KSN landlord/tenant attorney Jessica Ryan discusses the addition of source of income as a protect class to Illinois Fair Housing law and the impact on Chicagoland and Illinois landlords.

Jessica reviews how this legal update affects tenants, Section 8 housing vouchers, screening, inspections, property management, and more. (21 mins.)

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Episode Transcription

Bernie: You are listening to the KSN Podcast and on this episode, we are talking about a very important update to Illinois Fair Housing Law, effective January 2023 that has a major impact on Illinois landlords. Welcome to the KSN Podcast where you’ll hear from KSN attorneys as they share with their experience and insight on legal issues surrounding community associations, collections, property tax appeals, and landlord tenant law. I’m Bernie, and today we’re joined by KSN attorney, Jessica Ryan. Jessie is the head of the landlord tenant department. She has extensive experience in assisting landlords and property managers with rental property issues that includes evictions, building code violations, construction defect litigation disputes, compliance with statutes and local ordinances. Jessie is well versed in the Chicago residential landlord tenant ordinance, as well as the Cook County Residential tenant and landlord ordinance. Jessie, this is your domain, so welcome to the podcast.

Jessica: Thanks Bernie. Thanks for having me.

Bernie: So, every year, beginning of every year, it seems like there are updates, legal updates that landlords need to be aware of because it impacts not only their day-to-day operations, but it impacts tenants, screening, notices, property administration, and 2023, we’re starting off the year with an important legal update, correct?

Jessica: We are, this is really a big one. Sure, every year there’s legal updates, but this is a big one because in the Chicagoland area, only Cook County and a couple smaller municipalities have had a source of income as part of their fair housing and it’s going statewide. So, everyone now needs to be aware of this and the requirements.

Bernie: All right. So, let’s give listeners a little bit of context here, a little bit of background. So, the Fair Housing Act was established in 1968 and it was created to prohibit discrimination in the real estate transactions including buying, renting, and financing a home. The act protected against discrimination on the basis of race, color, religion, sex, natural origin. It was amended to protect against disability, family status, and sexual orientation and along with the Federal Fair Housing Act, individual states have passed their own laws. So for example, Illinois passed the Illinois Human Rights Act that added further protective classes, ancestry, age, order of protection, marital status, pregnancy, unfavorable discharge from military service and then on May 23rd, 2022, governor JB Pritzker signed a new update to that Illinois Human Rights Act and the update, like you mentioned, Jessie adds source of income as a protected class and that goes into effect January 1st, 2023. As defined in this update, source of income means the lawful manner by which an individual supports himself or herself and his or her dependent. And like you mentioned, Jessie, prior to this amendment to the Illinois Human Rights Act, source of income was already a protected class in Cook County and the city of Chicago but nevertheless, major legal impact for Illinois landlords.

Jessica: Yeah, it definitely is. You know, when you read that definition of source of income, really any lawful manner by which a person supports himself and his family, that’s going to include subsidy, voucher holders, all of your different types of aid that tenants get to help supplement their income to pay for their rent. So that’s really what’s important for landlords all over Illinois to understand now, because you cannot discriminate based on a tenant’s source of their income, that means you cannot discriminate against tenants who have a voucher or some other type of subsidy to help pay their rent.

Bernie: So, let’s dig into what would be considered non-wage income, different examples, spousal maintenance, child support, food stamps, military rental assistance, social security, unemployment, all of those are non-wage sources of income. But now that source of income has been added as a protected class, that can include subsidized programs like you were mentioning, HUD, department of Housing and Urban Development, section eight housing Choice Vouchers and that’s where it’s critical that landlords, property managers that work with tenants who utilize Section eight housing vouchers are also aware because there are a ton of other HUD requirements and obligations

Jessica: Right. In Cook County and other municipalities like City of Naperville, there has been source of income as a protected class, but it’s new everywhere else and outside of those limited areas, landlords are used to saying, sorry, we don’t accept section eight, no section eight here, we don’t accept vouchers and that is not acceptable anymore. That is going to land a discrimination complaint on your front door. So, we really need to get into all of the requirements that fall within having voucher holders and subsidy tenants. Landlords really need to be educated outside of Cook County and these other municipalities so that they are prepared to accept all of these tenants and make sure that they are not violating our new amendment to the fair Housing Act.

Bernie: And some of those obligations, Jessie, involve contracts, inspections, screening process. I mean there’s a lot of bureaucracy, there’s a lot of procedure, a lot of documentation, very particular documentation that landlords and property managers need to be aware of, especially like you mentioned landlords or property managers that had not worked with Section eight housing vouchers previously.

Jessica: Absolutely. So you know, first thing to be aware of is the landlord is going to get a HAP contract, H.A.P, from the housing authority or whatever organization they’re working with and that HAP contract is going to lay out what the authority believes the rent should be, the market rate rent for that unit, layout how much the housing authority is going to pay, and then what the tenant’s portion is going to be. The housing authority is also going to perform an inspection to make sure that the unit meets all of the standards and building codes and that it is a rentable unit. Now, a couple of things that come up a lot in questions that I get from landlords. One, what if we don’t like that market rate? What if our market rate is a little bit higher than what they are offering in the HAP contract? You are allowed to reject the HAP contract based on what your market rates are. As long as you can show and confirm that your market rates are reasonable and are based on actual data, you can reject that HAP contract. Now, I say that because as a landlord, if you are saying your quote market rate is $2,000 more than the HAP contract and your quote market rate doesn’t really line up what the market rate is and you are just using that as a tool to consistently reject voucher holders, you could end up with a discrimination complaint. So just be careful that if you are rejecting HAP contracts based on their market rate, what you believe is the market rate is actually based on data and if it is, you are not required to accept that contract and you can reject it.

Bernie: Since 1983, KSN has provided landlords with affordable comprehensive legal services. KSN can eliminate the need for multiple law firms to handle the broad spectrum of a landlord’s basic legal requirements through our landlord assistance multipurpose program or LAMP, landlords receive exceptional service related to their tenant-based issues. Some of the LAMP program features include residential and commercial evictions, review of leases, disclosures and vendor contracts, ordinance and code compliance tenants and third-party dispute negotiations and resolution including local property ordinances laws and more. If you’re a landlord experiencing any tenant issues or legal questions, just visit ksnlaw.com/lamp.

Jessica: The other thing that I get asked quite often is holding a unit. I think you can all imagine if anybody’s listening in Cook County, you know that they’re not going to get out within 24 hours to inspect your unit. It sometimes takes two or three weeks to inspect your unit and I will say this is a gray area. So, Bernie, I should mention, we’ve been in contact with state representatives, they’re a little hesitant to give any bright line rules on how this is going to be implemented and enforced. We are waiting for a little bit more guidance from them in the first quarter after what representatives have said so let’s see how the rollout goes. And so, we’re hoping to get some more guidance. So, I do want to add a little caveat here that when I say there’s a gray area, it’s just because this goes into effect January 1st, and we have to see kind of how things shake out. But one of the questions that I get is on holding a unit and there is a gray area because in Cook County, the county’s Q&A says you can treat this hold just like a hold for any other tenant, for any other applicant, you do not have to hold a housing authority unit any longer than anyone else. Well, a lot of clients and larger management companies only put a 72 hour hold out there.

So, if you’re only doing a 72 hour hold for a regular applicant, that is not going to be enough for the housing authority to get out there and do their inspection. So, what you have to think about is what is a reasonable amount of time. Is six weeks reasonable? No, you shouldn’t have to keep a unit off the market for six weeks. Is maybe 10 days reasonable? Probably, because it’s probably going to take them about that time to get out there. So my recommendation is always let the housing authority know that your standard is whatever it is, a 72 hour hold or whatever it may be, and then let them come back and say, all right, I don’t think we’re going to get out in 72 hours, but we could get out Friday and maybe that’s five days later, that’s reasonable, give it to them, but always let them know what your standard hold is and maybe that’ll light a little fire under them to push you up just in case. And I’m not guaranteeing anything is going to light a fire under a housing authority, but you can definitely let them know what your standard is. So, those are a couple of the bigger questions that I get as far as the nuts and bolts of initiating this process.

Bernie: And for landlords, property managers who have not had to deal with this, they also haven’t had to deal with the commensurate violations and those consequences can come with significant fines. As I read, a first-time violation of the Fair Housing Act can carry up to a $16,000 civil penalty. Subsequent violations range from over 37,000 to $65,000 according to HUD. So significant consequences that come with a complaint, with a violation of these requirements that again, landlords may not have been aware of because they were not working with tenants who were using Section eight housing vouchers.

Jessica: That’s very true and landlords and rental property managers are not going to like what I say next because those fines are pennies in comparison to what they could pay in attorney’s fees defending against a class action for discrimination. While those fines sound hefty, what you’re really concerned about is a tenant’s rights attorney getting wind of a yearlong policy after this goes into effect of you denying section eight tenants as a blanket rule at your property because that tenant’s rights attorney is going to bring a class action against you and you could spend hundreds of thousands of dollars in attorney’s fees and penalties and damages for all of the applicants that you denied. So yes, those numbers, $65,000 in a fine sound staggering, but what we really, really need to get landlords and rental property managers educated on and for the purpose is really to avoid these class actions.

Bernie: As you’ve started to talk to landlords and property managers that are processing these changes that are just being aware of these legislative updates, Jessie what are some of the questions that they have for you? They’re on the front lines, they’re seeing this day-to-day in their operations. How do they think this is going to impact them and maybe more importantly, what are they not thinking of?

Jessica: Sure, sure. So, let’s start with another question that I get quite often; how do we screen the tenant? On what basis do we calculate or compare their income when they’re only paying a portion of the rent? So, a general rule of thumb in screening a tenant is that their income has to be three times the amount of the rent. Well, if we have a Section eight tenant and they’re paying $300 of a $1,500 a month rent, their income probably is not 4,500 a month, which would be three times the full rent. So, in Cook County, the standard is three times the tenant’s portion. So, the tenant’s portion would only be 300, then you’re looking is the tenant’s own income just $900 a month and then they would need to be approved. Now, that’s different with the DuPage Housing Authority where Naperville has the source of income included in their local ordinance. The DuPage Housing Authority allows landlords and rental property managers to multiply that three times factor on the entire rent still. So, this is a gray area, and I cannot give clients a specific answer because we just don’t know how it’s going to roll out in the entire state. I mean, obviously the safer bet to avoid discrimination, I’m really trying to follow Cook County because it’s been established for quite a long time. Obviously Cook County is our largest county in Illinois, kind of sets the standards for how things kind of wash over the rest of the state. And of course, unless your local housing authority or your local municipality or county set something out differently, that’s very specific as to how you can calculate.

I’ve also gotten questions on a guarantee. Can a tenant have a guarantee for their small portion of the rent? And the answer is of course you can have a guarantee just like any other tenant. The concern, of course, which is a case-by-case basis and not really a legal question, but if you have a tenant who’s only paying $300 of a $1,500 a month rent and they’re not qualifying for that $300 and need a guarantee, do they really qualify and do they really meet your standards? So, it’s definitely something to look at, but I have had that question come up a couple of times and you can definitely have a guarantee. The other question that I get is how do they determine the market rate? And we have yet to find out how the state is going to do it. So, Cook County, the housing choice voucher program has a matrix by zip code. Each zip code kind of has a standard for their market rate. I’m not sure if that’s going to come out for the entire state. I’m not sure if the state is going to have each county come out with those or each housing authority come out with those. So, we will just have to wait and see as these HAP contracts kind of start rolling in, we will get an idea of how each housing authority or charitable organization is setting their market rate.

Bernie: And I think that’s important, Jessie, because, not to belabor the point, but if you have a landlord who has property in Chicago, they’ve worked under the Chicago residential landlord tenant ordinance, the RLTO for some time. Most recently we have the introduction of the Cook County residential tenant and landlord ordinance, the RTLO, because of course we have to make the acronyms as similar as possible to not make them confusing. You mentioned DuPage in Naperville, not only limited to those municipalities because you also have Evanston and Oak Park that have their own landlord ordinances. So put that all together for a landlord that before maybe only had a property in Chicago and was already working, like you mentioned under the RLTO or maybe they had a property in Rozelle, now the Cook County residential ordinance is kicking in. But now on top of that you have these fair housing updates that may be new to them because the standards that were set by the RLTO in Chicago were different for different properties they were managing and now this is kind of thrown another wrench in the mix, something else that they have to be aware of because if not, there are dire consequences.

Jessica: So, Bernie, it is true that there are so many layers of ordinances out there, but you’ve got to keep in mind that source of income has been a mandate in Cook County, including Chicago for years and years. The Fair housing ordinance of Cook County and the Fair Housing Ordinance in Chicago, both have included source of income. So, I hope that landlords and rental property managers with properties in Chicago and suburban Cook County have already been following this rule. This is going to be a big change for everyone outside of Cook County and to some extent, you know, landlords who have properties in suburban Cook County and Lake County, let’s say, they kind of now get to standardize their policies between the two properties where they had to kind of have different policies before cause they could reject section eight in Lake County. They no longer can, and they can standardize it and they might be able to use some standards and changing their policies as far as leasing and getting their Lake County or Collar County managers and leasing agents up to speed on source of income. It may actually help to reduce vacancies in properties because now you’re required to bring in some voucher holders and if you can reduce that vacancy rate, that may help. So, getting everybody up to speed outside of Cook County is really, really important but this for a change, standardizing it might actually help those landlords who kind of have an array of properties all over the Chicago land area in and outside of Cook County.

This is a big one. I mean this is really so important. You pointed out those fines. There’s risk of class action here. So setting up your, and when I say your, I’m talking to you my landlords and rental property managers, setting up policies and procedures on your front lines is going to be very, very important from the outset on January 1st. Making sure that your leasing agents are trained in how to screen these tenants, how to read and review a HAP contract. The market rate fluctuates from day-to-day, so when you get that HAP contract on day one, but the lease isn’t actually signed for two weeks cause you got to wait for that inspection. Can you raise your market rate? I mean these are all questions that come up as you start implementing these things that you really need to think about from the outset. And so, definitely we are here– I am doing lunch and learns for clients. I am answering questions constantly. We are talking about and scheduling webinars for Q1 to make sure everybody is up to speed on this. So, I think reaching out to your council, our office, is just vital to avoid any liability under the new amendment to this act.

Bernie: That was KSN attorney Jessica Ryan. Jessica is the head of KSN’s Landlord tenant department. Our firm is an experienced legal resource ready to provide landlords and property managers with quality advice and exceptional service. We look forward to demonstrating how we have earned the trust of thousands of clients over the past 40 years. If you’d like to reach Jessie or any of KSN’s experience attorneys, please call 855-537-0500. You can also visit our website, ksnlaw.com, and complete the contact form to send a message. Thanks for listening.

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Please note the material contained on the KSN Podcast is for informational purposes only and does not constitute legal advice. No attorney-client relationship is established by your review or receipt of the information contained on the KSN Podcast. You should not act on the information discussed on the KSN Podcast without first obtaining legal advice from an attorney duly licensed to practice law in your State. While KSN has made every effort to include up-to-date information on The KSN podcast, the law can change quickly. Accordingly, please understand that information discussed on the podcast may not yet reflect the most recent legal developments. Material is not guaranteed to be correct, complete, or up to date. KSN reserves the right to revise or update the information and statements of law discussed on the podcast at any time, without notice, and disclaims any liability for your use of information or statements of law discussed on the podcast, or the performance of the podcast generally. The KSN Podcast may be considered advertising in some jurisdictions under applicable law/s and/or ethical rules/regulations. © 2023 Kovitz Shifrin Nesbit, A Professional Corporation.