Foreclosure-Era Relocation Fees and Good-Faith Lease Renewals Are Not Per Se Takings When They Function as Landlord–Tenant Regulation

I. Introduction

In BBLI Edison, LLC v. City of Chicago (7th Cir. July 22, 2026), the Seventh Circuit addressed whether Chicago’s Keep Chicago Renting Ordinance (as amended in 2021) effects an unconstitutional taking when it (1) requires a purchaser of a residential rental building through foreclosure to negotiate in good faith for new 12‑month leases with existing tenants, and (2) requires payment of a fixed $10,600 “relocation assistance” fee to a tenant who does not sign a new lease.

The plaintiff, BBLI Edison, LLC, acquired a large apartment building at 5200 North Sheridan Road via sheriff’s deed after foreclosure. With more than 220 tenants in place, BBLI alleged that the Ordinance—especially the mandatory cash payment triggered by tenants declining renewal—constituted a taking under the Fifth Amendment (as incorporated against the States).

The central issues were whether the Ordinance constitutes (a) a per se (physical) taking by compelled transfer of money, (b) a regulatory taking under Penn Cent. Transp. Co. v. City of New York, or (c) an unconstitutional condition/exaction failing Nollan/Dolan scrutiny.

II. Summary of the Opinion

The Seventh Circuit affirmed dismissal of BBLI’s complaint. The court held:

  • The Ordinance is not a per se (physical) taking because it is best understood as a regulation of the landlord–tenant relationship, akin to rent control and similar economic regulations long treated as non-per-se.
  • The Ordinance is not a regulatory taking under Penn Central, because BBLI did not plead meaningful facts showing severe economic impact, and its investment-backed expectations were weak given it acquired the property after the Ordinance’s enactment.
  • The Ordinance is not an unconstitutional condition/exaction; the exactions framework is a poor fit outside the permitting context, and in any event BBLI did not plausibly allege lack of nexus or disproportionality.

Importantly, the panel emphasized it was applying “today’s” Supreme Court precedent and expressed no view on the Ordinance’s policy wisdom.

III. Analysis

A. Precedents Cited

1. Core “physical taking” framework and its expansionary trend

The opinion begins by situating the dispute within modern takings doctrine’s renewed vigor. It invokes Sheetz v. County of El Dorado, Knick v. Township of Scott, and Cedar Point Nursery v. Hassid to underscore that the Takings Clause is not a “poor relation” and that physical takings can occur even when the government acts by regulation.

  • Sheetz v. County of El Dorado, 601 U.S. 267 (2024): cited for incorporation against the States and for the Court’s contemporary attention to takings limits on government leverage. The Seventh Circuit also uses Sheetz to highlight an unresolved question—whether class-wide permit conditions must be tailored as specifically as individualized ones—while distinguishing Chicago’s ordinance from permitting exactions.
  • Knick v. Township of Scott, 588 U.S. 180 (2019): used to signal the Court’s insistence that takings claims are judicially enforceable without state-litigation exhaustion. This supports the panel’s framing that takings claims are serious and commonly litigated—without implying BBLI’s claim is substantively correct.
  • Cedar Point Nursery v. Hassid, 594 U.S. 139 (2021): cited for the principle that the “essential question” for a physical taking is whether the government has physically taken property for itself or others, and that even temporary access rights can be per se takings. The Seventh Circuit leverages Cedar Point mainly as doctrinal context, then pivots to landlord–tenant precedents that constrain BBLI’s theory.
  • Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (2005) and Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982): cited for the canonical rule that permanent physical invasions (even minor) are per se takings. The panel cites Loretto again for a distinct proposition: states have broad power to regulate housing and the landlord–tenant relationship without compensating for all economic injuries.
  • Horne v. Dep't of Agric., 576 U.S. 350 (2015) and Tyler v. Hennepin County, 598 U.S. 631 (2023): used to emphasize that takings doctrine can extend beyond land to personal property and even money-like interests. This background is important because BBLI’s strongest rhetorical move is to characterize the $10,600 payment as compelled transfer of money (a “taking”).
  • Pung v. Isabella County, 146 S. Ct. 1964 (2026): cited in passing to illustrate the Court’s attention to “just compensation” methodology. It plays little role in the holding, but reinforces that modern takings law is active and evolving.

2. The limiting principle: landlord–tenant economic regulation is not per se

Having acknowledged the Supreme Court’s broader takings trajectory, the Seventh Circuit anchors its outcome in the older, specific line of authority distinguishing landlord–tenant regulation from physical appropriation.

  • Yee v. City of Escondido, 503 U.S. 519 (1992): the panel’s key citation for the proposition that wealth transfers inherent in regulation (including rent control) do not convert regulation into a physical invasion. Yee supplies two moves the Seventh Circuit repeats: (1) landlord–tenant rules are typically “use” regulations, not per se physical takings; and (2) rent control often transfers wealth, yet remains non-per-se.
  • F.C.C. v. Fla. Power Corp., 480 U.S. 245 (1987): quoted for the broad rule that “statutes regulating the economic relations of landlords and tenants are not per se takings.” This line becomes the panel’s decisive doctrinal constraint even while recognizing modern takings expansion elsewhere.
  • Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982): beyond its physical-invasion rule, Loretto is used for its express affirmation of “broad power” to regulate housing and the landlord–tenant relationship.
  • Koontz v. St. Johns River Water Mgmt. Dist., 570 U.S. 595 (2013): invoked by BBLI (and considered seriously by the panel) for the idea that demands for money tied to a specific property interest can trigger per se analysis. The Seventh Circuit narrows Koontz to the land-use permitting/exactions context rather than treating it as a general rule that any property-linked monetary obligation is a per se taking.

3. Persuasive authority: relocation fees as rent-control analogues

  • Ballinger v. City of Oakland, 24 F.4th 1287 (9th Cir. 2022): provides the closest factual analogue. The Seventh Circuit adopts Ballinger’s characterization of relocation fees as resembling rent control and thus not constituting a physical taking. The court acknowledges a factual distinction—Oakland’s fee was triggered by landlord eviction, Chicago’s by tenant nonrenewal—but finds it non-dispositive because both regimes regulate resettlement costs attendant to ending tenancies after specified events.

4. Vertical stare decisis: why the court declines to extend modern takings doctrine

  • Hohn v. United States, 524 U.S. 236 (1998): cited for the principle that lower courts must follow Supreme Court precedent until the Court revisits it.
  • NLRB v. Constellium Rolled Prods. Ravenswood, LLC, 43 F.4th 395 (4th Cir. 2022) and Int'l Union of Operating Eng'rs, Stationary Eng'rs, Loc. 39 v. NLRB, 155 F.4th 1023 (9th Cir. 2025): cited as reminders of lower courts’ institutional role—apply the law “as it stands,” not as it might become.

5. Regulatory takings and pleading burdens

  • Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104 (1978): provides the three-factor balancing test used to evaluate partial regulatory takings.
  • Keene v. Consolidation Coal Co., 645 F.3d 844 (7th Cir. 2011): supports dismissal where a plaintiff fails to plead concrete facts about economic impact necessary to make out a taking.
  • Goodpaster v. City of Indianapolis, 736 F.3d 1060 (7th Cir. 2013): used to underscore that regulated entities should anticipate foreseeable regulatory environments, weakening “investment-backed expectations.”
  • Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211 (1986): cited on the “character of the government action” factor—public programs adjusting economic benefits and burdens generally do not constitute takings.

6. Unconstitutional conditions/exactions framework

  • Nollan v. Cal. Coastal Comm'n, 483 U.S. 825 (1987) and Dolan v. City of Tigard, 512 U.S. 374 (1994): establish “essential nexus” and “rough proportionality” requirements for permit conditions.
  • Sheetz v. County of El Dorado, 601 U.S. 267 (2024): provides the contemporary articulation of the Nollan/Dolan framework and reinforces that the doctrine polices government leverage in permitting.
  • Koontz v. St. Johns River Water Mgmt. Dist., 570 U.S. 595 (2013): cited for applying the doctrine to monetary exactions demanded in the permitting process, and for describing the anti-extortion purpose of the test.

B. Legal Reasoning

1. Why the court rejects a per se (physical) takings theory

BBLI’s per se theory depended on reframing the relocation fee as a compelled transfer of funds tied to identifiable property—newly foreclosed rental buildings. The Seventh Circuit accepted that Koontz contains language that, read broadly, could support per se analysis for some monetary obligations linked to property. But the panel declined to extend Koontz beyond the permitting/exactions setting.

The decisive reasoning is categorical: Chicago’s ordinance “first and foremost regulates the landlord-tenant relationship”, and Supreme Court cases treat such economic regulation as outside per se physical takings doctrine. The panel views the relocation payment as a form of “wealth transfer” common to rent control and other housing regulations. Under Yee and F.C.C. v. Fla. Power Corp., that kind of economic burden—standing alone—does not equal a compelled physical occupation or appropriation.

The opinion also offers a functional characterization: the fee requirement operates as an indirect (if “clunky”) rent-control-like mechanism, since landlords must offer lease terms more attractive than $10,600 to keep tenants.

Finally, the panel frames its restraint as an application of vertical stare decisis: even if broader Supreme Court trends suggest future movement, lower courts must apply the specific landlord–tenant precedents that remain on the books.

2. Why the court rejects a regulatory takings claim under Penn Central

The court applies the three Penn Central factors and finds all favor Chicago, emphasizing the procedural posture (a motion to dismiss) and BBLI’s pleading choices.

  • Economic impact: BBLI pleaded few facts about whether the fee and negotiation duties made the property economically infeasible to operate. The Seventh Circuit treats this as fatal at the pleading stage, relying on Keene v. Consolidation Coal Co. for the need to plead plaintiff-specific economic impact rather than abstract assertions.
  • Interference with reasonable investment-backed expectations: BBLI acquired the building after the 2021 ordinance; thus the regulation was part of the background legal environment. The court analogizes to Goodpaster v. City of Indianapolis, emphasizing foreseeability and the expectation that market entrants price in existing regulation.
  • Character of the government action: the Ordinance is a social-welfare housing regulation adjusting economic burdens and benefits, fitting Connolly v. Pension Benefit Guar. Corp.’s description of public programs that typically do not amount to takings.

3. Why the court rejects an unconstitutional conditions/exactions challenge

BBLI attempted to invoke Nollan/Dolan scrutiny (as discussed in Sheetz and Koontz) by analogizing the relocation fee to an “exaction.” The panel’s first response is structural: the exactions test polices government leverage in a permitting process, where the government conditions approval of a requested entitlement on a surrender of property. Chicago’s ordinance, by contrast, is a direct legislative mandate triggered by tenant nonrenewal and does not involve a permit denial or discretionary administrative leverage.

Even if the court “shoehorned” the ordinance into exactions doctrine, BBLI still failed: the City’s interest—keeping residents housed and mitigating foreclosure harms—supplied an “essential nexus,” and BBLI pleaded no plausible facts showing the $10,600 amount was not roughly proportional (e.g., by alleging actual relocation costs, market effects, or disproportionality metrics).

C. Impact

1. Near-term doctrinal impact in the Seventh Circuit

The decision strengthens a clear rule within the Seventh Circuit: fixed relocation assistance payments tied to termination/nonrenewal of tenancies in foreclosure-acquired buildings are unlikely to be treated as per se takings, at least when framed as landlord–tenant economic regulation rather than compelled physical occupation or appropriation.

The opinion also reinforces pleading discipline for takings plaintiffs: regulatory takings claims require plaintiff-specific economic facts, especially on “economic impact,” and courts may dismiss where a plaintiff declines to amend.

2. Practical effects for municipalities and housing regulation

Municipalities can read the case as support for the constitutionality (under current precedent) of tenant-protective measures in the foreclosure context, including: (a) mandated good-faith lease negotiations and (b) standardized relocation payments, so long as they remain within the lane of landlord–tenant regulation and avoid compelled physical occupation or classic exactions.

3. Signals for future Supreme Court litigation

The opinion candidly notes tension between (i) modern expansions in takings doctrine (e.g., Cedar Point Nursery, Tyler, Koontz) and (ii) the older landlord–tenant line (Yee, Loretto, F.C.C. v. Fla. Power Corp.). By explicitly choosing the latter based on stare decisis, the Seventh Circuit implicitly invites the observation that any major shift—treating property-linked monetary mandates in housing regulation as per se takings—would likely need to come from the Supreme Court.

IV. Complex Concepts Simplified

  • Per se (physical) taking: A taking that is automatically compensable because the government physically appropriates property or compels a physical occupation/access right—no balancing required.
  • Regulatory taking: A claim that a regulation restricts property use so severely that it is “tantamount” to a taking. Most are evaluated under Penn Central, which balances multiple factors.
  • Penn Central factors: Courts look at (1) economic impact, (2) interference with reasonable investment-backed expectations, and (3) the character of the government action.
  • Exaction / unconstitutional condition: In land-use permitting, the government cannot demand property or money as the price of a permit unless the condition has an essential nexus to the project’s impacts and is roughly proportional to those impacts (Nollan/Dolan, applied to some monetary demands in Koontz).
  • Wealth transfer vs. taking: Many regulations shift economic value between private parties (e.g., rent control). Under Yee, that fact alone does not transform a regulation into a physical invasion.
  • Pleading stage significance: At a motion to dismiss, the plaintiff must allege enough concrete facts to make the claim plausible. The Seventh Circuit faulted BBLI for not alleging facts showing severe economic impact or disproportionality.

V. Conclusion

BBLI Edison, LLC v. City of Chicago reaffirms a practical and doctrinal boundary in takings law: even when a housing ordinance mandates a substantial cash payment, courts may treat it as non-per-se landlord–tenant economic regulation—closer to rent control than to compelled occupation or property appropriation—so long as existing Supreme Court precedents like Yee and F.C.C. v. Fla. Power Corp. remain controlling.

The decision also underscores that regulatory takings claims require concrete allegations tied to the plaintiff’s circumstances and that exactions doctrine is unlikely to apply where the government is not leveraging a permit or similar discretionary approval. In the broader legal landscape, the opinion is a careful exercise in stare decisis amid evolving Supreme Court takings jurisprudence—applying the law as it stands, while acknowledging crosscurrents that may fuel future challenges.