Do You Own Rental Property in Chicago?

Landlords Beware

If you own any rental property in Chicago you should be aware of the Chicago Residential Landlord Tenant Ordinance (RLTO). The ordinance has been a continual thorn in the sides of small or private landlords throughout Chicago because of its pro-tenant stance and draconian punishments. Landlords who require security deposits must keep those deposits in separate, interest-bearing, bank accounts and must make sure that the bank account pays more than the ordinance-mandated interest rate. Landlords have to provide a written receipt for the security deposit and must pay interest to their tenant on an annual basis. When the tenant moves out, the landlord has forty-five days to (1) inspect the unit; (2) get estimates for any repairs (which must be provided to the tenant within thirty days of the tenants moving out); and (3) have those repairs made. Any remaining security deposit (including interest) has to be returned to the tenant, along with paid receipts for any deduction to the deposit, within forty-five days of the tenants moving out. Failure to do any of these items within the time allowed subjects a landlord to a penalty equal to two times the security deposit plus attorney’s fees.

Amendments to the Residential Landlord Tenant Ordinance

In June 2010, the RLTO was amended. Though it is now slightly more landlord friendly, the RLTO remains a draconian statute. Landlords are now required to provide tenants with their security deposit account information at the time of receiving a security deposit. Failure to provide this information subjects the landlord to a penalty equal to twice the security deposit plus attorney’s fees.

Landlords can now accept the first month’s rent and security deposit in the same check but they must transfer the security deposit into a segregated account within 14 days. If a landlord fails to make the transfer, he or she will be subject to a penalty of twice the security deposit.

Avoiding the Residential Landlord Tenant Ordinance

Clever landlords have discovered a way to avoid the RLTO’s problems and pitfalls – stop requiring security deposits and, instead, require non-refundable administrative fees equal to one month’s rent. The lease must specify that the fee is not a security deposit and it must specify that the fee will not be returned at the end of the lease. The lease should also provide that no security deposit is required or being accepted.

The form leases used by many small or private landlords do not contain provisions allowing for these administrative fees; they almost uniformly provide for security deposits. Despite referring to security deposits, they fail to identify the bank account in which the deposit is maintained (a requirement of the RLTO). Many of those leases also fail to document that a summary of the RLTO was provided to the tenant (another requirement of the RLTO whose violation subjects a landlord to a $100 penalty). Because of the harsh penalties imposed by the RLTO, a lease created by an attorney (as opposed to a form purchased from a stationary store) is a good idea. The upfront cost of having a lease created, usually less than $600, can be recouped over time through savings on litigation from unruly or unscrupulous tenants.

We have extensive experience defending landlords in RLTO lawsuits and would be happy to discuss creating a lease for you that avoids the problems created by the RLTO. Feel free to contact us at 312-223-1699 if you would like our law firm to review your current lease and provide suggestions for a nominal flat fee.

In addition, our law firm is happy to provide you with a copy of the Residential Landlord Tenant Ordinance. If you have received a letter from an attorney representing a present or former tenant you should contact a lawyer immediately.