The U.S. Court of Appeals for the Seventh Circuit on July 22, 2026, affirmed the dismissal of a constitutional challenge to a Chicago ordinance that forces buyers of foreclosed rental properties to pay departing tenants a $10,600 relocation fee. The unanimous panel held that the requirement is not an unconstitutional taking, leaving the Keep Chicago Renting Ordinance in force.
The dispute arose under a 2021 version of the ordinance, which the city adopted to protect residents' welfare and to blunt the effects of foreclosures on neighborhoods. The measure requires new owners of rental buildings acquired through foreclosure to negotiate in good faith for a new lease lasting at least 12 months with existing tenants. If a tenant does not sign a new lease, for any reason, the owner must pay that tenant the $10,600 relocation assistance fee. The ordinance does not apply to owners who bought their buildings before it took effect.
BBLI Edison, LLC, a Delaware limited liability company, took control of a building at 5200 North Sheridan Road through a sheriff's deed dated February 9, 2024, following a foreclosure action its predecessors filed in September 2022. More than 220 tenants lived in the building when BBLI took over. After BBLI notified them of their rights, at least five tenants declined new leases and requested the relocation fee. BBLI sued the city under 42 U.S.C. Section 1983, arguing the ordinance violated the Takings Clause, and asked the U.S. District Court for the Northern District of Illinois to block its enforcement. Judge Mary M. Rowland dismissed the complaint, finding no constitutional violation, and BBLI declined an opportunity to amend before appealing.
Writing for the court, Judge Scudder rejected BBLI's argument that the fee is a per se physical taking. The central question in physical-takings cases, he explained, is whether the government has physically taken property for itself or someone else. Drawing on Supreme Court precedent, the panel concluded that Chicago's ordinance instead regulates the economic relationship between landlords and tenants, a category the Supreme Court has repeatedly held is not a per se taking. That a regulation transfers wealth from a landlord to a tenant does not convert it into a physical invasion, the court noted, pointing to rent control as the classic example. The panel described the ordinance as operating like an indirect form of rent control, because landlords know they must offer lease terms worth more than $10,600 to keep tenants from leaving.
The court acknowledged that BBLI's position had force. Under the Supreme Court's decision in Koontz v. St. Johns River Water Management District, a demand for money tied to a specific parcel of real property can trigger a per se takings analysis. But Judge Scudder declined to read Koontz that expansively, distinguishing it as a land-use permitting case involving conditions imposed on a single development. Chicago's ordinance, by contrast, attaches no conditions to a benefit and applies to an entire class of owners: those who acquire residential buildings out of foreclosure. The panel said it recognized the trend in recent Supreme Court takings decisions but was bound to follow the specific line of precedent governing landlord-tenant regulation. The court also noted its conclusion matched the Ninth Circuit's reasoning in Ballinger v. City of Oakland, which upheld a similar relocation fee.
BBLI also argued the ordinance was a regulatory taking that overburdened its use of the property. Applying the balancing test from Penn Central Transportation Co. v. City of New York, the panel found all three factors favored the city. BBLI's complaint said little about the ordinance's economic impact and never alleged that the measure made operating the building economically infeasible, even though the district court offered a chance to amend. Because BBLI bought the building well after the ordinance took effect, the court said, it could not claim the law interfered with reasonable investment-backed expectations. And the ordinance's regulation of the landlord-tenant relationship fell within the broad power state and local governments hold over that relationship.
Finally, the court rejected BBLI's characterization of the fee as an unconstitutional condition, or exaction. That doctrine, Judge Scudder wrote, normally governs the permitting process and was a mismatch here because Chicago is not withholding permission for some activity, but directly requiring a payment when a tenant declines a new lease. Even applying that test, the panel found the city prevailed, because it has an interest in keeping residents housed and BBLI made no effort to show the fee was disproportionate to that interest.
The panel, which also included Judges St. Eve and Jackson-Akiwumi, stressed that it passed no judgment on the wisdom or utility of the ordinance. Given its reading of current Takings Clause precedent, the court concluded, BBLI could not carry its burden, and it affirmed the dismissal.