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A glimmer of hope for owners of tenant occupied foreclosed properties as a Cook County Trial Court found the Keep Chicago Renting Ordinance is preempted by the Illinois Rent Control Preemption Act and ruled in favor of the mortgagee who purchased the property through the Judicial Foreclosure Sale by dismissing a Plaintiff’s Complaint alleging violation of the KCRO. Although this decision is not precedential – meaning it is not yet controlling law – it is significant for any owner of tenant occupied foreclosed property because if upheld by a Court of Appeals, the KCRO would be preempted.
The Protecting Tenants in Foreclosed Rental Property Ordinance (commonly known as the Keep Chicago Renting Ordinance or “KCRO”) contains a rent control provision. Section 5-14-050 of the KCRO seeks to control the amount of rent the owner of a foreclosed rental property can charge a tenant for leasing private property, by limiting the rental increase to no more than 102% of the prior year’s annual rental rate. The provision is coupled with an option to pay a one-time relocation fee of $10,600.00 unless the owner offers the tenant a renewal or extension of the prior lease.
In Carmen Rivera v. The Bank of New York Mellon and Bayveiw Loan Servicing, LLC, Cook County Case No. 16 M1 108289, Defendant successfully moved to dismiss a KCRO action arguing that the City of Chicago’s ordinance violates the Illinois Rent Control Preemption Act because it limits the rental increases. This ruling is persuasive and instructive but is not precedential. The plaintiff could still file a motion to reconsider or an appeal.
Illinois’ constitution makes the City of Chicago a home rule unit of local government. City of Chicago v. Roman, 184 Ill.2d 504 (Ill. S.Ct. 1998). While home rule units have broad powers, the Illinois General Assembly can pre-empt home rule units’ authority by expressly limiting their powers and authority. Palm v. 2800 Lake Shore Drive Condo. Ass'n, 2013 IL 110505, ¶ 31 (Ill. 2013) (home rule units’ powers can be limited by the General Assembly); Illinois Constitution Art. 7 Sec 6(g) (“The General Assembly by a law approved by the vote of three-fifths of the members elected to each house may deny or limit the power to tax and any other power or function of a home rule unit not exercised or performed by the State other than a power or function specified in subsection (l) of this section”).
The Illinois legislature, through the Rent Control Preemption Act, codified as 50 ILCS 825/5 and 50 ILCS 825/10, expressly states that home rule units do not have the power to enact an ordinance that would control rent:
A unit of local government, as defined in Section 1 of Article VII of the Illinois Constitution, shall not enact, maintain, or enforce an ordinance or resolution that would have the effect of controlling the amount of rent charged for leasing private residential or commercial property. (emphasis added).
50 ILCS 825/5. The Rent Control Preemption Act reinforces this restriction in a separate provision expressly forbidding and restricting the Home Rule rights of a local municipality from enacting legislation contrary to the provisions of Section 5:
A home rule unit may not regulate or control the amount of rent charged for leasing private residential or commercial property. This Section is a denial and limitation of home rule powers and functions under subsection (g) of Section 6 of Article VII of the Illinois Constitution.
The Protecting Tenants in Foreclosed Rental Property Ordinance (commonly known as the Keep Chicago Renting Ordinance or “KCRO”) contains a rent control provision. Section 5-14-050 of the KCRO seeks to control the amount of rent the owner of a foreclosed rental property can charge a tenant for leasing private property, by limiting the rental increase to no more than 102% of the prior year’s annual rental rate. The provision is coupled with an option to pay a one-time relocation fee of $10,600.00 unless the owner offers the tenant a renewal or extension of the prior lease.
The Rent Control Preemption Act does not define what actions are attempts to regulate or control rent. Plaintiff argued that there are options within the ordinance that allow a foreclosing landlord to avoid the rental restriction, such as paying the relocation assistance or selling the property. The court opined, that even if a foreclosing landlord has options, the KCRO still caps the renewal rate if the landlord decides to renew the lease. Therefore, the KCRO restricts the rental amount.
Plaintiff made a public policy argument, claiming that because bona fide leases must be at fair market value, there is a low likelihood that the rental restriction would suppress rent below fair market value. The court found the plain language of the Rent Control Preemption Act prohibited any attempt to regulate or control the amount of rent charged.
The Plaintiff in Rivera argued that the rental control provision was severable from the remainder of the Ordinance. The court disagreed. Although there is a severability provision, removing the provision undermines the purpose of the ordinance. Thus, the entire KCRO is preempted by the Illinois Rent Control Preemption Act and the Court dismissed the Plaintiff’s Complaint. This case is a likely candidate for an appeal.
McCalla, Raymer, Pierce LLC continues to remain at the forefront of KCRO litigation and will keep its valued clients advised as the Courts continue to rule on this issue.
For questions, please contact:
Marcos Posada
Partner – Litigation, Eviction and REO
(312)-476-5626
Lee Perres
Managing Partner – Litigation, Eviction and REO
(312)-476-5532
