The new law, titled “Keep Chicago Renting,” forces banks that are filing foreclosure on rental properties to offer tenants a rent-controlled lease renewal, or pay a hefty relocation fee to tenants who prefer to move.
The ordinance will have a significant impact on area tenants, as more than 50,000 rental units in the Windy City went into foreclosure over the past three years, sources say.
Foreclosing Lenders Must Protect Existing Tenants
The city council passed the new law because it wants to keep existing tenants in foreclosed buildings. In theory, occupied buildings keep neighborhoods stable and help prevent crime.
But the new rules, set forth in Section 2-25-050 of the Chicago Municipal Code, could be a major headache for owners of foreclosed properties. These owners must now:
- Give notice. New owners of foreclosed properties must post notices about the ownership transition within 21 days of taking over the property. The notice must appear in four languages: English, Spanish, Polish, and Chinese.
- Option to renew. Owners must give tenants the option to renew their leases for 12 months, or extend their current lease. And if the owners try to hike the rent, they can only raise it 2 percent above the tenant’s current payments.
- Relocation payment. If the tenant declines the option to renew, owners of foreclosed properties must pay up to $10,600 per unit for the tenant’s relocation costs.
Owners must also pay $250 to register each new property with the City Commissioner. Failure to follow the new ordinance will result in a $1,000 fine for each day of violation. The ordinance will become effective on September 13, 2013.
New Ordinance a Victory for Tenant Advocates
The new ordinance is a major victory for tenant advocates, who have been fighting against banks for several months to pass sweeping tenant protections.
One activist, Maria Elena Sifuentes, who works with the Albany Park Neighborhood Council captured the mood of her colleagues after the ordinance was passed by telling WBEZ that she was “overwhelmed, excited, and speechless.”
And community leaders are excited keeping more tenants in foreclosed properties. According to sources, crime in Chicago’s abandoned buildings has increased 48 percent over the last 7 years. The new measure could help reduce this problem.