First, your board needs to take a close look at your association’s governing documents to determine whether or not they contain covenants that address using homes for business purposes. If your governing documents include a covenant that expressly states that no businesses are allowed; a business that requires a license most likely is prohibited. However, matters are complicated if the covenant merely expresses that homes are to be used for "residential purposes only." Courts often will deem such businesses such as child care and group homes to comport with residential uses. At this point, it will be necessary for the board to examine the situation closely in order to balance the lifestyle of its members with an association’s pressing need to enforce covenants.

However, before your board needs to worry about making an enforcement decision, it should ascertain whether or not the proposed business complies with local zoning ordinances. If the resident’s use falls outside the allowable zoning use, the municipality will be obligated to take steps to end the violation. Also, some types of businesses - such as day cares – require a license from the state. For example, if the resident who takes in her neighbors’ children for a small fee does not have a day care license, your board should not allow the unlicensed business to continue running from the home. Not doing so may affect your association’s liability insurance coverage.

What if your governing documents prohibit any type of business use? Restrictions on the business use of homes in the community serve to protect the residential character of a community’s neighborhood. However, chances are that these restrictions were devised before the internet and fax machine, which have made telecommuting a viable choice for many. It most likely seems unduly restrictive now to prevent an association member to work from home at least occasionally. First, it will prove difficult for the board to insure member compliance with this broad dictate. Additionally, unduly restrictive covenants may hamper the ability of your residents to sell their units. Your board may want to consider amending this covenant because it no longer reflects the reality of today’s workplaces and lifestyles. With the proper precautions, a provision can be constructed to allow reasonable business use of an owner’s unit without opening the flood gate to all types of commercial enterprises.

What type of covenant should your board consider? Work with your association attorney to create a specifically worded provision that identifies what type of business activities will not be permitted within your community. The covenant should be sure to ban any business that would detrimentally affect the rest of the community. Consider addressing such issues as increased traffic, signs advertising businesses, and businesses that have on-site employees that are not family members. For example, prohibit any business that would generate noise or odors that would disturb the neighbors. Prohibit any businesses that would require the use of commercial vehicles that are banned by a separate covenant. Allow for rule making by the board to fill in the gaps in the covenants and to allow for changes in terminology, etc.  Included in the rule, there should be a provision that requires residents obtain advance permission from the board before embarking on their ventures to avoid any misunderstandings of what type of activity is permissible. The board then can make a decision within the ambits of the rule, considering the external impact that the proposed business would have on the community. In this manner, your covenant (and rule) will safeguard the residential nature of your community while allowing your resident’s flexibility in how they earn their living.