New Rules, New Moves: What Chicago Landlords Need to Know About Tenant Purchase Rights

A new Chicago ordinance has introduced a pilot program for landlords within certain districts of the city, expanding the current pilot program already in place in  Woodlawn. If successful, this program may eventually be expanded further. For now, however, the Tenant Opportunity to Purchase Block (606) District Pilot Program (Chapter 5-11) is designed to provide tenants in Block 606 the right to be notified when their rental property is up for sale and, in many cases, to give them a Right of First Refusal (ROFR) to purchase the property. Block 606 is the area bounded by Addison Street, the north branch of the Chicago River, Western Ave, Division Street, California Ave, North Ave, Kedzie Ave, Hirsch St, Kostner Ave, Fullerton Ave, and Pulaski Road. This ordinance primarily aims to reduce tenant displacement, stabilize communities under gentrification pressures, and preserve affordable housing. However, this has direct implications for landlords, and failure to follow this ordinance may result in fines and litigation.

Here’s what landlords in Block 606 need to know!

Right of First Refusal (ROFR) for Tenants

The ROFR is central to this ordinance. It allows tenants to match any legitimate third-party offer to buy their building, giving them the first opportunity to purchase. The ordinance applies to multi-unit residential buildings and works differently depending on the size of the property:

• Buildings with five or more units: Tenants are granted 90 days to form a tenant association and notify the landlord of their intent to purchase.
• Buildings with four or fewer units: The time frame for tenants to organize and respond is shorter—30 days for buildings with 3-4 units and 15 days for 1-2 unit properties.

Notice Requirements for Landlords

Landlords intending to sell a property in Block 606 must provide written notice to both the city’s housing department and tenants well in advance:

• For buildings with five or more units, notice must be given at least 60 days before the property is listed for sale.
• For buildings with four or fewer units, the notice period is 30 days before listing.

This notice must be delivered in person or by certified mail, and landlords are required to post a notice of sale at all public entrances to the rental property. Additionally, the notice must include critical details such as the property’s asking price, a description of the property, and a summary of tenant rights under this new ordinance.

Exemptions from the Ordinance

There are specific transfers where the ordinance does not apply, including:

• Transfers through foreclosure or bankruptcy proceedings.
• Transfers via inheritance or among family members.
• Tax sales or transfers due to eminent domain.
• Transfers without consideration, such as adding property to a revocable trust.

What Happens if Tenants Wish to Purchase?

If tenants (through an association or individually) decide to exercise their ROFR, they must provide a written notice of intent to purchase along with an earnest money deposit. They are then given time to conduct due diligence and secure financing—120 days for larger buildings and 60 days for smaller ones.

If the tenants cannot complete the purchase or choose not to exercise their rights, the landlord is free to sell the property to a third party. However, if there are material changes in the sale terms or the third-party deal falls through, the tenants’ ROFR is reinstated.

Penalties and Enforcement

Failure to comply with the ordinance can lead to penalties ranging from $200 to $1,000 per offense, with each day of violation counting as a separate offense. Tenants also have the right to pursue civil action, seeking remedies that could include treble damages, court costs, and attorney fees.

Final Thoughts

This ordinance marks a significant step toward protecting tenants from displacement in Chicago’s gentrifying neighborhoods. While it places new obligations on landlords, it also ensures transparency and gives tenants an opportunity to remain in their homes under new ownership. Landlords should carefully review the requirements and work closely with legal counsel to ensure compliance. For landlords in the Block (606) District, keeping abreast of these regulations is vital to avoiding potential penalties and ensuring smooth property transactions.

If you have any questions regarding the new rules under this ordinance contact, Kelly Anderson at kanderson@lavellelaw.com, to schedule a consultation!