires home-based businesses carry a license and lists specific prohibited activities. These include auto repair, kennels, catering, medical services, and barber shops.
The code also limits how much of a dwelling a person can use for business, how many clients may visit in a day, and whether non-resident employees can work inside the home. This means that even if an HOA’s CC&Rs are silent on home businesses, city rules may still restrict them.
Can You Run a Home Business in Condo?
Condo associations face similar questions about business activity. In Illinois, the Condominium Property Act does not specifically ban or permit home businesses. Instead, it gives condo associations the authority to adopt rules, including rules restricting home businesses. Unit owners should refer to their governing documents for guidance.
HOA Allow Home Business: Common Restrictions
Rules can vary from one community to another. While some communities ban home businesses entirely, others allow them with conditions. Here are the most common HOA restrictions on home business.
1. Business Types
Some HOAs may allow certain businesses while prohibiting others. For example, an HOA may allow one resident to run an online consulting business but not a salon. Associations typically restrict businesses that could impact neighbors or increase liability.
2. Traffic and Parking Restrictions
An HOA may prohibit businesses that create extra traffic or parking problems. Deliveries, clients, and employees coming and going can affect the community. These traffic issues are one of the biggest concerns for associations when enforcing HOA rules for home business.
3. Signage Rules
Associations usually prohibit advertising signs in front yards or on windows. This keeps the neighborhood looking residential instead of commercial. Signage restrictions are common in communities with strict architectural controls.
4. Noise Limits
Noise restrictions apply to home businesses just like they apply to regular residents. An HOA can enforce rules that limit noise during certain hours. These rules fall under the HOA rules for home business.
5. Prohibited Use of Common Areas
Associations often ban the use of common areas for business purposes. That means residents can’t use the clubhouse, pool, or shared parking lot to operate their business. These areas are for the enjoyment of all residents, not for commercial activity.
6. Licensing Requirements
Associations may require proof of proper business licensing before allowing a resident to operate. This ensures that businesses follow local government regulations.
Additionally, licensing requirements are an extra safeguard for the association and its members. Associations often tie this into their HOA rules for home business to keep everything compliant.
7. Insurance Requirements
Some HOAs require homeowners to obtain additional insurance coverage if they run a business. This protects the association from liability if a customer or delivery driver suffers from an injury on the property.
The Final Word
Clearly, HOA rules for home business are designed to protect the community while balancing the needs of individual homeowners. Associations typically have the authority to regulate commercial activity, but it ultimately depends on state laws and the governing documents.
Hillcrest offers HOA management services to communities in Chicago. Call us today at 630-627-3303 or contact us online to request a proposal!
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