Thursday, October 6, 2011

Condo owners sue city over vacation-rental limit

From ChicagoBusiness.Com 
By: Mary E. Morrison October 06, 2011 

(Crain's) — A group of condominium owners in a River North high-rise is suing the city over controversial new regulations that restrict short-term rentals to vacationers. 

Owners of 27 units at 30 E. Huron St. filed the lawsuit last week, after the city cited some of them for violating the new ordinance, which took effect last year. The ordinance restricts and in some cases prohibits rentals of residences for periods of less than one month. 

“My clients have been utilizing their properties in a legal and appropriate manner, and we believe the city has improperly attempted to prevent them from continuing this use,” said the owners' lawyer, James Griffin, a partner at Chicago-based law firm Schain Burney Banks & Kenny Ltd. 

Vacation rentals became increasingly popular during the economic downturn because they offer homeowners who can't sell their condos a way to generate income and travelers an alternative to staying at a hotel. But the rentals also have drawn criticism from neighbors who don't want transient traffic and from cities that generate sizable revenue from hotel tax dollars. 

According to a Forrester Research survey, 18% of travelers in the first quarter had stayed at a rented home in the previous 12 months, up from 13% in the first quarter of 2009, said Henry Harteveldt, who conducted the research at Forrester and now is co-founder of San Francisco-based Atmosphere Research Group, a marketing and technology research firm that covers the travel industry. 

Other cities, including New York and Paris, have implemented restrictions on vacation rentals, but they're not heavily enforced, Mr. Harteveldt said. “It's routinely ignored because these are individuals who are doing it and it's very hard to police,” he said. 

The owners at 30 E. Huron want a judge to throw out the ordinance, arguing that it violates the state and federal constitutions. 

If it is allowed to stand, the owners will suffer damages of more than $1 million, including lost rental income and loss of property value, according to the complaint, filed last week in Cook County Circuit Court. A spokesman for the city's law department said the city had not yet been served the court complaint. "However, we believe in the ordinance, and that our interpretation of it is rational and constitutional," he said. 

Approximately 50 owners in the 460-condos building are using units as vacation rentals, Mr. Griffin said. They bought their condos based on their ability to rent out the units to short-term tenants, he said. 

Generally, with a change in zoning regulations, the city allows uses that were previously lawful to continue as legal non-conforming uses, according to Mr. Griffin. “That's a fundamental property right that we believe the city is violating through the enactment of the ordinance,” he said. 

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