Selling a House with Renters in Illinois: What Landlords Need to Know
Selling a property with existing tenants in Illinois requires careful navigation of state-specific landlord-tenant laws that protect renters' rights. Illinois landlords must honor existing lease agreements when selling, provide proper notice for showings, and understand that leases generally transfer to new owners upon sale.
Failure to follow Illinois tenant protection laws during a property sale can result in legal complications, delayed closings, and potential lawsuits from tenants. Always consult with a real estate attorney familiar with Illinois landlord-tenant law before listing a tenant-occupied property.
Key Considerations
Scenarios
Decisions
Scenarios
Decisions
Scenarios
Decisions
Relevant Documents
Assignment of Leases
A legal document that transfers the landlord's rights and obligations under existing lease agreements to the new property owner, ensuring continuity of the tenancy terms.
Cash for Keys Agreement
A document that formalizes an arrangement where the property owner offers financial incentive to tenants to vacate the property voluntarily before the sale or closing date.
Early Lease Termination Agreement
If the seller and tenants mutually agree to end the lease early before the sale, this document outlines the terms of that agreement, including any compensation or notice periods.
Estoppel Certificate
A document signed by tenants confirming the terms of their lease, current rent amount, security deposit held, and that the landlord is not in default. This provides assurance to potential buyers about the status of existing tenancies.
Notice to Tenants of Intent to Sell
A formal written notice informing tenants of the property owner's intention to sell the property. This document helps establish clear communication and may be required by law in many jurisdictions.
Property Disclosure Statement
A document where the seller discloses known material defects and other important information about the property, including the presence of tenants and the terms of their occupancy.
Real Estate Purchase Agreement
The contract between seller and buyer that should specifically address the existence of tenants, the status of their leases, and how those leases will be handled during and after the sale.
Rent Roll
A document that lists all rental units, current tenants, lease terms, monthly rent amounts, security deposits, and payment histories. This provides potential buyers with a clear picture of the property's rental income.
Security Deposit Transfer Agreement
A document that formalizes the transfer of tenant security deposits from the seller to the buyer, including accounting for all deposits and accrued interest where applicable.
Relevant Laws
Illinois Forcible Entry and Detainer Act (735 ILCS 5/9)
This law governs the eviction process in Illinois. When selling a property with tenants, the new owner must honor existing lease agreements. If you want to remove tenants with a valid lease, you generally must wait until the lease expires unless the lease contains an early termination clause specifically for property sales.
Illinois Security Deposit Return Act (765 ILCS 710)
When selling a rental property, the seller must either transfer all security deposits to the new owner or return them to the tenants. The new owner becomes liable for the security deposits, and the law requires proper notification to tenants about the transfer of their deposits.
Illinois Residential Landlord and Tenant Act (765 ILCS 705)
This law outlines the rights and responsibilities of landlords and tenants in Illinois. When selling a property, the seller must disclose the existence of tenants to potential buyers, and tenants must be properly notified about the change in ownership.
Illinois Real Estate License Act (225 ILCS 454)
This law regulates real estate transactions in Illinois. When selling tenant-occupied property, proper disclosures must be made to potential buyers about the existing tenancy, including lease terms, rental amounts, and security deposits held.
Chicago Residential Landlord and Tenant Ordinance (Municipal Code Ch. 5-12)
For properties in Chicago, this ordinance provides additional tenant protections beyond state law. It includes specific requirements for property transfers, including mandatory disclosures to tenants when ownership changes hands and restrictions on evictions during property sales.
Regional Variances
Chicago Metropolitan Area
Chicago has some of the strongest tenant protections in Illinois. The Chicago Residential Landlord and Tenant Ordinance (RLTO) provides additional rights beyond state law. When selling a tenant-occupied property, landlords must provide notice of sale to tenants within 7 days of listing. If a new owner intends to not renew leases, tenants are entitled to relocation assistance of $10,600 for most units or $12,800 for affordable units. Month-to-month tenants must receive 60-120 days' notice depending on length of tenancy.
Evanston has its own Residential Landlord-Tenant Ordinance that provides additional protections. Landlords selling property must disclose the sale to tenants, and new owners must honor existing leases. Evanston also requires a minimum 90-day notice for non-renewal of month-to-month tenancies when the reason is sale of property.
Oak Park has a local ordinance requiring landlords to provide at least 120 days' notice to tenants when selling a property if the new owner intends to occupy the unit. The village also requires that security deposits transfer with the property sale and that tenants receive written notice of the new owner's information.
Central Illinois
Champaign has a Tenant Union that provides additional resources for tenants in properties being sold. While it follows state law regarding lease obligations, the city has specific requirements for property transfers including prompt notification of tenants and transfer of security deposits.
Urbana has a Tenant's Rights Ordinance that provides additional protections during property sales. Landlords must notify tenants of a sale within 10 days of closing, and the new owner must honor existing leases. The city also has a tenant relocation program that may apply in certain circumstances when properties are sold.
Southern Illinois
Carbondale, home to Southern Illinois University, has specific ordinances addressing rental properties. When selling tenant-occupied properties, landlords must provide written notice to tenants within 15 days of the sale. The city also requires inspection of rental properties upon change of ownership, which can affect the timeline for property transfers.
Quad Cities Region
Rock Island follows state law regarding tenant rights during property sales but has additional inspection requirements for rental properties changing ownership. New owners must register with the city's rental property program within 30 days of purchase and schedule required inspections.
Moline has a Crime Free Housing Program that affects property sales involving rental units. New owners must attend landlord training within 60 days of purchase and must honor existing leases. The city also requires disclosure to tenants when a property is listed for sale.
Suggested Compliance Checklist
Review Existing Lease Agreements
1 days after startingCarefully review all current lease agreements to understand tenant rights, lease terms, and expiration dates. In Illinois, lease agreements survive property transfers, meaning the new owner must honor existing leases. Pay special attention to any clauses regarding property sale, right of first refusal, or early termination options.
Prepare Notice to Tenants of Intent to Sell
7 days after startingWhile Illinois law doesn't specifically require notifying tenants of your intent to sell, providing written notice is a professional courtesy and helps maintain good relations. This notice should inform tenants of your plans to sell, reassure them their lease rights will be preserved, and explain the showing process. For month-to-month tenants, consider whether you'll provide the standard 30-day notice to terminate their tenancy before listing.
Complete Illinois Property Disclosure Statement
14 days after startingIllinois law (765 ILCS 77/35) requires sellers to complete a Residential Real Property Disclosure Report. This form discloses known material defects in the property. You must provide this to prospective buyers before they make a written offer. Failure to provide this disclosure can give buyers the right to terminate the contract.
Coordinate Property Showings in Compliance with Tenant Rights
21 days after startingIn Illinois, landlords must provide reasonable notice (typically 24-48 hours) before entering a rental unit, including for showings. Work with tenants to establish a showing schedule that minimizes disruption to their lives while facilitating your sale. Document all communications about showings to demonstrate compliance with tenant rights.
Request Estoppel Certificates from Tenants
30 days after startingAn estoppel certificate confirms the terms of the lease, current rent amount, security deposit held, and that the tenant has no claims against the landlord. While not required by Illinois law, these certificates protect both the seller and buyer by documenting the current status of each tenancy. Request these from each tenant once you have a serious buyer.
Prepare a Comprehensive Rent Roll
35 days after startingCreate a detailed rent roll documenting all current tenants, their lease terms, monthly rent amounts, security deposits held, and any outstanding issues. This document will be essential for the buyer's due diligence and for calculating prorations at closing.
Negotiate Real Estate Purchase Agreement with Tenant Provisions
45 days after startingWhen drafting the purchase agreement, include specific provisions addressing the transfer of tenant leases, security deposits, and any prorations of rent. Illinois law requires security deposits to transfer to the new owner, and the agreement should clearly state this obligation. Consider whether to include contingencies related to tenant estoppel certificates or other tenant-related matters.
Consider Options for Vacant Possession (If Desired)
50 days after startingIf you or your buyer prefer vacant possession, evaluate legal options. For month-to-month tenants, provide proper notice (30 days in Illinois). For fixed-term leases, you may need to negotiate an Early Lease Termination Agreement or Cash for Keys Agreement. Remember that in Illinois, you cannot force tenants to leave before their lease ends simply because you're selling.
Draft Early Lease Termination Agreement (If Applicable)
55 days after startingIf tenants agree to terminate their lease early, document this agreement in writing. The agreement should specify the move-out date, any financial incentives offered, the condition the property must be left in, and release of future obligations. This is only valid if both parties voluntarily agree to the terms.
Prepare Cash for Keys Agreement (If Applicable)
60 days after startingA Cash for Keys agreement offers financial incentive for tenants to vacate before their lease ends. In Illinois, this must be entirely voluntary. The agreement should clearly state the amount offered, move-out date, property condition requirements, and release of claims. This can be a practical solution when a buyer requires vacant possession.
Prepare Security Deposit Transfer Agreement
65 days after startingIllinois law (765 ILCS 715/1) requires landlords to transfer security deposits to the new owner. The seller remains liable to tenants if this doesn't occur. Document the transfer of all security deposits, including amounts, tenant names, and acknowledgment by the buyer of their responsibility to maintain these funds in accordance with Illinois law.
Draft Assignment of Leases
70 days after startingPrepare a formal assignment of all leases to the new owner. This document transfers all landlord rights and obligations under existing leases to the buyer. In Illinois, this assignment should be executed at closing and should reference all current leases by tenant name and lease date.
Notify Tenants of New Ownership
75 days after startingAfter closing, provide written notice to all tenants informing them of the new ownership, including the new owner's name, contact information, and instructions for future rent payments. While not specifically required by Illinois statute, this communication is essential for a smooth transition and helps the new owner avoid potential disputes.
Transfer Security Deposits and Provide Accounting
80 days after startingAt closing, transfer all security deposits to the new owner and provide a detailed accounting of these funds. Under Illinois law (765 ILCS 715/1), failure to transfer these deposits can result in the seller being liable for their return, even after the property is sold. Document this transfer carefully.
| Task | Description | Document | Days after starting |
|---|---|---|---|
| Review Existing Lease Agreements | Carefully review all current lease agreements to understand tenant rights, lease terms, and expiration dates. In Illinois, lease agreements survive property transfers, meaning the new owner must honor existing leases. Pay special attention to any clauses regarding property sale, right of first refusal, or early termination options. | - | 1 |
| Prepare Notice to Tenants of Intent to Sell | While Illinois law doesn't specifically require notifying tenants of your intent to sell, providing written notice is a professional courtesy and helps maintain good relations. This notice should inform tenants of your plans to sell, reassure them their lease rights will be preserved, and explain the showing process. For month-to-month tenants, consider whether you'll provide the standard 30-day notice to terminate their tenancy before listing. | Notice to Tenants of Intent to Sell | 7 |
| Complete Illinois Property Disclosure Statement | Illinois law (765 ILCS 77/35) requires sellers to complete a Residential Real Property Disclosure Report. This form discloses known material defects in the property. You must provide this to prospective buyers before they make a written offer. Failure to provide this disclosure can give buyers the right to terminate the contract. | Property Disclosure Statement | 14 |
| Coordinate Property Showings in Compliance with Tenant Rights | In Illinois, landlords must provide reasonable notice (typically 24-48 hours) before entering a rental unit, including for showings. Work with tenants to establish a showing schedule that minimizes disruption to their lives while facilitating your sale. Document all communications about showings to demonstrate compliance with tenant rights. | - | 21 |
| Request Estoppel Certificates from Tenants | An estoppel certificate confirms the terms of the lease, current rent amount, security deposit held, and that the tenant has no claims against the landlord. While not required by Illinois law, these certificates protect both the seller and buyer by documenting the current status of each tenancy. Request these from each tenant once you have a serious buyer. | Estoppel Certificate | 30 |
| Prepare a Comprehensive Rent Roll | Create a detailed rent roll documenting all current tenants, their lease terms, monthly rent amounts, security deposits held, and any outstanding issues. This document will be essential for the buyer's due diligence and for calculating prorations at closing. | Rent Roll | 35 |
| Negotiate Real Estate Purchase Agreement with Tenant Provisions | When drafting the purchase agreement, include specific provisions addressing the transfer of tenant leases, security deposits, and any prorations of rent. Illinois law requires security deposits to transfer to the new owner, and the agreement should clearly state this obligation. Consider whether to include contingencies related to tenant estoppel certificates or other tenant-related matters. | Real Estate Purchase Agreement | 45 |
| Consider Options for Vacant Possession (If Desired) | If you or your buyer prefer vacant possession, evaluate legal options. For month-to-month tenants, provide proper notice (30 days in Illinois). For fixed-term leases, you may need to negotiate an Early Lease Termination Agreement or Cash for Keys Agreement. Remember that in Illinois, you cannot force tenants to leave before their lease ends simply because you're selling. | - | 50 |
| Draft Early Lease Termination Agreement (If Applicable) | If tenants agree to terminate their lease early, document this agreement in writing. The agreement should specify the move-out date, any financial incentives offered, the condition the property must be left in, and release of future obligations. This is only valid if both parties voluntarily agree to the terms. | Early Lease Termination Agreement | 55 |
| Prepare Cash for Keys Agreement (If Applicable) | A Cash for Keys agreement offers financial incentive for tenants to vacate before their lease ends. In Illinois, this must be entirely voluntary. The agreement should clearly state the amount offered, move-out date, property condition requirements, and release of claims. This can be a practical solution when a buyer requires vacant possession. | Cash for Keys Agreement | 60 |
| Prepare Security Deposit Transfer Agreement | Illinois law (765 ILCS 715/1) requires landlords to transfer security deposits to the new owner. The seller remains liable to tenants if this doesn't occur. Document the transfer of all security deposits, including amounts, tenant names, and acknowledgment by the buyer of their responsibility to maintain these funds in accordance with Illinois law. | Security Deposit Transfer Agreement | 65 |
| Draft Assignment of Leases | Prepare a formal assignment of all leases to the new owner. This document transfers all landlord rights and obligations under existing leases to the buyer. In Illinois, this assignment should be executed at closing and should reference all current leases by tenant name and lease date. | Assignment of Leases | 70 |
| Notify Tenants of New Ownership | After closing, provide written notice to all tenants informing them of the new ownership, including the new owner's name, contact information, and instructions for future rent payments. While not specifically required by Illinois statute, this communication is essential for a smooth transition and helps the new owner avoid potential disputes. | - | 75 |
| Transfer Security Deposits and Provide Accounting | At closing, transfer all security deposits to the new owner and provide a detailed accounting of these funds. Under Illinois law (765 ILCS 715/1), failure to transfer these deposits can result in the seller being liable for their return, even after the property is sold. Document this transfer carefully. | - | 80 |
Frequently Asked Questions
Yes, you can sell your property in Illinois even with tenants living in it. However, the sale does not automatically terminate existing lease agreements. The new owner generally must honor the terms of any valid, existing lease until it expires. Month-to-month tenancies can be terminated with proper notice.
While Illinois law doesn't specifically require you to inform tenants about your intention to sell, it's considered best practice to provide written notice. This helps maintain good relations and cooperation during the showing process. You should review your lease agreement as it may contain specific provisions about property sales.
In Illinois, landlords must provide tenants with at least 24 hours' notice before entering the property for showings. This notice should be reasonable and made in good faith. Some local ordinances, particularly in Chicago, may have additional requirements, so check your local regulations as well.
In Illinois, you cannot evict tenants simply because you want to sell the property. If tenants have a valid lease, they have the right to remain until the lease expires, even if ownership changes. For month-to-month tenancies, you can terminate with proper notice (30 days in most of Illinois, 60 days in Chicago for tenancies over 6 months).
When selling a property with tenants in Illinois, you must either transfer the security deposits to the new owner and notify tenants in writing of this transfer, or return the deposits to the tenants. The Illinois Security Deposit Return Act requires detailed accounting of any deductions and timely return of deposits (within 30-45 days depending on circumstances).
The new owner cannot raise the rent during the term of an existing fixed-term lease. Once the lease expires, they can propose new terms including rent increases, subject to any local rent control ordinances. For month-to-month tenancies, rent can be increased with proper notice (typically 30 days in Illinois, though Chicago may require more notice).
Yes, Chicago has its own Residential Landlord and Tenant Ordinance (RLTO) with additional protections for tenants. These include longer notice periods (60 days for tenancies over 6 months), stricter security deposit handling requirements, and potential relocation assistance if the new owner plans to occupy the unit. The RLTO also gives tenants a right of first refusal in certain condominium conversion situations.
Your purchase agreement should clearly address: (1) whether the property is being sold with tenants in place, (2) the status of all security deposits and last month's rent payments, (3) copies of all current leases, (4) disclosure of any pending tenant disputes, and (5) which party will be responsible for providing required notices to tenants. Having these details documented protects both seller and buyer.
Yes, you can negotiate a 'cash for keys' agreement where you offer tenants financial incentive to vacate early. This must be voluntary on the tenant's part - you cannot force or coerce them to accept. Get any agreement in writing, clearly stating the move-out date, amount to be paid, and condition requirements for the property upon vacancy.
When selling a tenant-occupied property in Illinois, you must disclose the existence of all current leases to potential buyers. You should provide copies of all lease agreements, rent payment histories, security deposit amounts, and any pending tenant disputes or maintenance issues. Failure to disclose material facts about tenant situations could potentially lead to legal issues after the sale.