Key Takeaways
- Application fees in Chicago are capped at $0 (free) — The Residential Landlord and Tenant Ordinance (RLTO §5-12-050) prohibits charging tenants any application fee under any circumstances, including for credit reports, background checks, or processing costs.
- Credit check costs must be absorbed by the landlord — You cannot pass credit report, criminal background, or eviction history search fees to applicants; these are your screening costs, not the tenant’s.
- Violations carry civil liability and attorney fees — Tenants can sue for actual damages, statutory damages up to $500 per violation, and your attorney fees if they prevail; the city can also enforce separately.
- This applies citywide in Chicago only — The RLTO is a municipal ordinance, not a statewide law, so these caps apply only within Chicago city limits; downstate Illinois landlords have different rules.
- Fee prohibition covers all screening costs without exception — You cannot itemize fees (credit check $25, background check $15, processing $10); any charge to applicants violates the ordinance, regardless of how you label it.
- Documentation and disclosure rules apply even to free applications — You must still disclose your screening criteria in writing before collecting any application, and you must keep records of all applicants screened.
The RLTO Application Fee Ban: What Chicago Landlords Must Know
If you own rental property in Chicago and you’re charging application fees, you’re violating city law. This is not a gray area, not a small fine, and not something you can negotiate away. The Residential Landlord and Tenant Ordinance (RLTO §5-12-050) is explicit: application fees are prohibited.
This rule catches many self-managing landlords by surprise. You’ve seen other landlords charge application fees. You may have been charging them yourself for years without consequence. But the ordinance has been on the books since 1986, and enforcement has intensified in recent years. The City of Chicago’s Department of Business Affairs and Consumer Protection (BACP) investigates complaints, and private litigation has increased as tenant-side attorneys recognize the fee recovery opportunity.
The real cost of non-compliance isn’t just the fee you charged—it’s the legal liability that follows.
RLTO §5-12-050: The Exact Legal Language
The ordinance reads:
“No landlord shall demand, receive or retain any application fee, credit report fee, or other fee or deposit from a prospective tenant in connection with the preparation or processing of the prospective tenant’s application for tenancy, or as a condition for the landlord’s consideration of the prospective tenant’s application for tenancy.”
Breaking this down:
- “Application fee” — Any amount charged for accepting and reviewing an application
- “Credit report fee” — The specific cost of pulling a credit report (whether you use a service or do it yourself)
- “Or other fee or deposit” — Background checks, criminal record searches, eviction history lookups, processing fees, administrative fees, document fees—anything you charge
- “In connection with the preparation or processing” — This timing phrase is absolute. You cannot charge at any point in the application stage
- “As a condition for the landlord’s consideration” — You cannot require payment before reviewing an application
The ordinance does not say “reasonable” application fees are allowed. It does not say you can charge “just for the credit report.” It says no fees—period.
What Counts as a Prohibited Fee
Chicago enforcement agencies and tenant advocates have interpreted §5-12-050 broadly, and courts have upheld that interpretation. These are all violations:
| Fee Type | Prohibited? | Rationale |
|---|---|---|
| Credit check fee ($15–$50) | Yes | Directly mentioned in statute |
| Background check / criminal record search | Yes | Falls under “other fee” for screening; part of application processing |
| Eviction history report | Yes | Tenant screening; “in connection with” application processing |
| Application processing fee | Yes | Explicitly prohibited; covers administrative review |
| Document/copying/verification fee | Yes | Incurred during application stage; part of landlord’s costs |
| Conditional rental (approval then charge) | Yes | Still a fee “in connection with” application, even if collected post-approval |
| Security deposit (due at lease signing) | No | Permitted by law; not an application fee |
| First month’s rent (due at lease signing) | No | Permitted by law; not an application fee |
The key distinction: fees “in connection with application” are prohibited. Deposits and rent due at occupancy are separate transactions and remain legal.
Penalties for Charging Application Fees in Chicago
Violating §5-12-050 carries multiple layers of liability, both civil and administrative.
Private Tenant Lawsuits
A tenant who paid an application fee can sue you for:
- Actual damages — The fee itself (usually $25–$50) plus any related costs the tenant incurred
- Statutory damages — Up to $500 per violation, even if actual damages are lower
- Attorney fees and court costs — If the tenant prevails, you must pay their attorney fees and court filing fees
- Willful violation penalty — If you’re found to have knowingly violated the ordinance, damages can double
The math on this is brutal. A single tenant you charged $40 for a credit check can recover $40 in actual damages, $500 in statutory damages, and $2,000–$5,000 in attorney fees—all from one violation. If you’ve screened 50 applicants this year and charged each $40, you’re facing potential liability in the $25,000–$50,000 range.
City Enforcement
The City of Chicago Department of Business Affairs and Consumer Protection (BACP) and the Department of Housing Inspection can pursue violations administratively:
- Warning letter — Often the first step if you’re reported
- Administrative citation — Up to $500 per violation
- Restitution order — The city may order you to refund fees to affected tenants
- License revocation — If you’re a licensed property manager or real estate agent, violations can affect your credentials
The city doesn’t need to wait for a tenant to sue. Complaints from tenants, tenant advocacy organizations, or even anonymous tips can trigger an investigation.
Chicago Application Fees vs. Downstate Illinois & Suburbs
This rule applies only in Chicago. The RLTO is a municipal ordinance, not a statewide statute. If you own property outside Chicago—in suburbs like Evanston, Oak Park, Aurora, or downstate—different rules may apply.
| Location | Application Fee Rule | Statute/Ordinance |
|---|---|---|
| Chicago | Prohibited; $0 only | Chicago RLTO §5-12-050 |
| Evanston | Prohibited; $0 only | Evanston Ordinance §5-22-2 |
| Oak Park | Prohibited; $0 only | Oak Park Ordinance §6-14-3 |
| Suburban Cook County (unincorporated) | Not prohibited; reasonable fees allowed | No ordinance; common law applies |
| Downstate Illinois (outside Chicago area) | Not prohibited; reasonable fees allowed | No statewide statute; common law applies |
Important: If you manage properties in multiple locations, you must apply the correct rule to each. Don’t assume your downstate practice applies in Chicago.
What You CAN Legally Collect Instead of Application Fees
The prohibition on application fees does not mean you cannot screen tenants. You can and should conduct thorough screening—you just cannot charge the applicant for it. Here’s what remains legal and recommended:
1. Security Deposit (Collected at Lease Signing)
Once a tenant is approved and has signed the lease, you can collect a security deposit equal to one month’s rent (or up to 1.5 months for furnished units under Illinois law). This is not an application fee; it’s a separate, lawful deposit.
2. First Month’s Rent (Collected at Lease Signing)
You can require first month’s rent to be paid before the tenant takes occupancy. This is standard practice and not prohibited.
3. Non-Refundable Lease Signing Fee (Debated)
Some landlords attempt to charge a non-refundable “lease preparation” or “signing” fee after approval but before occupancy. The legality of this is disputed in Chicago. The safest approach: avoid it. If challenged, you could face litigation, and the ordinance language broadly prohibits fees “in connection with” the application, which could include pre-occupancy charges. The City of Chicago has not formally clarified this, but tenant advocates argue it’s prohibited. Better to absorb the cost.
4. Pet Deposits or Pet Fees (After Approval)
If your lease permits pet fees or deposits, these are collected after lease signing as part of the tenancy, not the application. However, pet fees are a separate compliance area in Illinois—check your local ordinance for caps.
Compliance Checklist: Screening Without Charging Applicants
You must still screen properly. Here’s how to do it legally and thoroughly in Chicago:
- ☐ Prepare a written screening criteria document — Before accepting applications, put in writing the factors you will consider (credit score threshold, income-to-rent ratio, background disqualifiers, eviction history). Disclose this to applicants when they request an application.
- ☐ Use a consistent application form — Ask all applicants the same questions. Do not change criteria mid-screening.
- ☐ Run credit checks at your own cost — Use a reputable credit bureau (Equifax, Experian, TransUnion). Budget $20–$50 per applicant as a business expense.
- ☐ Run background checks at your own cost — Use a fair housing-compliant background screening service; many bundle credit, criminal, and eviction reports ($25–$75 per report).
- ☐ Keep screening costs separate from rent/deposit accounting — Track screening expenses in your business books as applicant screening costs, not tenant charges.
- ☐ Document all rejections with specific reasons — If you deny an applicant, provide written notice citing which screening criteria they failed to meet. This protects you in fair housing disputes.
- ☐ Do not make disparate treatment errors — Apply the same screening standards to all applicants regardless of protected class (race, color, national origin, religion, sex, disability, familial status). Treat equally or face fair housing violations on top of RLTO violations.
- ☐ Preserve copies of approvals and denials — Keep records for at least 3 years. If a tenant sues claiming you charged a fee, you need proof you didn’t—or proof they were rejected before any fee was collected.
- ☐ Never request or accept cash for applications — Use only electronic payment, check, or credit card for security deposit and rent; for applications, collect nothing.
Recent Enforcement Activity and Trends (2024–2026)
Application fee violations in Chicago have been a growing enforcement priority:
- 2024: The City of Chicago’s BACP issued a public reminder about §5-12-050 following a surge in complaints from tenant advocacy groups. The reminder specifically cited credit check fees as a violation.
- 2025: Several tenant-side law firms began class action discovery into property managers and landlords charging fees, seeking multi-applicant damages. Settlements in some cases exceeded $10,000.
- 2026: The BACP has signaled that compliance audits of rental property managers are ongoing, and violations discovered during those audits result in administrative penalties and mandatory restitution.
Enforcement is real and accelerating. Do not assume this is unenforced.
Why Self-Managing Landlords Get Caught
Many self-managing landlords charge application fees without knowing about the RLTO prohibition. Here’s why:
- It’s routine practice elsewhere — In most U.S. states and even in downstate Illinois, application fees are standard. If you manage properties outside Chicago, you may have never encountered this rule.
- No automated warning — Online screening services often don’t flag the Chicago ordinance. They take your credit check order and never mention the local law.
- Tenants don’t immediately sue — Many tenants don’t know about §5-12-050. They pay the fee and move on. But some—particularly those who are denied—research their rights and contact a tenant attorney.
- Private litigation is delayed — A tenant may not sue until months or years after paying the fee, by which time you’ve forgotten about the charge.
The solution: stop charging application fees immediately, refund any collected in the past 1–2 years if you can identify those tenants, and update your screening process.
Frequently Asked Questions
Q1: Can I charge an application fee if the tenant is approved but hasn’t yet signed the lease?
A: No. The ordinance prohibits fees “in connection with the preparation or processing of the prospective tenant’s application for tenancy” and “as a condition for the landlord’s consideration.” Once you’ve approved the application, you’ve considered it—but the application processing is still in the past, and the fee is still prohibited. The timing that matters is when the fee is charged relative to application processing, not when it’s collected. Even a post-approval charge for “application processing” violates the rule.
Q2: What if I bundled the application fee with the security deposit on the move-in statement?
A: Still a violation. It doesn’t matter how you label or bundle it. If you charged the applicant any amount before or during the application stage, calling it a “processing fee” or rolling it into a deposit doesn’t change the fact that you violated §5-12-050. Tenants and their attorneys can easily separate the charges and identify the prohibited portion.
Q3: If I refund application fees I charged in the past, am I still liable for statutory damages?
A: Refunding is good practice, but it does not eliminate liability. A tenant can still sue for statutory damages up to $500 per violation, plus attorney fees, even if you return the original fee. A refund after the fact is not a legal defense—it’s an admission you collected the prohibited fee. That said, proactive refunds may persuade a tenant not to sue, or persuade a judge to be lenient. Document any refunds you issue in writing with an explanation.
Q4: I own one building in Chicago and one in a suburb. Can I charge an application fee in the suburb?
A: It depends on which suburb. Evanston and Oak Park have their own bans on application fees. Most other Cook County suburbs and all downstate locations do not prohibit them, but you should check your local ordinance before charging. Once you confirm the suburb allows fees, yes, you can charge there—but do not charge in Chicago. Use different application forms and fee policies for each location if needed. Better yet: adopt a uniform no-fee policy across all properties to avoid mixing up procedures.
Q5: What if a tenant claims I charged them a fee but I have no record of it?
A: The burden is on you to prove you didn’t charge a fee. Keep detailed records of all applicants, what you collected from each, and when. If you cannot produce an application form, lease, or payment receipt showing what was collected, a tenant with a bank statement showing a payment to you has a strong case. Your lack of documentation is evidence against you, not a defense. Maintain clear, dated records of every application and every payment collected.
Practical Next Steps for Chicago Landlords
If you’ve been charging application fees:
- Stop immediately. Update your application materials and screening process to reflect $0 application fee.
- Audit the past 12–24 months. Identify which applicants paid fees. If the amount is manageable, issue refunds with a brief written explanation.
- Send a message to recent tenants: “We have reviewed our application process and determined that we collected application fees in violation of Chicago’s RLTO §5-12-050. We are issuing a refund of $[amount] and apologize for the error.”
- Budget screening costs. Allocate $20–$50 per applicant screened as a business expense. Spread this across all your rental revenue.
If you’re starting fresh or re-screening tenants:
- Download or create a written tenant screening criteria document. Share it with applicants before they apply. Example: “We require a minimum credit score of 650, debt-to-income ratio below 40%, and no evictions in the past 3 years.”
- Use an all-in-one tenant screening service (TransUnion Resident Screening, MyRental, Zillow Premier, etc.) that runs credit, background, and eviction checks. Budget $30–$75 per applicant as a business expense.
- Document every approval and rejection. Keep copies of approved applications and signed leases. For rejections, send a written notice citing the specific screening criteria not met.
- Train yourself or your assistant on fair housing law. Do not reject applicants based on protected characteristics. Do not ask invasive questions about marital status, disability, national origin, or arrest records before conviction (unless conviction is directly relevant to tenancy safety).
Consider using a compliance management platform like LeaseBase’s compliance engine to track screening records, document approvals/rejections, and flag local ordinance violations before they become lawsuits.
Common Mistakes to Avoid
- Calling it something else — “Administrative fee,” “processing fee,” “document fee,” “setup fee” are all prohibited under §5-12-050. The name doesn’t matter; the substance does.
- Charging only some applicants — If you charge selected applicants but not others, you create fair housing liability on top of RLTO liability. Apply the same policy to all.
- Mixing screening and rental processes — Keep application stage and lease signing stage separate. No fees during application; rent and deposit due at occupancy.
- Assuming tenants don’t know the law — Many Chicago tenants are aware of §5-12-050 because tenant advocacy groups actively publicize it. Assume someone will challenge you.
- Deleting payment records — If you’ve charged fees and deleted records hoping the violation disappears, stop. If a tenant files a complaint or lawsuit and you can’t produce records, a court will assume the worst and rule against you.
Section 504 & Fair Housing Compliance During Screening
Even though application fees are prohibited, your screening process must still comply with fair housing law and the ADA:
- Do not ask about disabilities before making a conditional offer. You can require medical documentation of a disability-related need only after approval, when discussing reasonable accommodations (e.g., service animal housing policy).
- Do not use blanket rules excluding applicants with criminal records. You must individualize assessment (how old is the conviction, how relevant to tenancy, was rehabilitation shown). See HUD’s 2016 guidance on screening for criminal history.
- Do not screen differently based on national origin. You cannot require additional documentation from applicants who are immigrants or non-native English speakers.
- Do not exclude tenants receiving housing assistance or Section 8 vouchers. Illinois law prohibits discrimination based on source of income.
A screening process that violates §5-12-050 and simultaneously violates fair housing law creates compound liability. You could face a civil rights lawsuit, an HUD complaint, and a city ordinance violation all at once.
Documentation and Record-Keeping Standards
To protect yourself, maintain records of every applicant you screen, whether approved or denied:
- Completed application form (with date received)
- Screening criteria document (what you’re evaluating)
- Screening results (credit score, background check findings, eviction history)
- Decision letter (approval or denial, with specific reasons if denied)
- Proof of communication (email or certified letter to applicant)
- Lease or move-out date (for approved applicants)
- Receipts for deposits/rent collected (showing $0 application fee)
Keep these records for at least 3 years. If a tenant sues over an application fee, your records are your defense. A disorganized, fee-free screening process is better than a well-documented one that charged prohibited fees.
Disclaimer
This article is for informational purposes only and does not constitute legal advice. The information provided is based on the Chicago Residential Landlord and Tenant Ordinance §5-12-050 as of August 2026. Landlord-tenant law changes frequently, and interpretations vary by jurisdiction. Before implementing screening practices or responding to a tenant complaint or lawsuit, consult a qualified Illinois real estate attorney licensed to practice in Cook County. This article does not address all applicable laws (fair housing, data privacy, credit reporting regulations) and is not a substitute for professional legal counsel.