Worth reading, if only for its somewhat odd logic is the U.S. Court of Appeals for the Seventh Circuit’s opinion in BBLI Edison, LLC v. City of Chicago, No. 25-1713 (July 22, 2026), where the court upheld, against a takings challenge, a city requirement (the “Keep Chicago Renting Ordinance”) that anyone who acquires a rental property via foreclosure must either enter into new minimum one-year leases with any existing tenant who desires to remain, or pay $10,600 if a tenant chooses to vacate.

[Disclosure: this is another one from our shop.]

The Ordinance recited the usual stuff that its “stated purposes are ‘to protect and promote the health, safety, and welfare of [city] residents’ and to ‘mitigate the damaging effects on our communities of foreclosures[.]'” Slip op. at 2. Although labeled a “relocation” payment, tenants who choose (at their sole discretion) to leave rather than execute a new lease, can do whatever he or she wants with the money. Apparently, it’s just free money. Nice.

When BBLI took over ownership of a building, some 220 tenants resided there. Most of the tenants elected to get new long-term leases, but five chose Door Number 2 and opted for the cash money.

Next up, federal takings lawsuit. The district court dismissed for failure to state a claim.

The Seventh Circuit affirmed. The court’s analysis started off well enough: it noted that property rights are not second-class constitutional rights, and repeated the “not a poor relation” truism. “[M]any recent Supreme Court decisions illustrate the protection afforded by the Takings Clause.” Slip op. at 3.

But then the “but” (and there’s almost always a “but,” isn’t there?): “But physical takings are not limitless.” Slip op. at 4. “The government may also impose certain types of requirements on the landlord-tenant relationship without causing a physical taking.” Slip op. at 5. The court concluded that when government is regulating the landlord-tenant relationship, it can never be a categorical taking. The examples given for this proposition are things like requiring compliance with building codes, providing utility connections, mailboxes, smoke detectors, and fire extinguishers.

If this analogy seems like a disconnect to you, it does to us as well. There’s a pretty big difference between things like requiring buildings comply with design and safety standards, and requiring the owner pay a tenant a hefty cash bounty if the tenant, at their sole discretion, decides to leave. The court’s assertion also paints with too broad a brush in our view: the Supreme Court has never concluded that government regulation of the lessor-lessee relationship is subject to its own set of takings rules, carving out cases where the fee simple estate has been divided from the usual rules that if a regulation imposes a physical invasion, the “character” Penn Central factor wins, regardless of the other two (even though it does seem that way, sometimes, when you count the win-loss ratio in these type of cases).

Nonetheless, because “the Ordinance seems to operate as an indirect (and clunky) form of rent control,” the requirement of the cash payment to tenants who choose to leave is merely a regulatory adjustment of the lessor-lessee relationship. Slip op. at 6. Remember that next time you are in court, government attorneys: “Your Honors, Ordinance XYZ is really a clunky form of rent control, so I win.”

And we ask: what form of regulation can’t be seen as a “clunky form or rent control?” Especially when the connection between the regulation and rent control seem pretty tenuous, and the court had to do a bit of stretching: “Current and prospective landlord know that they will need to offer lease terms more valuable than the $10,600 relocation assistance fee to avoid tenants leaving.” Slip op. at 6. Hang on. You mean “rent control” now includes the government using its regulatory power not only as a price control, but also to “encourage” lessors to entice tenants to not voluntarily vacate? Count us skeptical.

The court treated this as a well-worn path (nothing to see here folks, move along), pointing to a Ninth Circuit decision which upheld an ordinance requiring a cash payment from the owner when it tells a tenant to leave:

We are not alone in our conclusion. The Ninth Circuit re-solved a similar question in much the same way. See Ballinger v. City of Oakland, 24 F.4th 1287, 1293 (9th Cir. 2022) (holding a “relocation fee is not an unconstitutional physical taking” in part because it resembles “rent control”).

Slip op. at 6.

The Seventh Circuit kind of pooh-poohed the massive difference between the Oakland payment and Chicago’s: “[t]here the landlord’s decision to evict tenants triggered the relocation fee. See id. at 1291. Under Chicago’s Ordinance, however, tenants decided whether they will renew or opt to receive the fee.” Slip op. at 6. But that’s not important, held the court:

But we do not see this distinction as dispositive. Regardless of which party is the impetus for the termination of the lease, the landlord’s inability to extend it requires that they assist the tenant in re-settling. In short, there is no disputing that the Ordinance regulates an aspect of the landlord-tenant relationship.

Id.

And here’s the curious part. The court acknowledged that reasonable minds can differ on this:

To be sure, BBLI’s position has something to it. The Supreme Court appears to have endorsed the view that “when the government commands the relinquishment of funds linked to a specific, identifiable property interest such as a bank account or parcel of real property, a per se takings approach is the proper mode of analysis.” Koontz, 570 U.S. at 614 (cleaned up); see also Ballinger, 24 F.4th at 1295 (reading Koontz the same way). And it has held that a demand for money satisfied that test when it “direct[ed] the owner of a particular piece of property to make a monetary payment,” and thereby “burdened … ownership of a specific parcel of land.” Koontz, 570 U.S. at 613. Read broadly, this suggests that the Ordinance may amount to a physical taking because it directs the owners of particular pieces of property—newly fore-closed buildings—to make specific monetary payments to their tenants.

Slip op. at 6-7.

The court may be open to new arguments (“In no way are the trends in the Supreme Court’s recent takings cases lost on us.”), but in the end it wasn’t willing to go there: “[b]ut, in light of the state of today’s law, we are not inclined to read Koontz so expansively.” Slip op. at 7. The court noted that it is a lower court, and developing any trends is not their job: “[i]n these situations, the Supreme Court has reminded lower courts of our role. [and we only apply] ‘the law as it is, compelled by decades of precedent, not as what we wish, predict, or think it to be.’ We follow that guidance here. Slip op. at 8 (citations omitted).

Thus, the court moved on to the Penn Central factors, and we know what that meant. The complaint didn’t allege enough about economic impact. Next, the court concluded that the owner had no distinct investment-backed expectations because it “took possession of the property…well after the Ordinance went into effect.” Slip op. at 9. And come on Chicago owners, you should know what percentage of tenants would elect to stay and how many would take the money and run.” A bootstrap rationale where ever-expanding restrictions justify themselves (and no mention of Palazzolo, either). Same with character (mere regulation of the lessor-lessee relationship, no doesn’t look like eminent domain).

This one, and ones like it, remind us of a recent discussion which noted that “[t]he battle over backyard trees is become a significant constitutional showdown.” See “It’s my tree. Why can’t I cut it down?” (Planet Money (June 12, 2026)). Short answer: because it ain’t really your tree. You may think it is your tree, and consequently that because the Constitution protects your right to private property, you have certain rights. But as the courts repeatedly remind us, that’s the Chump’s Constitution not the actual Constitution (you know, the one the courts are willing to enforce — that’s the only real constitution).

That vibe seems the same here. Owners think they have certain rights. It’s my private property, isn’t it? The courts, however, seem to have a different view: no it isn’t, especially when you choose to own rental property. In that case, it really isn’t yours, but is a form of public housing. As as the Seventh Circuit noted, until the Supreme Court does something about it, that’s the awful truth.

More here on the decision from the Wisconsin Law Journal.

BBLI Edison, LLC v. City of Chicago, No. 25-1713 (7th Cir. July 22, 2026)