Peggy:

The only stipulation in the by-laws states that the Association acts on behalf of all unit owners, however, with only 12 units in the building, the HOA allowed any unit owner to rent out their unit. Now with my sale, I cannot close because of the tight restrictions on unit owner/occupancy. I had questioned this before with the HOA and they stated that their is nothing in the by-laws that state an owner cant rent. Out of the 12 units in my building only 3 are owner occupied, one is owned but not lived in and one is a foreclosure that was rehabed and went on the market yester. No one in our building is aware that under the guidelines of Fannie Mae and Freddie Mac that no-one can sell right now. I have a real estate attorney, and the situation looks bleak, the HOA who has no interest in my building because they only run it and reside in the building next to mine, which they run effectively, basically say oh well.

We have basically become a rental building, however, I believe that the owners wether they live on premise or not should have a say in allowing the units to be rented from this point on, The Condominium Act of Illinois has had many ammendments, and I am currently searching for a solution so I don't lose my condo to a low bid cash sale. Our by-laws are 30+ years old.

As I am somewhat unclear of your specific question, if the HOA has a policy withing their ByLaws and Condo Declaration that no renters are allowed, but in fact allowed 5 other owners to rent but did not allow you to rent your condo, this is a problem. On the other hand, if the HOA had such a policy and the owner rented without permission, only for the HOA to find out about it, it is within the law for the HOA to fine and basically do what they will until the tenant is removed.
Maybe you might restate your question, but if the rules and regulations state one thing, and they allow some to do and other not, this is a matter for an attorney and not real estate agent.
My experience has unfortunately seen the side of owners renting when they didnt have permission, and subsequent had to pay major fines for the entire year the tenant was in occupancy.
Would be happy to answer if you can provide more details.