If you own any rental property in Chicago, you should be aware of the Chicago Residential Landlord Tenant Ordinance (RLTO). Because of its pro-tenant stance, the ordinance may cause issues for many small landlords. Landlords who require security deposits must keep them in separate interest-bearing bank accounts. The bank accounts must pay more than the ordinance-mandated interest rate. The RLTO requires Landlord to provide a written receipt of the deposit and pay interest to their tenants on an annual basis. When the tenant moves out, the landlord has 45 days to inspect the unit, receive estimates for repairs, and complete the repairs. The landlord must return the security deposit with interest to the tenant. If the landlord fails to comply, he/she is subject to a penalty.
Amendments to the Residential Landlord Tenant Ordinance
In June 2010, Chicago amended the RLTO. Although the ordinance is slightly more neutral, the RLTO remains a draconian statute. The ordinance requires landlords to provide tenants with their account information at the time of receiving a security deposit. If landlords fail to do this, they are subject 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. However, they must transfer the security deposit into a segregated account within 14 days. If a landlord fails to make the transfer, the RLTO subjects him/her to a penalty of twice the security deposit.
Avoiding the Residential Landlord Tenant Ordinance
Clever landlords discovered a way to avoid RLTO’s problems and pitfalls. Many landlords no longer require security deposits. Instead, they request non-refundable administrative fees equal to one month’s rent. The lease must specify that the fee is not a security deposit and that it will not be returned. The lease should also provide that the landlord does not require a security deposit. The form leases used by many small or private landlords do not contain provisions that allow 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 the landlord provided a summary of the RLTO to the tenant, which is required. Because the RLTO imposes harsh penalties on landlords, an attorney written lease (as opposed to a form purchased from a stationary store) is a good idea. The upfront cost of an attorney written lease saves landlords from future legal costs.
We have extensive experience defending landlords in RLTO lawsuits and would be happy to discuss creating a lease for you. Feel free to contact us at if you would like our law firm to review your current lease and provide suggestions for a nominal flat fee. If you received a letter from an attorney representing a present or former tenant, you should contact a lawyer immediately.