Background
Chicago enacted the Keep Chicago Renting Ordinance in 2021 to protect residents from the effects of foreclosures. The ordinance requires new owners of foreclosed rental properties to negotiate new leases with existing tenants in good faith. If a tenant declines to renew, the owner must pay a relocation assistance fee of ten thousand six hundred dollars. BBLI Edison, LLC acquired a building through foreclosure in 2024 and sued the City of Chicago under Section nineteen eighty-three, alleging the ordinance violated the Takings Clause. The district court dismissed the complaint, and BBLI appealed.
The court’s reasoning
The court analyzed the ordinance under physical takings, regulatory takings, and unconstitutional conditions doctrines. It found that statutes regulating the economic relations of landlords and tenants are not per se takings. The relocation fee was viewed as an indirect form of rent control rather than a physical appropriation. Under the Penn Central test, the court found no significant economic impact, no interference with investment-backed expectations since the ordinance predated the purchase, and broad state power over landlord-tenant relations. The unconstitutional conditions test was deemed inapplicable as the ordinance did not involve a permit process, but even if applied, the fee had a nexus to the city’s interest in housing stability.
What it means going forward
The decision upholds Chicago’s ability to enforce relocation fees for tenants in foreclosed properties without compensating landlords, reinforcing that such regulations of the landlord-tenant relationship do not trigger Fifth Amendment compensation requirements.