Selling a House with Renters in Illinois (2026)
Reviewed by DocDraft Legal Team · Illinois · Last updated 2026-05-18
Illinois sale of a tenant-occupied home runs along two tracks at once: the real-estate transaction itself, and a regulated landlord-tenant sequence operating beneath it. Illinois's deposit-transfer rule on sale is set out. What follows lays out the second track, in the order it actually has to be worked.
Key Considerations
Two state-level overlays sometimes attach to a Illinois sale of a tenant-occupied home. The first is a right of first refusal: Illinois does not codify a statutory right of first refusal for tenants on a landlord sale; common law or municipal ordinance applies. for the full landlord-tenant code. The second is relocation assistance: Illinois does not codify a state-level relocation-assistance obligation in a sale-driven termination; common law or municipal ordinance applies. for the full landlord-tenant code. Neither overlay is universally triggered, but both should be checked at the diligence stage so they are not discovered after the contract is signed.
Deposit handling and notice format are the two procedural layers a Illinois seller closes through. On the deposit: 765 ILCS 710/1.1. On the format of any notice the tenant receives (showing notice or termination notice): in writing. Both are low-cost to do right and high-cost to do wrong.
A Illinois owner who lists a tenant-occupied property has to separate two questions: whether the sale itself ends the tenancy, and what happens to the lease at closing. On the first: Illinois does not codify a sale-driven exception to the notice-to-vacate rule; common law or municipal ordinance applies. for the full landlord-tenant code. On the second: In the event of a sale, lease, transfer or other direct or indirect disposition of residential real property. by a lessor who has received a security deposit or prepaid rent from a lessee, the transferee of such property shall be liable to that lessee for any security deposit, including statutory interest, or prepaid rent which the lessee has paid to the transferor. Both rules cut the same way in most cases: the tenant stays, and the buyer becomes the landlord.
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Relevant Documents
Documents commonly executed for a Illinois sale of a tenant-occupied home: the tenant notice of intent to sell, the showing-notice form (formatted to the state's entry-notice rule), the assignment of leases and security deposits at closing, and the deposit transfer letter to the tenant identifying the buyer as the successor deposit holder. In Illinois, showing notices must conform. Deposit transfer in Illinois is governed by.
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
Send the tenant a written intent-to-sell notice at the start of the process
Before listing days after startingThe notice should disclose that the home is going on the market, describe the showing-notice cadence the seller will follow, and confirm whether the lease will ride into the buyer's hands or whether a separate termination is contemplated.
Comply with the showing-notice rule before each entry
Before listing days after startingin writing. Track the notices in a log so the chain of compliance is documented if the tenant later disputes access.
Settle the termination analysis before listing
During listing days after startingIllinois does not codify a sale-driven exception to the notice-to-vacate rule; common law or municipal ordinance applies. for the full landlord-tenant code. The buyer-pool sees a markedly different deal depending on whether the property comes with an in-place lease, so the answer here drives the marketing strategy.
Resolve the ROFR question at diligence
At closing days after startingIllinois does not codify a statutory right of first refusal for tenants on a landlord sale; common law or municipal ordinance applies. for the full landlord-tenant code. If a purchase preference exists in the lease itself or under a local condominium-conversion or mobile-home-park ordinance, the tenant has to be served the third-party offer and given the contractual or statutory election window.
Check the relocation-assistance overlay for the property's specific jurisdiction
Before closing days after startingIllinois does not codify a state-level relocation-assistance obligation in a sale-driven termination; common law or municipal ordinance applies. for the full landlord-tenant code. The relocation line, when it applies, comes off the seller's net proceeds and should be modeled into the underwriting rather than discovered at the settlement table.
Transfer the security deposit to the buyer at closing (or refund it to the tenant)
Before closing days after starting765 ILCS 710/1.1. Document the transfer in a written deposit transfer letter to the tenant identifying the new holder, the new address, and the amount transferred.
Build a paper record on the deposit
Before closing days after startingThe HUD or closing statement showing the deposit credit, the seller-to-buyer transfer letter, and a copy of the tenant notice should all live in the closing file so the deposit's path is reconstructable if challenged.
Sign and record
Final step days after startingAt a Illinois closing on a tenant-occupied home, the deed transfers ownership, the assignment of leases moves the landlord position to the buyer, the deposit credit appears on the settlement statement, and the tenant-notice letter goes out with a copy retained in the closing file.
| Task | Description | Document | Days after starting |
|---|---|---|---|
| Send the tenant a written intent-to-sell notice at the start of the process | The notice should disclose that the home is going on the market, describe the showing-notice cadence the seller will follow, and confirm whether the lease will ride into the buyer's hands or whether a separate termination is contemplated. | notice-to-tenants-of-intent-to-sell | Before listing |
| Comply with the showing-notice rule before each entry | in writing. Track the notices in a log so the chain of compliance is documented if the tenant later disputes access. | - | Before listing |
| Settle the termination analysis before listing | Illinois does not codify a sale-driven exception to the notice-to-vacate rule; common law or municipal ordinance applies. for the full landlord-tenant code. The buyer-pool sees a markedly different deal depending on whether the property comes with an in-place lease, so the answer here drives the marketing strategy. | - | During listing |
| Resolve the ROFR question at diligence | Illinois does not codify a statutory right of first refusal for tenants on a landlord sale; common law or municipal ordinance applies. for the full landlord-tenant code. If a purchase preference exists in the lease itself or under a local condominium-conversion or mobile-home-park ordinance, the tenant has to be served the third-party offer and given the contractual or statutory election window. | - | At closing |
| Check the relocation-assistance overlay for the property's specific jurisdiction | Illinois does not codify a state-level relocation-assistance obligation in a sale-driven termination; common law or municipal ordinance applies. for the full landlord-tenant code. The relocation line, when it applies, comes off the seller's net proceeds and should be modeled into the underwriting rather than discovered at the settlement table. | - | Before closing |
| Transfer the security deposit to the buyer at closing (or refund it to the tenant) | 765 ILCS 710/1.1. Document the transfer in a written deposit transfer letter to the tenant identifying the new holder, the new address, and the amount transferred. | - | Before closing |
| Build a paper record on the deposit | The HUD or closing statement showing the deposit credit, the seller-to-buyer transfer letter, and a copy of the tenant notice should all live in the closing file so the deposit's path is reconstructable if challenged. | - | Before closing |
| Sign and record | At a Illinois closing on a tenant-occupied home, the deed transfers ownership, the assignment of leases moves the landlord position to the buyer, the deposit credit appears on the settlement statement, and the tenant-notice letter goes out with a copy retained in the closing file. | - | Final step |
Frequently Asked Questions
No, the lease continues. In the event of a sale, lease, transfer or other direct or indirect disposition of residential real property. by a lessor who has received a security deposit or prepaid rent from a lessee, the transferee of such property shall be liable to that lessee for any security deposit, including statutory interest, or prepaid rent which the lessee has paid to the transferor. A Illinois sale of tenant-occupied housing is functionally a substitution of landlord, not a termination of the tenancy.
Yes, you can sell. Illinois law accommodates a sale with a tenant in possession. Illinois does not codify a sale-driven exception to the notice-to-vacate rule; common law or municipal ordinance applies. for the full landlord-tenant code. The tenant has continuing occupancy rights under the lease, and the buyer steps into the seller's landlord role at closing.
At a Illinois closing the security deposit either moves to the buyer (with a written deposit transfer letter to the tenant) or is refunded to the tenant in full. 765 ILCS 710/1.1. The chain of title for the deposit should be documented in the closing file.
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