Illinois Commercial Rent Increases: The Preemption Act
Why Illinois commercial real estate escapes entirely from rent control through the Rent Control Preemption Act and the importance of rent escalations.
Legal Disclaimer
This content is for general informational and educational purposes only. It does not constitute legal advice and should not be relied upon as such. Laws change frequently — always verify current regulations and consult a licensed attorney in your jurisdiction for advice specific to your situation. Landager is a property management platform, not a law firm.Information last verified: May 2026.
Since the Rent Control Preemption Act (50 ILCS 825) went into effect on August 1, 1997, commercial rent increases in Illinois have been entirely uncapped and dictated purely by the free market and the lease agreement. Unlike residential tenancy in some jurisdictions, Illinois law explicitly prohibits local municipalities from imposing rent control on commercial properties.
Official Law Citation: The rules and regulations outlined on this page are governed by general commercial contract law and the statutory prohibition on rent control under the Rent Control Preemption Act.
The Rent Control Preemption Act (50 ILCS 825)
Illinois has a long-standing law on the books known as the Rent Control Preemption Act. Simply put, this state statute forbids any city, county, or local municipality in Illinois from enacting any type of rent control.
This applies directly to both residential and commercial properties. Consequently, cities like Chicago or Evanston cannot pass ordinances limiting how much a commercial landlord can charge per square foot or how much they can increase the rent upon lease renewal.
Structuring Commercial Escalations
Because the state will not step in, commercial landlords must proactively structure rent increases into their lease contracts. These built-in increases are essential for protecting the landlord's ROI against long-term inflation.
Common structures used in Illinois commercial leases include:
- Fixed Step-Ups: The rent increases by a predefined flat dollar amount or a fixed percentage every year of the lease (e.g., $15/sqft in Year 1, escalating by 3% annually).
- CPI Escalations: The rent increases annually based on an index, typically the Consumer Price Index (CPI), ensuring the revenue outpaced inflation.
- Percentage Leases: Most common in retail. The tenant pays a "base rent" plus a percentage of their gross sales over a certain threshold (e.g., $5,000/month base rent + 5% of gross sales exceeding $500,000 annually).
Timing and Notice
If a commercial lease is expiring, Illinois law does not mandate a rigid 60-day or 90-day warning before a landlord can demand higher rent for a new term. Disputes regarding commercial lease renewals and rent adjustments are generally handled in the Illinois Circuit Courts. However, practically all sophisticated commercial leases contain an Option to Renew clause.
This clause typically states the tenant must provide written notice (often 6 to 9 months in advance) of their intent to renew the lease. The exact terms of the renewed rent increase are either stated directly in the clause (e.g., "110% of the previous year's rent") or tied to a defined "Fair Market Value" appraisal process.
Holdover Tenancy
If a commercial lease expires, the tenant remains in the space, and the landlord continues to accept rent, they become a month-to-month holdover tenant. Under Illinois law (735 ILCS 5/9-207), a landlord may terminate the tenancy by providing 30 days' written notice. This 30-day notice is the legal mechanism required to terminate a month-to-month tenancy in order to offer a new lease at an increased rent.
However, a well-drafted commercial lease will contain a severe Holdover Penalty Clause. These clauses specify that if the tenant does not vacate upon expiration, the rent instantly doubles (or jumps to 150%) to penalize the business for overstaying and preventing the landlord from leasing to a new tenant. Note that 735 ILCS 5/9-202 also provides for double rent if a tenant willfully holds over after their term expires and after the landlord has made a demand in writing for the possession thereof.
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Frequently Asked Questions
▶What are the Illinois landlord-tenant laws every property owner should know?
Illinois landlord-tenant law is a mix of state statutes (765 ILCS) and powerful local ordinances. The state provides a baseline framework covering security deposits, eviction procedures, and habitability, but cities like Chicago (CRLTO), Evanston, and suburban Cook County (RTLO) impose significantly stricter requirements around deposit returns, late fees, and tenant remedies. Non-compliance with local ordinances can result in severe penalties.
Read the complete guide▶What is the Illinois eviction process and how long does it take?
Illinois eviction follows the Forcible Entry and Detainer process. For non-payment, landlords serve a 5-Day Notice to Quit. For lease violations, a 10-Day Notice to Quit is required. To terminate a month-to-month tenancy without cause, 30 days' notice is needed. Self-help evictions (changing locks, removing belongings) are strictly prohibited. In Chicago, the CRLTO imposes additional notice requirements and tenant cure periods that landlords must follow.
Read the complete guide▶What is the Illinois security deposit limit and return deadline?
Illinois state law does not cap security deposit amounts, but Cook County, Evanston, and Oak Park limit deposits to 1.5 times the monthly rent. State law requires deposits to be returned within 45 days of move-out. If deductions are made for property damage, an itemized statement with paid receipts must be provided within 30 days. Chicago's CRLTO requires deposits in interest-bearing accounts with annual interest payments to tenants.
Read the complete guide▶Does Illinois have rent control or caps on rent increases?
No. Illinois passed the Rent Control Preemption Act, which prohibits any city or municipality from enacting rent control measures. There are no state limits on how much a landlord can increase rent. During a fixed-term lease, rent cannot be increased unless the lease explicitly allows it. For month-to-month tenancies, landlords must provide at least 30 days' written notice before any increase takes effect.
Read the complete guide▶What is the Chicago RLTO and how does it affect landlords?
The Chicago Residential Landlord and Tenant Ordinance (CRLTO) is one of the most powerful local tenant protection laws in the country. It imposes strict rules on security deposit handling (interest-bearing accounts required), mandates specific lease disclosures, limits late fees, and provides tenants with aggressive remedies including the ability to recover twice the deposit amount if a landlord violates the ordinance. Landlords operating in Chicago must comply with both state law and the CRLTO.
Read the complete guide▶What disclosures must Illinois landlords provide to tenants?
Illinois landlords must disclose lead-based paint hazards for pre-1978 buildings, radon hazards if testing reveals elevated levels, flood zone status and flooding history within the past 10 years (new in 2025), and shared utility meter arrangements where tenants may be paying for common area utilities. Chicago adds additional required disclosures including building code violations, foreclosure proceedings, and the full text of the CRLTO summary.
Read the complete guide▶What are Illinois landlord maintenance obligations and habitability standards?
Illinois enforces an implied warranty of habitability, requiring residential properties to be fit for human occupation and comply with building, housing, and health codes. Tenants can use the 'repair and deduct' remedy (765 ILCS 742) for repairs costing less than $500 or half a month's rent — they give 14 days' written notice, have the work done professionally, and deduct the cost from rent. Chicago's CRLTO provides even stronger tenant remedies for habitability failures.
Read the complete guide▶What are the late fee rules for rental properties in Illinois?
Illinois state law does not impose a specific cap on late fees but requires them to be reasonable and stated in the lease. Chicago's CRLTO is more restrictive, capping late fees at $10 per month for rent under $500, and 5% of the monthly rent amount for higher rents. The CRLTO also mandates a 5-day grace period before any late fee can be assessed. Violations of these limits can trigger tenant remedies under the ordinance.
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