diff --git a/dta_service/core/tests/test_property_location_restriction.py b/dta_service/core/tests/test_property_location_restriction.py
new file mode 100644
index 0000000..3b48495
--- /dev/null
+++ b/dta_service/core/tests/test_property_location_restriction.py
@@ -0,0 +1,59 @@
+from django.test import TestCase
+from rest_framework.test import APIClient
+from rest_framework import status
+from core.models import Property, PropertyOwner, User
+from unittest.mock import patch
+
+class PropertyLocationRestrictionTests(TestCase):
+    def setUp(self):
+        self.client = APIClient()
+        self.user = User.objects.create(email="owner@example.com", first_name="Owner", last_name="User", user_type="property_owner")
+        self.owner = PropertyOwner.objects.create(user=self.user)
+        self.client.force_authenticate(user=self.user)
+
+        self.il_property = Property.objects.create(
+            owner=self.owner,
+            address="123 IL St",
+            city="Chicago",
+            state="IL",
+            zip_code="60601",
+            market_value=100000,
+            realestate_api_id=1,
+            property_status="off_market"
+        )
+
+        self.ny_property = Property.objects.create(
+            owner=self.owner,
+            address="456 NY St",
+            city="New York",
+            state="NY",
+            zip_code="10001",
+            market_value=200000,
+            realestate_api_id=2,
+            property_status="off_market"
+        )
+
+    def test_activate_il_property_success(self):
+        # Mock the attorney letter check to pass
+        with patch('core.services.document_service.DocumentService.check_engagement_letter_accepted', return_value=True):
+            response = self.client.patch(
+                f'/api/properties/{self.il_property.id}/',
+                {'property_status': 'active'},
+                format='json'
+            )
+            self.assertEqual(response.status_code, status.HTTP_200_OK)
+            self.il_property.refresh_from_db()
+            self.assertEqual(self.il_property.property_status, 'active')
+
+    def test_activate_ny_property_failure(self):
+        # Mock the attorney letter check to pass (though it shouldn't be reached)
+        with patch('core.services.document_service.DocumentService.check_engagement_letter_accepted', return_value=True):
+            response = self.client.patch(
+                f'/api/properties/{self.ny_property.id}/',
+                {'property_status': 'active'},
+                format='json'
+            )
+            self.assertEqual(response.status_code, status.HTTP_400_BAD_REQUEST)
+            self.assertIn("Only properties in Illinois can be set to active.", str(response.data))
+            self.ny_property.refresh_from_db()
+            self.assertEqual(self.ny_property.property_status, 'off_market')
diff --git a/dta_service/core/views/property.py b/dta_service/core/views/property.py
index b73b95b..6b47b4b 100644
--- a/dta_service/core/views/property.py
+++ b/dta_service/core/views/property.py
@@ -96,6 +96,21 @@ class PropertyViewSet(viewsets.ModelViewSet):
         else:
             serializer.save()
 
+    def perform_update(self, serializer):
+        # Check if status is being set to active
+        new_status = serializer.validated_data.get("property_status")
+        if new_status == "active":
+            # Check state
+            state = serializer.validated_data.get("state", serializer.instance.state)
+            if state != "IL":
+                from rest_framework.exceptions import ValidationError
+
+                raise ValidationError(
+                    {"detail": "Only properties in Illinois can be set to active."}
+                )
+
+        serializer.save()
+
     @action(detail=True, methods=["post"])
     def increment_view_count(self, request, pk=None):
         property_obj = self.get_object()