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Illinois: “Keep Chicago Renting Ordinance” Ruled Invalid by Cook County Circuit Judge

Posted By USFN, Tuesday, November 29, 2016
Updated: Tuesday, November 22, 2016

November 29, 2016

by Douglas A. Oliver
Anselmo Lindberg Oliver, LLC – USFN Member (Illinois)

A Cook County Circuit Court recently ruled the “Keep Chicago Renting Ordinance” (frequently referred to as KCRO) to be invalid. The court found the ordinance to violate Illinois’ state-wide legislative ban on local rent control laws.

In 2013 the Chicago City Council enacted the KCRO to enhance the rights of tenants living in foreclosed rental properties. The ordinance requires those acquiring title to residential rental property through deed-in-lieu of foreclosure, consent foreclosure, or foreclosure sale to: pay a one-time relocation assistance fee of $10,600 to a qualified tenant unless the owner offers such tenant the option to renew or extend the tenant’s current rental agreement. [Chicago Municipal Code § 5-15-050(a)(1).]

Critically, the ordinance further requires that if the owner chooses to renew or extend an existing lease rather than pay the $10,600 relocation fee, the annual rental payment under the resulting lease may not exceed 102 percent of the existing rental payment, nor exceed 102 percent of the previous year’s rent in any subsequent annual renewal. Thus, the ordinance limits rental payment increases to 2 percent per year, regardless of market rents. This rental increase limitation continues in perpetuity or until the property is sold to a third party, post-foreclosure. [Chicago Municipal Code § 5-15-050(a)(1).]

When an owner fails to meet its obligations under the ordinance to timely offer either a relocation fee payment of $10,600 or a renewal or extension of the lease for no more than 102 percent of the previous rent, the owner is subject to a fine and is also liable to the tenant for $21,200 (double the $10,600 fee) plus attorney fees and court costs.

On November 8, 2016, Cook County Circuit Judge Mitchell held in a written ruling that the KCRO violates a state-wide legislative ban on rent control laws and is therefore invalid. In its opinion, the court noted that the KCRO limits the amount of rent that can be charged to a tenant covered by its terms, regardless of market rental rates. This, he observed, ran afoul of the Illinois Rent Control Preemption Act of 1997.

In 1997 the Illinois Legislature enacted the Illinois Rent Control Preemption Act as a state-wide ban on rent control laws. The statute withdrew from home-rule local governments (such as the City of Chicago) any authority to regulate or control rents. Its language specifically prohibits any “ordinance or resolution that would have the effect of controlling the amount of rent charged for leasing private residential or commercial property.” [50 ILCS 825/5.]

The court opined that the Illinois Rent Control Preemption Act prohibited any rent control, and the limitation of rental increases to 102 percent under the KCRO was clearly a control on rental rates. Further, the circuit court held that the rent control provision found within the KCRO was not severable from the rest of the ordinance since the ordinance, absent the rental limitation, could not serve its intended purpose of forcing a choice between offering cheap rent or paying the $10,600 relocation fee.

Currently, Judge Mitchell’s ruling holding the KCRO to be invalid is part of a circuit court order; it has no precedential authority. At this time, it would be inadvisable to ignore the KCRO or adopt a lax approach to compliance as the ruling will most likely be appealed. However, this ruling will provide leverage in resolving questionable claims that are brought in an effort to exploit the KCRO to extract unwarranted concessions.

Ultimately, there is reason to anticipate a successful outcome on appeal, as Judge Mitchell’s ruling is based upon a strongly-worded, clear statutory mandate.

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