Renting Out an ADU or Coach House in Chicago, Illinois: Ordinance Zones, RLTO Rules, and Leases
Permitting & Zoning Standards
Chicago has specific zoning requirements for accessory dwelling units (ADUs) and coach houses. Landlords must ensure their property falls within an appropriate zone to rent out an ADU or coach house. According to the Chicago Zoning Ordinance, certain zones are designated for ADUs and RLTOs (Residential Limited-Term Occupancy). Landlords should check their property’s zoning classification to determine eligibility.
ADU Ordinance Zones
Chicago has designated certain zones for ADUs, including:
- R1: Residential Districts
- R2: Single-Family Districts
Landlords must ensure their property is located in one of these zones to rent out an ADU. Additionally, the City requires that any ADU be located within 100 feet of an existing building and not exceed the height restrictions set by the zoning ordinance.
Owner-Occupancy Requirements
Under Chicago’s RLTO rules, landlords are generally required to occupy their rental property. However, there are exceptions for 1-to-6 unit landlords who can rent out their properties without occupying them themselves. This is known as an RLTO exemption. Landlords must apply for this exemption through the Chicago Department of Housing and ensure they meet certain requirements, such as maintaining a minimum level of income from the rental property.
Parking Minimums
Chicago requires that any ADU or coach house be equipped with a minimum number of parking spaces. Landlords must adhere to these requirements to avoid fines or other penalties. The specific number of parking spaces required can vary depending on the zoning district and the size of the property.
Lease Structuring, Utility Metering, and Disclosures
When renting out an ADU or coach house in Chicago, landlords must ensure that their lease agreements are properly structured and comply with all relevant laws. Landlords should consider the following when drafting their lease agreements:
Lease Agreement Structure
A well-structured lease agreement should include all necessary provisions, such as the terms of rent, payment schedule, security deposit, and lease duration. Landlords should also include provisions for maintenance responsibilities, repairs, and eviction procedures.
Utility Metering
Landlords must ensure that their rental properties are equipped with separate utility meters for water, electricity, and gas. This allows landlords to charge tenants for their actual usage rather than a flat rate. Landlords should also ensure that all utility meters are properly installed and functioning.
Disclosures
Landlords must provide tenants with certain disclosures before entering into a lease agreement. These disclosures should include information about the property, the landlord’s background, and any potential risks or hazards. Landlords should also provide tenants with a copy of the lease agreement, as well as any applicable tenant rights and responsibilities.
State Landlord-Tenant Act Compliance
Chicago landlords must comply with the Illinois Landlord-Tenant Act (ILTA) to ensure that their rental properties are legal and safe. The ILTA sets forth specific requirements for landlords, including:
Notice Periods
Landlords must provide tenants with proper notice before entering into eviction proceedings or making significant changes to the rental property. The specific notice period required can vary depending on the reason for eviction or the type of change being made.
Deposit Handling
Landlords must handle tenants’ security deposits in accordance with the Illinois Security Deposit Return Act (SDRA). Landlords must provide tenants with a receipt for their deposit and keep it in an interest-bearing account. Landlords must also return tenants’ security deposits within 30 or 45 days, depending on the length of the lease.
Fee Caps
Landlords must adhere to fee caps when charging tenants for repairs or other services. The specific fee cap required can vary depending on the type of service being provided and the length of the lease.
Defensible Record-Keeping & Compliance Checklist
To ensure that your rental property is legal and compliant, landlords must maintain proper record-keeping. The following checklist can help landlords stay on top of their compliance obligations:
- Zoning Compliance: Ensure that your property falls within an appropriate zone to rent out an ADU or coach house.
- RLTO Exemption: If applicable, apply for the RLTO exemption and ensure you meet all requirements.
- Parking Requirements: Ensure that your rental property is equipped with the minimum number of parking spaces required.
- Lease Agreement: Draft a well-structured lease agreement that includes all necessary provisions and complies with all relevant laws.
- Utility Metering: Ensure that your rental properties are equipped with separate utility meters and that all meters are properly installed and functioning.
- Disclosures: Provide tenants with the required disclosures before entering into a lease agreement and provide them with copies of the lease agreement and any applicable tenant rights and responsibilities.
- Notice Periods: Provide tenants with proper notice before entering into eviction proceedings or making significant changes to the rental property.
- Deposit Handling: Handle tenants’ security deposits in accordance with the Illinois Security Deposit Return Act and return deposits within 30 or 45 days.
- Fee Caps: Adhere to fee caps when charging tenants for repairs or other services.
By following these guidelines and maintaining proper record-keeping, landlords can ensure that their rental properties are legal and compliant.