Buying an Occupied 2 to 4 Unit Building in Chicago
The Listing Says "Fully Rented." Nobody Sent the Leases.
The listing says both units are rented. The seller's agent sends a one-page rent roll. Nobody sends a lease. Nobody mentions the security deposits. You are about to buy tenancies you have never read.
I close deals for investors, and I file more than 150 evictions a year. The bad eviction cases often start at a closing like this one. This page covers the part before closing: what transfers with the building, the paper to demand, the estoppel certificate, and the closing credits. If you already closed, read my companion guide, the tenant came with the building you bought.
The tenants, their leases, and their deposits all transfer to you at closing. Illinois law makes the buyer liable for every deposit, its statutory interest, and any prepaid rent (765 ILCS 710/1.1). So demand the paper before you close. That means leases, a rent roll, a deposit ledger with bank proof, and tenant estoppel certificates. Then take every deposit as a credit on the closing statement. In Chicago and suburban Cook County, send each tenant a written transfer notice within 14 days.
Sources: Chicago Municipal Code 5-12-080(e) and (f)(1); Cook County Code Sec. 42-111(l).
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What Transfers With the Building
You buy the building subject to the existing tenancies. A sale does not end a lease. The tenant keeps the same rent, the same term, and the same rights. Illinois law lets the tenant enforce the lease against you, as against the seller (735 ILCS 5/9-216). You also take over the seller's remedies under the lease (735 ILCS 5/9-215). Chicago's RLTO defines "landlord" to include "the successor in interest" (Chicago Municipal Code 5-12-030(b)). The Cook County RTLO uses the same words (Sec. 42-103(a)(3)).
Three things move to you at closing:
- The leases. Written or oral, every term binds you until the tenancy ends.
- The deposits, with interest and prepaid rent. You owe them back even if the seller never handed them over.
- The history. Chicago's notice tiers count the tenant's whole time in the unit, including every year under the seller. My companion guide explains that clock.
The deposit rule is where buyers lose money. Here is who owes what after the sale.
| Law | Buyer owes | Seller released when |
|---|---|---|
| Illinois, 765 ILCS 710/1.1 | Deposit, interest, prepaid rent | Never; stays jointly liable |
| Chicago RLTO 5-12-080(e) | Deposit, interest, prepaid rent | Transfer plus 10-day notice |
| Suburban Cook RTLO 42-111(j) to (l) | Deposit paid to seller | Transfer plus 10-day notice |
Sources: 765 ILCS 710/1.1 (ilga.gov); Chicago Municipal Code 5-12-080(e) (American Legal Publishing, current); Cook County Code Sec. 42-111(j), (k), (l) (Municode, current).
Read the state rule twice. Under 765 ILCS 710/1.1 the buyer is liable for "any security deposit, including statutory interest, or prepaid rent which the lessee has paid to the transferor." The statute does not ask whether you received the money. If the seller keeps the deposits, the tenants still collect from you.
The RLTO excludes owner-occupied buildings of six units or fewer, except for its notice tiers and lockout ban (5-12-020(a)). A seller who lived in the two-flat may never have kept a separate deposit account. If you do not move in, I read the RLTO to apply to your ownership from the day you close. The Cook County RTLO has the same six-unit owner-occupied exclusion (Sec. 42-102(a)(6)).
The Document Package to Demand Before Closing
Before closing, the seller wants your money and answers your questions. After closing, the seller is gone. Ask for this package during attorney review, and make it a written contract term.
- Every lease, amendment, and renewal. Signed copies. If a unit has no written lease, get that in writing. The seller states the rent and the start date.
- A rent roll. One line per unit: tenant names, rent, due date, what the rent includes, paid-through date, and lease end date.
- Bank proof of the rent. Twelve months of deposits that match the rent roll. A rent roll the bank statements do not support is a sales document, not evidence.
- A deposit ledger, with bank proof. Amount, date received, where held, and interest paid each year. In Chicago the deposit belongs in a federally insured, interest-bearing account at an Illinois institution (5-12-080(a)(1)). Ask for the statement that shows it.
- A signed estoppel certificate from each tenant. The template is below.
- Every notice from the last 12 months. Termination notices, 5-day notices, rent increase notices, and tenant repair demands. Ask whether any eviction case is pending.
- Code violations. Search the City's building violation records by address, and ask the seller for any housing court case. In Paragraph 24 of the Multi-Board contract the seller represents no knowledge of uncorrected code violations.
- Rental licensing. Chicago has no citywide rental registry today. Both ordinances in the PRO vs FAIR fight would create one. Outside Chicago, ask the village whether it licenses rentals or requires a point-of-sale inspection.
- Subsidy contracts. If a tenant pays with a Housing Choice Voucher, ask for the payment contract and the last inspection result.
One address check comes first. If the building sits in the Block 606 district or the Jackson Park pilot area, tenants hold purchase rights. The seller must clear them before your deal can close.
When the seller's ledger and a tenant's estoppel disagree about a deposit, take the higher number as your closing credit. The tenant can sue you for what the tenant paid, not for what the seller wrote down. Let the seller argue about the difference before closing, with the seller's own money.
Estoppel Certificates: What They Prove
An estoppel certificate is a short statement the tenant signs before you close. It confirms the rent, the term, the deposit, the paid-through date, and any side deals. It is practice, not a statutory form. Its job is to fix the tenant's version of the deal on paper while the seller is still reachable.
An estoppel certificate proves what the tenant said on the date it was signed. It catches the side deals sellers forget: a reduced rent for snow shoveling, a promised parking space, a free month. It does not prove the seller's bank records, and it does not replace the lease.
Two limits matter. First, a tenant has no duty to sign an estoppel certificate. In practice, tenants always sign one. The seller must deliver the signed certificates. I require them on every tenanted property under five units. Second, a signed certificate helps you most against later claims by that tenant. If a tenant will not sign, have the seller certify the same fields in writing instead.
Here is the template. Copy the fields into a one-page document. Have the seller deliver it, because the tenant knows the seller.
| Field | Tenant fills in |
|---|---|
| 1. Building address and unit | ____________________ |
| 2. Names of every tenant on the lease | ____________________ |
| 3. Names of every other occupant | ____________________ |
| 4. Lease type | Written / oral (circle one) |
| 5. Lease start date and end date | ________ to ________ |
| 6. Monthly rent | $__________ |
| 7. Rent due date each month | __________ |
| 8. Rent includes (heat, water, parking, storage) | ____________________ |
| 9. Rent paid through | __________ |
| 10. Prepaid rent held by the landlord | $__________ |
| 11. Security deposit paid, and date paid | $__________ on ________ |
| 12. Deposit interest last paid or credited | $__________ on ________ |
| 13. Other money held by the landlord (pet, key, other) | $__________ |
| 14. Side agreements (rent credits, free months, work for rent, promised repairs) | None / describe: __________ |
| 15. Option to renew, option to buy, or right of first refusal | None / describe: __________ |
| 16. Rent subsidy or voucher | None / agency: __________ |
| 17. Open repair requests or claims against the landlord | None / describe: __________ |
Statement: "I confirm that the information above is true and complete on the date below. I understand that the buyer of this building will rely on it."
Tenant signature ____________________ Date __________
Printed name ____________________ Phone or email ____________________
You may not need all of this. Say you will live in one unit of a two-flat. The other tenant is a relative on a handshake, with no deposit. A one-page seller statement may be enough there. Spend the effort where a stranger paid a deposit to someone you have never met.
Rent and Deposits at Closing
Paragraph 12 of the Multi-Board 8.0 contract prorates "rents and deposits (if any) from tenants." It prorates them "to and including the Date of Closing." So the seller keeps rent through closing day. You receive a credit for the rest of the month.
Here is an example, not a client file. The rent is $1,500 for a 30-day June. Closing is June 20, and the tenant paid June in full.
| Closing statement item | Credit to the buyer |
|---|---|
| June rent, June 21 to 30 (10 days) | $500 |
| Security deposit | $1,500 |
| Unpaid deposit interest | Amount accrued |
| Prepaid last month's rent | Full amount |
Example only. The deposit and rent figures are illustrative, not drawn from any file. Proration basis: Multi-Board 8.0, Paragraph 12.
Two gaps show up at almost every occupied closing. First, the tenant has not paid the current month. Decide in writing who collects that rent and who keeps it. Second, the seller wants to "transfer the bank account later." Do not accept that. The deposit moves at closing, as a credit or a transfer, with the ledger attached.
If the deposits do not appear on the closing statement, you will pay them twice: once in the price, and again when the tenant moves out.
The Multi-Board 8.0 Paragraphs That Matter
The Multi-Board 8.0 contract is the standard residential form in the Chicago area. It has a Multi-Unit property box. Five paragraphs carry most of an occupied-building deal. My Multi-Board 8.0 guide walks the whole form.
| Paragraph | What it does for you |
|---|---|
| 12, Prorations | Credits rents and deposits |
| 13, Attorney Review | Adds the document package |
| 19, Municipal Compliance | Flags local sale requirements |
| 24, Seller Representations | Covers known code violations |
| 37, Contract Addendums | Multi-Unit addendum checkbox |
Attorney review under Paragraph 13 runs five business days after the Date of Acceptance. That window is when I add the document package and the estoppel requirement as contract terms. Paragraph 24's representations survive closing and are deemed re-made as of closing. Paragraph 37 lists a "Multi-Unit (4 Units or fewer)" addendum. I check it on every tenanted property under five units.
The Notices You Send After Closing
Prepare these letters before closing, so they go out the same week.
- The buyer's deposit notice. In Chicago, within 14 days of the transfer, tell each tenant in writing that you hold the deposit. Include your name, business address, and your agent's business phone (5-12-080(e)). Suburban Cook requires the same notice in 14 days (Sec. 42-111(l)).
- The seller's transfer notice. The seller stays jointly liable until the seller transfers the deposit and notifies the tenant within ten days (5-12-080(e); Sec. 42-111(k)). Ask the seller to sign this letter at closing.
- Owner and agent information. The RLTO requires the owner's or manager's name, address, and phone. That duty "extends to and is enforceable against any successor landlord" (5-12-090).
- A new bank, if you move the deposits. Chicago requires written notice of the new institution within 14 days (5-12-080(a)(3)).
- The RLTO summary, on any new lease or renewal. The summary must be attached when a rental agreement is offered, new or renewal (5-12-170).
What happens when nobody demands this paper? I have had to bring prior owners into eviction cases over the deposit and the rent history. That story is on the companion page.
"Buying a 2 to 4 flat with tenants?"
Read the leases before you own them.
I review the leases, the rent roll, and the deposit ledger during attorney review. I write the document package into the contract. Then I run the closing and prepare the tenant notices.
All consultations are confidential.
I handle the whole closing for a buyer for a $500 flat fee. A multi-unit building adds $150 for each unit after the first.
Frequently Asked Questions
What happens to tenants when a building is sold in Illinois?
The tenants stay. The sale does not end their leases. You become the landlord on the same rent and the same term. Chicago's RLTO and the Cook County RTLO both define the landlord to include the successor in interest. Any change to the tenancy runs through a proper notice and the courts, never a lockout.
Does the buyer owe the security deposit the seller collected?
Yes. Under 765 ILCS 710/1.1 the buyer owes the deposit, its statutory interest, and any prepaid rent paid to the seller. The seller stays jointly liable too. Chicago and suburban Cook County add a written notice from the buyer within 14 days. So take every deposit as a credit at closing.
What is a tenant estoppel letter?
It is a signed statement from the tenant. It confirms the rent, the lease term, the deposit, the paid-through date, and any side deals. It is practice, not a statutory form. Its value is that the tenant's own signature fixes the numbers before you close. The template on this page lists the fields a buyer needs.
How are rent and security deposits handled at closing?
Paragraph 12 of the Multi-Board 8.0 contract prorates rents and tenant deposits to and including the Date of Closing. The seller keeps rent through closing day. The buyer receives a credit for the rest of the month. Every deposit, its unpaid interest, and any prepaid rent should come to the buyer as a credit too.
Related Reading
- The tenant came with the building you bought
- The Illinois landlord's guide to security deposits
- The Multi-Board 8.0 contract, paragraph by paragraph
- The Chicago RLTO summary for landlords
- The Cook County RTLO for suburban landlords
- Form the rental LLC before you close
- Chicago closing attorney, flat fee
Sources
- 765 ILCS 710/1 and 710/1.1, Security Deposit Return Act (ilga.gov, read 2026-10-12)
- 735 ILCS 5/9-215 and 5/9-216, remedies of the grantee and the lessee after a transfer (read 2026-10-12)
- Chicago Municipal Code 5-12-020, 5-12-030, 5-12-080, 5-12-090, 5-12-170 (RLTO; American Legal Publishing, current edition, read 2026-10-12)
- Cook County Code Secs. 42-102, 42-103, 42-111 (Residential Tenant and Landlord Ordinance; Municode, Supplement 63, read 2026-10-12). These sections were formerly numbered 42-802, 42-803 and 42-811.
- Multi-Board Residential Real Estate Contract 8.0, Paragraphs 12, 13, 19, 24, and 37