Key Takeaways
- SB 2979 effective July 1, 2026 — Illinois bans "junk fees" on rental applications, leases, and lease renewals. Violations result in actual damages plus statutory penalties up to $500 per violation.
- Prohibited fees include — application processing, credit check admin fees, lease preparation, lease review, document preparation, move-in inspection, move-out inspection, tenant screening, and convenience/administrative charges not tied to actual costs.
- Allowed fees must be tied to actual costs — pet deposits, pet rent, late fees, returned check fees, and utility setup charges are permitted only if they reflect direct, documented expenses.
- Landlords must audit leases and agreements immediately — any lease signed before July 1, 2026, but charging prohibited fees after that date triggers liability. Renewals are covered by the ban.
- Penalties are per-violation, not per-lease — each prohibited fee charged to each tenant is a separate violation. A single lease with three junk fees charged to one tenant = three violations.
- No "processing fee" loophole — fees described as administrative, convenience, or processing charges are banned regardless of label if they don't represent actual landlord costs incurred for that tenant.
What Is SB 2979 and Why It Matters to Illinois Landlords
On July 1, 2026, Illinois becomes one of the strictest states in the nation on rental fees. Senate Bill 2979, signed into law in 2024, prohibits what consumer advocates call "junk fees"—charges that appear on rental applications, lease agreements, or lease renewals but don't reflect direct, documented costs borne by the landlord.
Illinois is following California's SB 611 model (effective 2020), but SB 2979 goes further in some areas. The statute applies to all rental properties in Illinois regardless of size, meaning it affects LeaseBase users managing 2-75 unit portfolios just as much as institutional landlords.
Why this matters: If you charge prohibited fees after July 1, 2026, tenants or their attorneys can sue for actual damages plus statutory penalties of $500 per violation, plus court costs and attorney fees. The violation is counted per fee per tenant, not per lease. A three-unit property with one prohibited fee on each lease = three violations minimum.
Your current lease template may include fees that were legal under prior Illinois law but are now prohibited. Procrastinating on this audit puts your 2026 and 2027 rent collections at legal risk.
Which Fees Are Banned Under SB 2979
SB 2979 Section 2 explicitly prohibits the following charges on rental applications, lease agreements, or lease renewals:
Explicitly Prohibited Fee Categories
| Fee Type | Status Under SB 2979 | Common Alternative Names |
|---|---|---|
| Application Processing Fee | ❌ BANNED | "App fee," "application review fee," "admin processing" |
| Credit Check / Background Check Admin Fee | ❌ BANNED | "Screening fee," "credit report fee," "background admin" |
| Lease Preparation / Document Preparation | ❌ BANNED | "Lease fee," "document processing," "preparation charge" |
| Lease Review / Legal Review | ❌ BANNED | "Lease review," "legal review fee," "attorney review" |
| Move-In Inspection | ❌ BANNED | "Inspection fee," "move-in documentation," "walkthrough charge" |
| Move-Out Inspection | ❌ BANNED | "Exit inspection fee," "final walkthrough charge" |
| Tenant Screening / Background Processing | ❌ BANNED | "Tenant verification," "screening charge," "report processing" |
| Administrative / Convenience Fees | ❌ BANNED (if not tied to actual cost) | "Admin fee," "convenience charge," "processing fee" |
| Application Disclosure / Information Fee | ❌ BANNED | "Disclosure fee," "information processing," "document delivery" |
Critical Language Caveat: "Junk Fee" Definition
SB 2979 defines a junk fee as any charge that is not "reasonably related to actual costs incurred by the landlord or landlord's agent in connection with a particular rental unit or tenant." This language means:
- Application fees are always banned — Even if you use a third-party screening company, the screening company's fee is not a "cost incurred by the landlord." You can't pass it through to tenants.
- Lease preparation is always banned — You cannot charge a fee for creating, printing, or customizing a lease, even if you use a template service or attorney.
- Inspection fees are always banned — Move-in and move-out inspections cannot be charged as separate fees, even if done by a third party. These are operational costs of being a landlord.
Which Fees Remain Legal Under SB 2979
SB 2979 does NOT ban all fees. The following are legal if they represent actual documented costs:
Fees That Survive the Ban (With Conditions)
| Fee Type | Legal Status | Compliance Requirement |
|---|---|---|
| Pet Deposit | ✅ LEGAL | Cannot exceed one month's rent per pet. Must be refundable (treated as security deposit under Illinois law). |
| Pet Rent / Monthly Pet Fee | ✅ LEGAL | Must be applied monthly for actual pet-related costs (e.g., increased damage liability). Cannot be disguised as "convenience" charge. |
| Late Fee | ✅ LEGAL | Must be "reasonable" under Illinois law (no statutory cap, but excessive fees may be challenged). Must be disclosed in lease. |
| Returned Check / NSF Fee | ✅ LEGAL | Must reflect actual bank charges and landlord processing costs. Illinois law caps NSF penalties at actual costs or the amount provided by the bank. |
| Utility Setup / Transfer Charge | ✅ LEGAL (if tenant-requested) | Only if the tenant requests the landlord arrange utilities and actual third-party costs are incurred. Cannot be charged if tenant arranges directly. |
| Damage Repair / Cleaning (after move-out) | ✅ LEGAL | Deducted from security deposit under Illinois law; not charged as separate upfront fee. Must follow IRLTO itemization rules. |
| Parking Fee / Garage Charge | ✅ LEGAL | If disclosed in lease as separate from rent and reflects actual cost or market rate for dedicated parking. |
The "actual cost" test: For any fee you intend to charge after July 1, 2026, be prepared to document the direct, per-tenant cost. "I pay $50/month for credit checks" is not the same as "Tenant A's credit check cost me $50." If you buy a bulk license to a credit reporting service for $300/year across 20 units, you cannot charge each tenant $50 — that's not a cost "incurred in connection with a particular tenant."
Timeline and Effective Date: July 1, 2026
SB 2979 is effective July 1, 2026. Here's what that means:
- Leases signed before July 1, 2026: If they contain prohibited fees, you can still charge those fees until the lease ends, UNLESS the lease renews or is modified after July 1, 2026. A renewal triggers full SB 2979 compliance.
- Lease renewals after July 1, 2026: Any renewal agreement, even if the original lease predates the law, must comply with SB 2979. You cannot renew a lease with junk fees intact.
- Month-to-month tenancies after July 1, 2026: Any tenant on month-to-month after the effective date is covered by the ban, even if the original lease was signed years earlier.
- New applications after July 1, 2026: All new tenant applications cannot include prohibited fees, even if the property has charged them historically.
The practical implication: You have 9 months (from now through June 30, 2026) to audit every lease in your portfolio and remove or rename any prohibited fees. If you wait until July 1 and then charge a prohibited fee, you're liable from day one.
Specific Violation Penalties and Liability
SB 2979 provides a private right of action for tenants. Here's the financial impact:
Penalty Structure
| Penalty Type | Amount | Calculation Basis |
|---|---|---|
| Statutory Penalty Per Violation | $500 | Per prohibited fee, per tenant, per charging instance |
| Actual Damages | Amount of fee charged | Full refund of prohibited fee(s) collected |
| Attorney Fees and Court Costs | Full recovery for prevailing tenant | Added on top of statutory penalty and actual damages |
Example: You charge a tenant a $50 "application processing fee" and a $40 "lease preparation fee" after July 1, 2026. The tenant sues:
- Actual damages: $90
- Statutory penalties: $500 × 2 violations = $1,000
- Attorney fees and court costs: $2,000–$5,000+
- Total liability: $3,090–$6,090 for two prohibited fees on one tenant
If you have 10 tenants and charged both fees, the math becomes $30,900–$60,900 in exposure. This is not a small compliance issue.
Step-by-Step Compliance Audit for Your Lease
You must complete this audit before July 1, 2026. Here's the process:
Step 1: Gather All Lease Documents
Pull every lease template, addendum, and fee schedule you use. This includes:
- Your standard residential lease
- Any pet addenda
- Any utility addenda
- Move-in condition checklists
- Separate fee schedules or "application packet" documents
- Lease renewal templates
Step 2: Create a Fee Audit Worksheet
For each fee in your documents, answer:
| Question | If "Yes" = Keep | If "No" = Delete/Rename |
|---|---|---|
| Is this fee charged after lease signing or move-in? | Late fees, pet rent, NSF fees | Application, lease prep, inspection |
| Can I document a specific per-tenant cost for this fee? | Pet rent, utilities, parking | Admin, processing, screening fees |
| Is this fee excluded from the explicit ban list in SB 2979 Section 2? | Damage repair, late rent, NSF | Application, lease, screening, inspection |
Step 3: Flag High-Risk Fees
These are especially likely to trigger liability:
- "Application Fee" under any name: $25–$75 charged before lease signing. Always banned.
- "Administrative" or "Convenience" charges: If not tied to actual per-tenant costs, always banned.
- "Lease Preparation" / "Document Preparation": Always banned, even if you pay an attorney or service to prepare it.
- "Move-In Inspection" or "Move-Out Inspection": Always banned. Inspections are a landlord operational cost, not tenant charges.
- "Screening" or "Background Check" with an upfront charge: Always banned. The tenant's cost for a credit report is not your cost as a landlord.
Step 4: Identify Leases Signed Before July 1, 2026
Create a list of:
- Current leases expiring before January 1, 2027 (will renew and need amendment)
- Current leases expiring after January 1, 2027 (can charge prohibited fees through expiration, but not at renewal)
- Month-to-month tenants (instantly covered by ban on July 1, 2026)
Step 5: Amend or Replace Affected Leases
For each lease with prohibited fees:
If the lease expires before July 1, 2026: Do nothing until renewal. At renewal, provide new lease compliant with SB 2979.
If the lease expires after July 1, 2026: You have two options:
- Send a pre-July 1 amendment deleting prohibited fee language before July 1 (preferred, shows good faith).
- Simply stop charging prohibited fees July 1 forward, and remove language at next renewal.
If the tenant is month-to-month after July 1, 2026: You must immediately remove or amend any lease addenda charging prohibited fees. A month-to-month is treated as a continuous new agreement each month under Illinois law.
Step 6: Test Your New Lease Language
Before July 1, send your revised lease to a local Illinois real estate attorney for a 30-minute compliance review (typically $100–$200). They should confirm:
- No language on the application form charges prohibited fees
- No language in the lease itself charges prohibited fees
- Any remaining fees (late, pet, etc.) are explicitly described and clearly tied to actual costs
- Security deposit and pet deposit language complies with both SB 2979 and Illinois Residential Tenants' Rights Act (IRLTA)
How to Handle Existing Tenant Situations
Tenants with Leases Expiring Before July 1, 2026
At renewal, you must use a compliant lease. You cannot:
- Charge application fee on renewal
- Charge lease prep fee on renewal
- Charge screening fee on renewal (even if first lease had this)
You can continue to charge pet deposits, pet rent, late fees, etc., as long as they comply with the actual-cost test.
Tenants with Leases Expiring After July 1, 2026
A gray area exists here. If a lease signed before July 1, 2026, contains prohibited fees, and you charge those fees after July 1, you are violating SB 2979. The statute does not include a grace period for pre-existing leases that charged prohibited fees.
Best practice: Send every tenant with a lease containing prohibited fees an amendment effective July 1, 2026, explicitly removing those fees. Use language like:
"Effective July 1, 2026, the following provisions of your lease are deleted due to Illinois Senate Bill 2979: [list fees]. No fees in addition to rent, security deposit, and pet deposit will be charged without your prior written consent and evidence that such fees represent actual costs incurred by the landlord for your specific tenancy."
Tenants on Month-to-Month After July 1, 2026
Month-to-month tenants are immediately covered. If you have a standing addendum charging application fees or lease prep fees, you must delete it from your month-to-month template on July 1, 2026. Do not serve a new addendum charging prohibited fees to existing month-to-month tenants.
Compliance Documentation You Must Keep
If a tenant sues claiming you charged a prohibited fee after July 1, 2026, you'll need evidence that you did not. Keep:
- Signed lease copies for every tenant, dated and initialed on final page
- Application forms used, showing no application fee line item
- Fee schedules or addenda provided to tenants, with dates
- Payment receipts/ledgers showing what was actually charged and paid
- Communication with tenants about fees (emails, texts, lease addenda)
- Amendment documents sent before July 1, 2026, if you modified leases to remove prohibited fees
- Documentation of actual costs if you charged any fee you believe is compliant (e.g., pet rent invoices showing monthly pet-related costs, utility setup receipts from third parties)
LeaseBase's lease operations module automatically stores signed leases and amendment history. This creates an audit trail. When you amend a lease to remove prohibited fees, the system timestamps the change.
Common Questions: SB 2979 Compliance
Q: Can I charge a "non-refundable lease preparation fee" instead of an application fee?
No. SB 2979 explicitly bans lease preparation fees and document preparation charges. Relabeling an application fee as a "lease prep fee" does not exempt it from the ban. The prohibition is on the substance (a charge for the administrative process of onboarding a tenant), not the name.
Q: What if I use a third-party property management company to screen tenants—can I charge the tenant their screening cost?
No. The cost of screening is a business expense of being a landlord, not a cost "incurred by the landlord in connection with a particular rental unit or tenant" in the sense SB 2979 means. You cannot pass through third-party screening company fees to tenants. If your PM charges you $50 per applicant to screen, that's your cost, not theirs.
Q: Are utility setup fees allowed if the utility company charges me a fee to transfer service?
Only if the tenant requests that you arrange utilities on their behalf AND you pass through the actual charge from the utility. If the tenant arranges utilities directly (the normal scenario), you cannot charge a fee. If you arrange them and the electric company charges a $15 transfer fee, you can charge $15 if disclosed in advance. You cannot mark it up or estimate it; it must be the actual cost.
Q: Do I have to refund prohibited fees I've already collected before July 1, 2026?
The statute does not explicitly require retroactive refunds. However, if a tenant sues, they can claim damages for any prohibited fee they paid, regardless of when it was charged. Consult an attorney about whether refunding prohibited fees collected before July 1, 2026, reduces your legal exposure. Many attorneys advise proactive refunds as a risk mitigation strategy.
Q: Can I raise rent instead of charging application fees?
Yes. You can bake the cost of screening and processing into rent, as long as it's disclosed in the lease and complies with Illinois rent increase laws. However, rent cannot increase mid-lease without tenant consent. For new tenants, you can set market-rate rent that reflects your all-in cost. You simply cannot separately charge prohibited fees.
Federal Fair Housing Considerations
SB 2979 compliance intersects with fair housing law. If you charge prohibited fees differently based on protected class (e.g., $50 application fee for white applicants, $100 for Black applicants), you violate both SB 2979 and the Fair Housing Act. Ensure your fee structure is applied uniformly to all applicants and tenants, regardless of race, familial status, disability, national origin, religion, color, or sex.
Using LeaseBase's compliance engine to standardize all leases reduces the risk of inconsistent fee treatment across your portfolio.