On June 5, the Chicago City Council passed a new tenants’ rights ordinance by a vote of 49­ – 4 – 1. The final version of the ordinance imposes mandatory relocation fees and rent control requirements on mortgagees and other judicial sale purchasers when a foreclosed property includes residential rental units.

Under the ordinance, any purchaser of residential rental property in a foreclosure sale (including a mortgagee who is the credit bidder) either must pay a $10,600 relocation assistance fee to the tenants in each residential unit of the property (even if their lease has expired) or allow the tenants to remain in the property until they choose to leave, on lease terms limiting their rent increases to two percent annually. The ordinance also requires the purchasers to notify tenants of these options and to register each property with the city for a $250 fee. It also imposes substantial penalties, including fines of $500 to $1,000 per violation per day, and civil damages of up to $21,200 per residential unit. It also grants private rights of actions to tenants for damages and attorneys’ fees against purchasers who violate these provisions.

The IBA strongly opposed the ordinance, which was actively supported by Mayor Emanuel’s office and various housing rights groups. Read the IBA Call to Action opposing the ordinance. The ordinance most likely will be published at the next full City Council meeting on June 26, and it will become effective 90 days after its publication date, in which case the most likely effective date for the ordinance will be September 24.

As with the vacant property ordinance adopted by Chicago two years ago imposing maintenance requirements on mortgagees before they acquire title to a property, we expect this ordinance to be enacted by other local governments throughout Illinois until such time as the ordinance is successfully challenged in the courts.