Illinois Junk Fee Ban (SB 2979) — What Landlords Must Stop Charging by July 2026

What Is SB 2979 and Why It Matters Now

On June 12, 2024, Illinois Governor J.B. Pritzker signed Senate Bill 2979 into law, creating the most restrictive junk fee prohibition in the Midwest. Effective July 1, 2026, this statute fundamentally changes how Illinois landlords can structure their lease fees and upfront charges.

Unlike previous state-level fee caps (which typically limited late fees or security deposits), SB 2979 takes a categorical approach: it bans entire classes of charges the legislature deemed non-essential to landlord operations. This matters because landlords operating without updated compliance procedures will face tenant lawsuits, Department of Financial and Professional Regulation (DFPR) enforcement actions, and potential triple damages under Illinois consumer protection law.

As of August 2026, we are in the active enforcement period. Any lease signed on or after July 1, 2026, must comply immediately. Landlords managing month-to-month renewals or lease renegotiations are already subject to this law.

Which Fees Are Now Illegal Under SB 2979

SB 2979 modifies 815 ILCS 5/2-501 to explicitly prohibit landlords from charging tenants for:

Application and Screening-Related Fees

Landlords may charge an application fee, but only to recover the actual cost of obtaining a credit report and criminal background check from third-party vendors. The statute states: “an application fee may not exceed the reasonable cost incurred by the landlord in obtaining a consumer credit report or criminal background check report.”

Prohibited under this category:

• Administrative or processing fees added to application screening costs
• Non-refundable application fees that exceed vendor charges
• “Convenience fees” for online application submission
• Flat-rate application fees not tied to actual screening vendor invoices
• Duplicate screening fees if tenant resubmits application or information

If your vendor charges $35 for a credit report and $25 for a background check, your maximum application fee is $60. Any amount above that is a junk fee violation.

Move-In and Move-Out Inspection/Processing Fees

Completely prohibited. This includes:

• Move-in inspection fees (even if landlord conducts formal walkthrough with tenant)
• Move-in photographic documentation fees
• Move-out inspection or walkthrough charges
• Move-out cleaning inspection fees
• Unit preparation or turnover fees charged to incoming tenant
• “Administrative processing” fees for lease initiation

The cost of move-in and move-out inspections must be absorbed by the landlord or recovered through damage deductions from the security deposit (subject to 815 ILCS 5/2-504 security deposit return requirements).

Lease Renewal or Extension Fees

Landlords cannot charge tenants to renew or extend an existing lease agreement. Prohibited charges include:

• Flat “lease renewal fees” ($50, $100, etc.)
• Administrative fees for processing a new lease agreement
• “Renewal processing” or “re-documentation” charges
• Fees for updating lease terms or addendums

If a tenant wishes to renew their lease for an additional term, the only charges that may be imposed are increased rent (if permitted under local ordinances) and any legitimate re-screening fees (limited to actual credit/background check costs).

Holding Fees

Prohibited entirely. A “holding fee” is any charge imposed to reserve a unit pending lease execution or while an application is pending approval. This includes:

• Deposits to hold unit for prospective tenant
• “Reservation fees” pending application approval
• Charges to remove unit from active marketing

If a prospective tenant wants to hold a unit, that amount must either be credited toward the security deposit and first month’s rent at lease execution, or returned in full if lease is not executed.

Early Lease Termination Facilitation Fees

While landlords may charge early termination fees as stipulated in the lease (within reason), SB 2979 prohibits charging fees for the administrative act of processing early termination, including:

• Fees for re-leasing the unit
• Administrative charges for processing an early termination request
• “Lease break” processing fees separate from liquidated damages

However, liquidated damages for breach of lease term (actual early termination penalties) remain enforceable if they represent reasonable pre-estimate of harm and comply with Illinois common law on penalty clauses.

Rent Payment Processing Fees (With Exception)

Landlords cannot charge a general rent processing fee. However, if a tenant elects a specific payment method that incurs third-party fees (e.g., credit card payment through a processor that charges 2.5%), the landlord may pass that fee to the tenant only if:

• An alternative payment method with no fee is available (e.g., bank transfer, check, ACH)
• The fee exactly matches the third-party processor charge
• The fee is disclosed before the tenant elects that payment method

Flat rent processing fees (e.g., “$5 per rent payment”) are violations, as are fees for standard payment methods like check or ACH transfer.

Which Fees Remain Legal Under SB 2979

Not all fees are banned. Landlords may still charge the following, provided they meet statutory requirements:

Permitted Fee Type	Legal Limit / Requirement
Credit report cost	Actual vendor charge only; must provide itemized receipt
Background check cost	Actual vendor charge only; must provide itemized receipt
Late rent fee	Subject to 815 ILCS 5/2-502 (cannot exceed 5% of rent or $5, whichever is greater; limited to once per lease year under certain conditions)
NSF/returned check fee	Reasonable amount; typically $15-$25, but must be proportionate to actual bank fees incurred
Utility payment fee (if tenant-responsible)	If lease assigns utility payment to tenant, costs are not “fees” but lease obligations
Pet rent or pet deposit	Allowed; subject to security deposit rules (815 ILCS 5/2-504) if designated as deposit
Optional tenant services (e.g., furnished appliances, parking)	Allowed if genuinely optional and tenant consents; cannot be hidden or mandatory surcharges

Timeline: What Landlords Must Do Before July 1, 2026

Since we are now in August 2026 (the effective date has passed), compliance is immediate. However, landlords with existing leases have specific transition rules:

Leases Signed or Renewed On/After July 1, 2026

• Immediate action required: All new leases and renewals must comply with SB 2979 restrictions
• No grace period: Non-compliant clauses are void and unenforceable
• Disclosure requirement: Any permitted fees (application screening, payment processing) must be itemized and disclosed in lease or separate fee addendum

Existing Leases (Signed Before July 1, 2026)

• Grandfathered status through lease term: Prohibited fees in existing leases are technically unenforceable as of July 1, but tenants may not have immediate cause to challenge them if charges have not yet been collected
• Upon lease renewal: All renewal leases must be compliant
• Practical guidance: Landlords should proactively notify tenants that fee structures will change at lease renewal to avoid disputes

Penalties and Enforcement for SB 2979 Violations

Tenant Private Right of Action

815 ILCS 5/2-501 creates a private right of action for tenants. Enforcement is NOT limited to government agencies. A tenant may:

• Sue in small claims court (up to $10,000) without attorney requirement
• Recover the prohibited fee charged plus court costs and filing fees
• Claim violation of Illinois Consumer Fraud Act (815 ILCS 505/2), enabling recovery of treble damages (3x the prohibited fee amount) if violation is deemed “deceptive” or “unfair”

Example: If a landlord charged a $200 move-in inspection fee, a tenant could recover:

• Base violation: $200 (the prohibited fee)
• Under Consumer Fraud Act: up to $600 (treble damages)
• Plus attorney fees (if claim proceeds beyond small claims)
• Plus court costs

Government Enforcement

Illinois Department of Financial and Professional Regulation (DFPR) and county State’s Attorney offices can pursue violations under consumer protection statutes. Penalties include:

• Up to $500 per violation
• Mandatory restitution to affected tenants
• Civil penalties and injunctions
• Potential criminal charges if pattern of fraud is established (815 ILCS 505/7)

Practical Consequence: Lease Enforceability

Any lease clause attempting to charge a prohibited fee is void and unenforceable. A tenant can:

• Refuse to pay a prohibited fee
• Deduct the fee from rent (though this creates other compliance issues)
• Use the fee violation as a defense in an eviction proceeding (claiming retaliatory intent if landlord attempts to evict for non-payment after fee refusal)
• Sue for return of fees already paid

How to Audit Your Current Leases and Fees for Compliance

Step 1: Review All Lease Addendums and Fee Schedules

Pull every version of your lease template currently in use, including:

• Main lease agreement
• Pet addendums
• Separate fee schedules or disclosures
• Move-in/move-out inspection forms
• Application materials
• Parking or utility addendums

Search for language including “fee,” “charge,” “cost,” “deposit” (if not security deposit), and “processing.”

Step 2: Flag Potentially Non-Compliant Language

Create a spreadsheet with these columns:

Clause/Fee Name	Amount/Description	SB 2979 Compliant?	Action Required
Application fee	Flat $75	❌ Not verified against actual vendor costs	Obtain vendor invoices; adjust or eliminate
Move-in inspection fee	$50	❌ Prohibited	Remove entirely from lease
Lease renewal fee	$100	❌ Prohibited	Remove entirely from lease
Pet deposit	$300	✅ Allowed (part of security deposit framework)	Keep; ensure compliance with deposit return rules
Late rent fee	$50 or 5% of rent	✅ Allowed (within statutory limits)	Keep; verify compliance with 815 ILCS 5/2-502

Step 3: Update All Lease Templates

For any lease signed or renewed on or after July 1, 2026, remove all non-compliant fee language. Replace with compliant alternatives:

Non-compliant version:

“Application Fee: $100 (non-refundable)”

Compliant version:

“Application Fee: Tenant agrees to reimburse Landlord for the actual cost of obtaining a consumer credit report and criminal background check, not to exceed $[actual vendor cost]. Landlord will provide itemized receipt. [REMOVE ANY ADMINISTRATIVE OR PROCESSING FEE COMPONENT].”

Non-compliant version:

“Move-In Inspection Fee: $75. This fee covers Landlord’s cost to photograph unit condition and document existing damage.”

Compliant version:

“[REMOVE THIS CLAUSE ENTIRELY. Move-in inspection is a landlord obligation. Cost is recovered through damage deductions from security deposit if applicable.]”

Step 4: Notify Current Tenants (Discretionary, but Recommended)

For tenants with leases signed before July 1, 2026, consider sending a notice:

“Effective July 1, 2026, under Illinois SB 2979, certain fees previously permitted are no longer allowed. If you are charged any of the following fees in the future, they are invalid and unenforceable: [list]. Upon lease renewal, your lease will reflect these changes. We have removed these fees from our lease template. For questions, contact [contact info].”

This reduces tenant litigation risk and demonstrates good faith compliance.

Step 5: Train Your Team (If Applicable)

If you use property management software, work with your vendor to update:

• Lease templates in your system
• Automated fee collection rules
• Application processing workflows (to ensure fees charged reflect actual vendor costs, not flat rates)

LeaseBase’s compliance engine automatically flags leases with prohibited clauses and surfaces necessary updates before lease execution. Lease operations features ensure that only permissible fees are charged and documented correctly.

Common Compliance Mistakes to Avoid

Mistake 1: Bundling Junk Fees Into a Single “Administrative Fee”

Some landlords attempt to circumvent SB 2979 by renaming prohibited charges as a single “administrative fee” or “lease processing fee.” This does not work. The statute prohibits the underlying categories of fees, regardless of what they’re called. If a fee compensates the landlord for non-essential services (e.g., handling paperwork, inspections, renewals), it’s prohibited.

Mistake 2: Charging Application Fees Without Vendor Documentation

Landlords must retain receipts or vendor invoices proving that application fees match actual credit report and background check costs. Charging a $100 flat application fee without vendor documentation is a violation, even if vendor costs are sometimes $100. You must verify costs on a per-application basis or use average documented costs.

Mistake 3: Hiding Prohibited Fees in Lease “Disclosures”

Disclosing prohibited fees does not make them legal. Even if a lease states, “Tenant agrees to the following prohibited fees,” the clause remains unenforceable.

Mistake 4: Allowing Property Management Companies to Charge Junk Fees on Your Behalf

If you hire a property manager or use a platform that charges fees to tenants on your behalf, you remain liable for SB 2979 violations. Ensure your property management agreement explicitly prohibits junk fees and that all charges comply with Illinois law.

Mistake 5: Enforcing Old Lease Clauses on New Lease Terms

Even if your old lease (signed before July 1, 2026) contained a prohibited fee, you cannot enforce it against a tenant in a new lease term or renewal. Transition proactively to compliant language.

Frequently Asked Questions About SB 2979

Q: Can I charge a “documentation fee” for preparing and printing the lease agreement?

A: No. This is a prohibited administrative/processing fee. The cost of creating lease documents is a landlord business expense, not a tenant cost. You cannot charge tenants for preparing their lease.

Q: What if a tenant requests an expedited background check that costs more than a standard check?

A: You may charge the actual difference in vendor cost for expedited service only if the tenant requests it and you disclose the cost before charging. However, “expedited fee” cannot be a markup; it must reflect the actual additional vendor charge. The statute requires you to pass through “reasonable costs incurred,” not markup or convenience charges.

Q: Can I charge a fee to process an early lease termination if the tenant initiates it?

A: No. SB 2979 prohibits fees for processing early termination. However, you may include an early termination clause in the lease that imposes liquidated damages (a penalty fee) if the tenant breaks the lease early. The key distinction: a termination fee for violating lease terms is allowed; an administrative fee for paperwork is not.

Q: My lease has a “non-refundable application fee.” Is this still legal?

A: Only if the fee is limited to actual credit and background check costs. If any portion is non-refundable administrative fee, it’s prohibited. If vendor costs are $50 total, your fee must be $50 (refundable if application is rejected, or creditable toward rent if tenant is approved).

Q: Can I charge a separate fee for processing online rental applications versus in-person applications?

A: No. SB 2979 doesn’t allow a “convenience fee” or platform fee for online submission. If you charge for processing method, it violates the statute. Offer online applications at no additional cost, or charge only actual vendor screening costs regardless of submission method.

Q: What about holding a unit for a tenant pending lease approval—can I charge for that?

A: Holding fees are explicitly prohibited. If a prospective tenant wants to hold a unit while their application is reviewed, any payment must either (a) be credited toward the security deposit and first month’s rent if lease is executed, or (b) be refunded in full if lease is not executed. You cannot keep a “holding fee.”

Staying Compliant: Documentation and Record-Keeping

Protect yourself by maintaining clear records of all fees charged and their justification:

• Application fees: Keep vendor invoices for credit reports and background checks. Document that fees charged to tenants match invoiced amounts. Use these records to defend against complaints.
• Late fees: Maintain lease copies showing the late fee clause (compliant with 815 ILCS 5/2-502). Document each instance a late fee is assessed, including date and amount of rent paid late.
• NSF fees: Retain bank statements or canceled check images showing that a check was returned. Keep evidence of bank fees charged to you (typically $15-$35) to support NSF fees you charge tenants.
• Lease compliance: For every lease signed after July 1, 2026, maintain a copy in your records with the effective date clearly marked. This proves compliance during the effective period.

If a tenant sues for junk fees or a government agency investigates, your documentation will either protect you (if compliant) or become evidence against you (if not). Document thoroughly.

Leveraging Compliance Software to Prevent Violations

Manual compliance audits are error-prone and time-consuming. Consider using a platform that enforces compliance rules:

• Compliance engine: Automatically reviews all lease clauses before execution and flags non-compliant language based on current Illinois law, including SB 2979 restrictions.
• Lease operations: Manages lease renewals and automatically applies compliant templates to new terms, preventing unintentional violations when renewing existing tenants.
• Rent payments: Processes rent and late fees with built-in compliance rules, ensuring only permissible fees are charged and only when lease-compliant circumstances exist.
• Portfolio management: Tracks lease versions and effective dates across your portfolio, ensuring you know which leases are subject to SB 2979 and which are grandfathered.

Landlords managing 2-75 units often lack the resources of large property management companies, but they face the same legal liability. Compliance automation removes the guesswork.

Final Takeaway: Compliance Is Your Defense

SB 2979 is now in active enforcement. As of August 2026, any lease signed or renewed must comply. Violations expose you to treble damages under Illinois Consumer Fraud Act, private tenant lawsuits in small claims court, and government enforcement actions.

The solution is straightforward: audit your current lease templates, remove prohibited fee clauses, document legitimate fees with vendor receipts, and implement processes that prevent future violations. Proactive compliance costs far less than defending lawsuits or paying damages.

If you manage a portfolio of leases, prioritize updating templates immediately for all new leases and renewals. For existing leases signed before the effective date, plan a transition strategy to compliant fee structures at next renewal.

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Disclaimer

This article is for informational purposes only and does not constitute legal advice. Consult a qualified Illinois attorney for guidance specific to your situation, leases, or circumstances. Compliance with SB 2979 depends on individualized facts; this content provides general guidance based on statute language and does not address all potential scenarios or local ordinance interactions.