A foreclosing lender must offer existing Chicago tenants a new 12-month lease or pay them a substantial $10,600 relocation fee – and the tenant can decide which one to choose. This 2021 amendment to the Keep Chicago Renting Ordinance (KCRO), a change that has mostly flown under the radar, marks a major departure from the original 2013 version of the ordinance, which provided owners the choice between offering a lease renewal or paying the relocation fee. The power is now in the hands of tenants.

The Implications

The amended ordinance creates a strong incentive for tenants to reject lease offers and instead opt to collect the $10,600 payment. Once a tenant vacates the unit, the owner must provide the relocation fee within a tight seven-day window. Failure to pay on time can result in a harsh penalty, with owners potentially owing double the relocation amount per tenant plus attorneys’ fees and costs.

Moreover, the language of the amended ordinance is ambiguous and overbroad, leading to confusion about its application. Also troubling to many industry stakeholders is that the stated purpose of the KCRO, which is to prevent vacancies in foreclosed rental buildings, is having the opposite effect. By forcing lenders to offer $10,600 in relocation fees, it incentivizes tenants to break their current lease, take the cash and leave an empty unit.

The problematic provisions of the amended KCRO place a heavy financial and administrative strain on lenders who have already had to take the difficult step of foreclosing on a property. The ordinance's ambiguity and misaligned incentives threaten to undermine the goal of maintaining stability in foreclosed rental buildings.

Takeaways and Next Steps

Many in the industry believe that the currently structured ordinance is detrimental to lenders' interests and counterproductive to the city's goals of attracting investors and maintaining stable communities.