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Author: Mark Ainely | Partner GC Realty & Development & Co-Host Straight Up Chicago Investor Podcast
Illinois House Bill 3564 passed the Illinois House this week with a 64 to 40 vote and is now heading to Governor Pritzker's desk. A companion trailer bill, HB 5234, also passed the House and moves the effective date to January 1, 2027. Every landlord, property manager, and real estate investor operating in Illinois needs to read this.
The bill was introduced in the House by Rep. Nabeela Syed of Illinois House District 51, which covers the north suburban communities of Palatine, Lake Zurich, Hawthorn Woods, Deer Park, and nearby areas. It was carried in the Senate by Sen. Mike Simmons of Illinois Senate District 7, which represents the Chicago north side neighborhoods of Rogers Park, Edgewater, Andersonville, Uptown, and Lincoln Square.
Part of what I do as the founder of GC Realty and Development and as co-host of the Straight Up Chicago Investor Podcast is cut through the noise when new legislation hits. There is a lot of noise around this one. So let me break it down plainly: what the bill actually says, who it affects, and what you should be doing about it right now.
What Is HB 3564?
HB 3564, formally known as the Rental Fee Transparency and Limitations Act, amends the Illinois Landlord and Tenant Act. The bill went through nine amendments over more than a year before landing in its current form. Assuming the governor signs both HB 3564 and the trailer bill HB 5234, the law takes effect January 1, 2027.
The bill does three main things:
It bans a defined list of fees that landlords can no longer charge tenants.
It requires that all remaining non-optional fees be disclosed on the first page of any lease agreement.
It caps late fees and imposes new timing rules on when they can be charged.
There is a small landlord exemption: the law does not apply to owner-occupied buildings with six units or fewer. Everything else is covered.
The Junk Fee Ban: What You Can No Longer Charge
This is the heart of the bill. Starting January 1, 2027, landlords may not require tenants to pay any of the following:
Application and background check fees above $50. Landlords may charge up to $50. Fees beyond $50 are only permitted if the actual third-party cost exceeds that threshold, the landlord pays upfront, and provides receipts within 14 days. If the landlord misses the 14-day window, the fee is waived entirely. In addition, if a prospective tenant brings their own background check conducted within the past 30 days, the landlord must accept it and cannot charge a fee.
Fees ancillary to the application. No additional processing or administrative fees tacked on at the time of application.
Lease modification or renewal fees. If a tenant renews or modifies their lease, that transaction cannot carry a fee.
Eviction notice or filing fees charged before a court order. Landlords can still recover court costs and filing fees through the eviction action itself, but they cannot bill tenants directly before the court grants an eviction order.
After-hours maintenance request fees. Calling in a maintenance request in the evening or on a weekend cannot trigger an extra charge to the tenant.
Fees for contacting the building owner or property manager. Any contact related to maintenance, lease questions, or tenancy-related matters must be free to the tenant.
Travel fees for maintenance work. If a technician has to come out, the tenant cannot be billed for that travel.
Maintenance hotline fees. If you run a maintenance hotline or after-hours answering service, you cannot pass that cost to tenants.
Routine maintenance and upkeep fees. Standard wear-and-tear maintenance of the unit cannot be charged to the tenant.
Pest abatement fees where the tenant did not contribute to the infestation. If bugs or rodents were there before the tenant, the landlord absorbs that cost.
In-person walkthrough fees at move-in or move-out. Conducting a condition inspection is part of doing business. It cannot be a billable event.
The law also includes an important anti-evasion clause: landlords may not rename a fee to avoid application of this law. If it looks like a duck and quacks like a duck, it is a duck.
Fee Transparency: The First-Page Rule
Beyond what cannot be charged, the law also governs how permitted fees must be disclosed.
Every non-optional fee, whether it is a one-time charge or a recurring fee, must appear explicitly on the first page of the lease agreement. If a fee is not on the first page, the tenant is not legally obligated to pay it. That is a significant exposure for landlords who bury fees in addenda or in the back half of a 30-page lease.
Rental listings must also disclose all non-optional fees in a clear and conspicuous manner. If you are advertising a unit on Zillow, Apartments.com, or your own website, your listed price needs to reflect what tenants will actually be paying. Utilities must also be disclosed, whether they are included in rent or not.
Late Fee Caps: New Limits and a New Clock
The bill also restructures how and when late fees can be assessed. Under the new rules:
A late fee cannot be charged until rent is at least five days past due. If rent is due on the first, you cannot assess a late fee until the sixth.
The fee is capped at $10 for the first $1,000 in rent, and 5% of any amount above $1,000. On a $1,500 rent, for example, the maximum late fee would be $10 plus 5% of $500, which equals $35.
Late fees cannot be classified as rent for purposes of eviction proceedings under Article IX of the Code of Civil Procedure. This is a meaningful legal distinction in the eviction process.
Impact on Residents
For tenants, this law is straightforward: it puts more money in their pockets and more information in front of them before they sign.
Renters who are already in financially tight situations will no longer face surprise fees at application or move-in. The cap on background check fees removes a common barrier to even getting an application reviewed. The transparency requirement means a tenant can look at the first page of their lease and see exactly what they are agreeing to pay. There is no fine print escape hatch anymore.
The portability of background checks is also notable. A prospective tenant who has been shopping around can pay for one background check and use it at multiple properties within 30 days. That is a real cost savings for renters applying to multiple units in a competitive market.
Where residents should be cautious: if this law drives some landlords to raise base rents to offset eliminated fee revenue, the net effect for tenants may be mixed. Eliminating fees does not automatically make housing cheaper if the underlying economics push costs back into the monthly rate.
Impact on Property Managers
This is where I want to speak directly to my peers in property management, because this bill requires immediate operational review.
Lease templates need to be rebuilt. Every fee your company currently charges needs to be audited against this list. Anything on the banned list has to come out. Anything remaining has to land on page one. If your leases are structured so fees appear in addenda or riders, that structure is no longer legally defensible.
Listing systems need to be updated. If your property management software or your listing templates do not currently surface all non-optional fees alongside rent, that workflow needs to change before January 1, 2027. Listings that show a rent price without disclosing fees are going to create compliance problems.
Application processes need to be restructured. The background check fee workflow is more complex than it used to be. You need a system that can track actual third-party costs, issue receipts within 14 days, and handle situations where applicants provide their own reports. If your current process does not support this, fix it now.
Revenue models need to be re-examined. Property management companies that relied on ancillary fee revenue from items like after-hours call fees, renewal fees, or maintenance-related charges will need to make up that ground elsewhere or have a frank conversation with owners about adjusted management structures. The fees are not going away as costs. They are going away as line items you can pass to tenants.
Civil liability is real. The enforcement mechanism in this bill is a private right of action. Any person alleging a violation can bring a civil lawsuit seeking injunctive relief, monetary damages, and attorney's fees. That is the kind of exposure that attracts litigation. Compliance is not optional.
Impact on Investors
For real estate investors, HB 3564 does not directly regulate rents. But it does affect the economics of rental properties in ways that matter to your underwriting and your due diligence.
Fee income needs to be written out of pro formas. If you are buying a property and the seller's income statement includes revenue from maintenance fees, renewal fees, application fees above $50, or any of the other banned categories, that income disappears on July 1. Do not buy based on numbers that will not exist by the time you close.
Smaller owner-occupied properties are exempt. The law does not apply to owner-occupied buildings with six units or fewer. If you are evaluating an investment in that category, the fee landscape does not change. If you are looking at larger buildings, it does.
Management costs may go up. If your property manager was subsidizing operational costs through tenant-facing fees, they may need to adjust their management fee structure. Factor that into your cash-on-cash return analysis.
Rent pricing strategy may shift. Some operators who previously set a lower base rent but supplemented with fees will likely move toward pricing those costs into base rent. That changes how comparable properties look in the market and may affect what tenants are willing to pay.
The investors who are best positioned under this law are the ones who were already running clean operations: transparent pricing, no junk fees, no surprise charges. If that is already your model, your competitive position actually improves as others are forced to catch up.
What to Do Before January 1, 2027
The effective date gives everyone a window to get ready. Here is what needs to happen:
Pull every lease template you use and audit every fee against the banned list.
Redesign your first page to capture all permitted, non-optional fees in one clear place.
Review your rental listings to make sure fees and utilities are disclosed accurately.
Update your application process to comply with the $50 cap and the receipt-within-14-days rule for higher background check costs.
Train your leasing and management staff on the new rules before they are in front of prospects and applicants.
Talk to your attorney. Civil liability attaches to violations, and the specifics of your operation matter.
If you are not sure where to start, start with your leases. That is where the most exposure lives.
Final Thought
HB 3564 is now a near certainty to become law. The legislature has done its job. The governor will make the final call, but the direction is clear.
My take: some of what is in this bill is reasonable and long overdue. Fee transparency is good for everyone. Applicants should know what they are agreeing to pay. Listings should show real costs. Those are things professional operators should have been doing already.
Other provisions, particularly the blanket bans on fees that offset real operational costs, will create challenges for property managers and owners who have to absorb those expenses elsewhere. The industry will adapt, but the adjustment period is real.
What does not change: the fundamentals of running a good operation. Provide a good product. Be transparent. Charge fair prices. Maintain your properties. Tenants and owners are not the enemy of each other. Good policy and good operators can coexist.
Watch the Straight Up Chicago Investor Podcast for more coverage as this bill moves to the governor's desk and beyond. If you have questions about how this affects your specific operation or portfolio in Chicagoland, reach out to our team at GC Realty.
Mark Ainley
Founder, Managing Broker, Director of Sales and Marketing
GC Realty and Development | gcrealtyinc.com
Co-Host, Straight Up Chicago Investor Podcast
