2027 Pending and Proposed Changes to Chicago Rental Laws: What Multifamily Owners Should Know
The State of Illinois recently passed a broad ban on ‘junk fees’ related to apartment rentals while mandating additional landlord disclosure. These laws will take effect on January 1, 2027 state wide, including in the city of Chicago. The new year is only three months away, so as a landlord or apartment manager, it’s important to understand these changes and implement the new requirements quickly.
Key Changes in the Law Include:
- First-Page Disclosure – All mandatory one-time and recurring fees must be listed on the first page of the lease. Tenants will not legally be required to pay any fee omitted from the first page of the lease or the rental listing.
- Application Fee Cap – Screening and background check fees are capped at $50 unless third-party costs are higher, documented, and disclosed by the landlord.
- Reusable Reports – Landlords will be required to accept a tenant-provided background check completed within the last 30 days.
- Banned Fees – Landlords will no longer able to charge for a variety of fees deemed ‘junk fees’ including: modifying or renewing a lease, the receipt of an eviction notice, for routine maintenance and upkeep, for after-hours maintenance requests, for pest abatement and removal that is not the fault of the tenant, or for contacting a building owner or property manager.
- Exemption for Owner Occupied Building of 6-Units or Fewer – Owners of owner-occupied buildings with 6 units or fewer will be exempt from the laws above.
Proposed Changes to Chicago’s Residential Tenant and Landlord Ordinance
Separately, the city of Chicago is negotiating two competing proposals to overhaul Chicago’s Residential Tenant and Landlord Ordinance (the ‘RLTO’). One is the PRO act, sponsored by Mayor Brandon Johnson; and the other is the FAIR act, sponsored by Aldermen Gilbert Villegas.
The most recent revision of the RLTO occurred in 2024. That legislation mandated longer notice periods for rent increases and non-renewals of tenancy, a minimum of 60 days notice in all cases and 120 days notice for tenants that have been living in an apartment for over three years. The proposed changes for 2026 are much more significant.
The PRO and FAIR act are both currently scheduled for a final vote at city council on October 14th. It is an election year and most alderman want to pass something in favor of their constituents. It is expected that some form of proposal will be approved which will include a limitation on fees that a landlord may charge, new disclosure rules, and a city-wide building registry administered by a new city department.
Expected Changes Across the PRO and FAIR Act Proposals
Expected changes across both proposals, the PRO and FAIR act, include:
Creation of a Citywide Rental Registry
The bill would create a new Bureau of Rental Housing Services. The PRO act proposes that this new bureau be administered by the Department of Housing while the competing FAIR act proposes that it be run by the Department of Buildings. Under the PRO act, all buildings would be required to pay an annual registration fee of $20 per unit for buildings with 1-4 units, $40 per unit for buildings with 5-49 units, and $60 per unit for buildings with 50 more units. This fee is estimated to raise an additional $22 million in annual income for the city of Chicago, offset by the increased staffing of the new bureau.
Ownership Transparency
The registration would also include ownership information for all owners of greater than a 20% interest in the real estate. This information would not be available to the public but solely for internal use by the city. In addition, registration would disclose the property current rent roll and top line income, unit mix, and occupancy. It would also likely serve as a tool for the Cook County Assessor to ensure a more equitable valuation of assets.
An Exclusion for Owner Occupied Buildings of 6-units or Fewer
Owners of owner-occupied assets with less than 6 units would be exempt from the registration fees. They would still be required to register their building annually (and confirm their owner occupancy status), but would not be charged an annual fee.
More Stringent Notice Requirements for Non-Renewal
The PRO act currently proposes tighter notice standards for non-renewal, akin to an eviction notice – certified mailer, process server, or in-person delivery with an affidavit. In the past, an e-mail notice was typically deemed sufficient for both non-renewal and rental increases.
Security Deposit Reform
The PRO act currently proposes a limitation on security deposits to one month of rent maximum. In a small compromise, there is no longer a requirement that the proceeds be deposited in an interest-bearing account. Landlords will only be allowed to charge either a move-in fee or a security deposit and not allowed to charge for both.
Limitation on Move-In Fees
All fees will need to be connected to actual costs expended by the landlord. This includes move-in fees and it’s unclear what is considered acceptable documentation of costs related to a move-in fee.
Limitation on Other Fees
Pet fees will be limited to either a monthly rent cost or increased security deposit, but not both. Application fees will be governed by the recently passed State of Illinois limitation to a maximum of a $50 fee at application or actual third-party documented and disclosed costs.
Provisions No Longer Included in Either Proposal
It’s important to note that negotiations over these two acts are fluid. Discussions have been ongoing since March and a few of the more expansive changes to the RLTO were rejected at previous city council meetings.
The following are no longer included in either proposal:
Just Cause
The State of Illinois has had a ban on rent control since 1997. Earlier drafts of the PRO act included a Just Cause provision that landlords could not terminate an existing lease without just cause, or through no fault of the tenant. This, combined with other provisions, would likely have been challenged in court as rent control.
Relocation Fees in the Event of Unconscionable Rent Increases
An earlier proposal included provisions for relocation assistance paid to tenants of up to $10,000 in the event of non-renewal or unconscionable rent increases. What constitutes an unconscionable rent increase was never defined and again, would likely have been challenged in court.
Navigating Chicago’s Changing Rental Requirements
We fully expect that one of these two proposals or a compromise to be approved. An Essex Three-Twelve broker can help you navigate these rapidly changing legal requirements, ensuring a smooth transaction, and avoiding any costly legal foot faults or delays. Stay abreast of new developments by joining our mailing list or reach out to your local Essex Three-Twelve broker today.
Disclaimer: This article is provided for general informational purposes only and does not constitute legal advice. Property owners should consult qualified legal counsel regarding specific compliance requirements.
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Essex Three-Twelve is a Chicago multifamily brokerage specializing in investment sales of three- to twelve-unit apartment buildings. As an entity of Essex Realty Group, Essex Three-Twelve provides property owners and investors with market insight, valuation expertise, strategic marketing, and transaction advisory services tailored to Chicago’s small multifamily market.