Check Governing Documents Before Banning Daycare

Check Governing Documents Before Banning Daycare

Before taking drastic steps to shut down a daycare in the community or condominium building you manage, check whether the business actually is allowed in the governing documents. An Illinois association learned the hard way that if the covenants permit a certain type of business to operate, it can’t be shut down.

In that case, the association discovered that two homeowners in the community were operating daycare businesses in their homes. The association asked a trial court for a declaration that this was in violation of the restrictive covenant, and an injunction—that is, an order from the court to shut down the businesses.

The association asserted that “to promote the development of single-family homes, the declaration states that ‘all Lots shall be used only for Single Family Dwellings.’” However, the trial court pointed out that there were exceptions for so-called “personal businesses.” Personal businesses included a home-based business, but only if the business is conducted within the residence, the business is not prohibited by ordinances, and no motor vehicle with business markings is parked overnight.

The association argued that a separate “commercial business” section overrode the personal business section. It barred “commercial activities of any kind whatsoever to be conducted in any building or any portion of the property except as provided in [the personal business section].” It stated that “no such activities shall require or allow customers or the public to frequent the Property for such home occupation.”

The homeowners each asked the trial court for a judgment in their favor without a trial. The trial court ruled in favor of the homeowners. The association appealed. An Illinois appeals court upheld the trial court’s decision.

The appeals court determined that the plain language of both sections of the covenant intended to allow home-based businesses. The commercial business section of the covenant didn’t apply to these homeowners. That’s because some of the children attending the daycares walked from their homes, and the few additional cars entering and leaving the subdivision due to the daycare businesses did not constitute “frequent commercial traffic” in violation of the covenant. The activity surrounding the daycares wouldn’t thwart the intent of a single-family subdivision, said the appeals court. “A homeowner’s association has the authority to interpret the covenants, conditions, and restrictions in its declaration—however, it is not free to ignore the express language of the declaration,” the appeals court warned [Neufairfield Homeowners Ass’n v. Wagner, November 2015].