Federal judge skeptical of landlord challenge to Chicago tenant-protection ordinance

CHICAGO (CN) — Chicago property owner BBLI Edison’s lawsuit against the city floundered in federal court on Friday, with a judge unconvinced by its arguments against a pro-renter law.

“Because BBLI cannot show a likelihood of success on the merits, irreparable harm, or a lack of adequate remedy at law, the balance of harms must weigh heavily in its favor,” U.S. Circuit Judge Mary Rowland, a Donald Trump appointee, wrote in her opinion denying summary judgment to the company. “BBLI cannot meet that burden.”

The Chicago law that BBLI had challenged is known as the “Keep Chicago Renting Ordinance.” It requires owners of newly foreclosed rental properties to either offer their tenants a one-time $10,600 relocation payment or a new 12-month lease based on good-faith rent negotiations.

Chicago’s city council first enacted the law in 2013, amid fallout from the 2008 housing crisis. Initially, it mandated that a tenant’s new rent could not exceed 102% of their old rent.

An Illinois appeals court blocked that version of the law in April 2021, following a legal fight between a Chicago tenant and her new landlords, the Bank of New York Mellon and Florida investment management company Bayview Loan Servicing.

After buying the building she lived in, the tenant said those companies evicted her without offering her a relocation payment or a new lease. A lower court ruled in her favor, but a state appeals court reversed that decision, ruling that the Chicago ordinance violated Illinois’ statewide Rent Control Preemption Act, a 1997 law that bars rent control efforts.

Enacted under former Republican Governor Jim Edgar, the law was backed by real-estate interests. Portions of it are nearly identical to a model law from the American Legislative Exchange Council, a conservative group that writes legislation on behalf of politicians.

“It is evident that the Keep Chicago Renting Ordinance clearly regulates and controls the amount of rent a landlord may charge for residential property — no more than 102% of a qualified tenants’ current annual rent,” then-appellate court judge Joy Cunningham — now an Illinois Supreme Court justice — wrote in 2021. “As such, it clearly runs afoul of the Act, which prohibits such control or regulation by ‘home rule’ bodies such as the City.”

Three months later, the city council revived the ordinance without the 102% cap on rent.

Despite this concession, BBLI argued in a June complaint that the new ordinance was punitive and unfair to new property owners.

“The amount of funds incentivizes renters to leave an empty unit or even sue the lender because the tenant can collect a penalty equal to double the $10,600 relocation fee,” BBLI argued in court filings. “Doing the math, the Ordinance is also punitive in nature. In a building with 200 units, if half of the tenants decide they prefer the funds, the owner pays over one million dollars simply because the tenants decided not to renew.”

BBLI also claimed the amended ordinance amounted to an unconstitutional seizure of private property for public purposes. It brought six claims for due process and constitutional violations against the city, hoping to have the law enjoined.

Rowland rebuked those arguments on Friday, finding little supportive evidence.

“The amended Keep Chicago Renting Ordinance is not a regulatory taking,” Rowland wrote. She said BBLI was making “conclusory allegations that the amended Keep Chicago Renting Ordinance will make it commercially impracticable for it to continue operating the property.”

Rowland similarly waved off the company’s assertion that the ordinance would result in irreparable injury if it wasn’t enjoined. Even if the landlord did suffer some loss from the law, she reasoned, these could all be “adequately redressed through monetary damages.”

While a loss for BBLI, Friday’s ruling was a win Chicago’s tenants’ rights movement. Groups like Lift the Ban Coalition — itself consisting of numerous labor and tenant unions, community groups and political organizations like the Chicago Democratic Socialists of America — have been fighting for years to combat what they see as predatory landlord practices, including through efforts to reverse the state ban on rent control.

BBLI’s case was especially relevant to those efforts because the property it owns is located in Chicago’s diverse and working-class Uptown neighborhood. It’s an epicenter in Chicago for tenant political action, and tenant unions have been active there since at least the 1980s.

BBLI filed its federal complaint against the city just one week after a group of its tenants filed their own state-level class action against the company for violations of the Keep Chicago Renting Ordinance. That suit also named Berkshire Communities, a property management firm.

In their suit, the tenants said that after acquiring the Uptown property in a foreclosure sale this past January, BBLI broached the Keep Chicago Renting Ordinance by failing to negotiate new leases in good faith, refusing to pay required relocation fees, and trying to coerce tenants into waiving their rights. That case has since been moved to federal court, where it’s currently pending.

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