Most landlords consider taking a security deposit form their tenants an essential part of the lease agreement. In most circumstances, there are very good reasons for taking a security deposit, as it provides the landlord some financial coverage in the event the tenant stops paying rent or returns the property damages.
Unfortunately, notwithstanding these obvious benefits, landlords taking security deposits for Chicago residential apartments, condominiums, or single family homes, do so at great peril thanks to the Chicago Residential Landlord Tenant Ordinance (“CRLTO”) Chicago Municipal Code 5-12-010 through 180. While the CRLTO does not prohibit taking security deposits from Chicago residential tenants, it sets forth stringent and complex requirements on Landlords who chose to do so, and allows disgruntled tenants to sue their landlords for violations of the same.
These requirements are set out in CRLTO 5-12-080, and provide in relevant parts that:
(a)(1) A landlord shall hold all security deposits received by him in a federally insured interest-bearing account in a bank, savings and loan association or other financial institution located in the State of Illinois…
(a)(3) The name and address of the financial institution where the security deposit will be deposited shall be clearly and conspicuously disclosed in the written rental agreement signed by the tenant…
(b)(1) Except as provider for in subsection (b)(2), any landlord who receives a security deposit from a tenant or prospective tenant shall give said tenant or prospective tenant at the time of receiving such security deposit a receipt indicating the amount of such security deposit, the name of the person receiving it and, in the case of the agent, the name of the landlord for whom such security deposit is received, the date on which it is received, and a description of the dwelling unit. The receipt shall be signed by the person receiving the security deposit…..
(c) A landlord who holds a security deposit or prepaid rent pursuant to this section for more than six months shall pay interest to the tenant accruing from the beginning date of the rental term specified in the rental agreement at the rate determined in accordance with Section 5-12-081 for the year in which the rental agreement was entered into. The landlord shall, within 30 days after the end of each 12-month rental period, pay to the tenant any interest, by cash or credit to be applied to the rent due.
(d) The landlord shall, within 45 days after the date that the tenant vacates the dwelling unit or within 7 days after the date that the tenant provides notice of termination of the rental agreement pursuant to Section Section 5-12-110(g), return to the tenant the security deposit or any balance thereof and the required interest thereon; provided, however, that the landlord may deduct from such security deposit or interest due thereon for the following:
(1) any unpaid rent which has not been validly withheld or deducted pursuant to state or federal law or local ordinance; and
(2) a reasonable amount necessary to repair any damage caused to the premises by the tenant or any person under the tenant’s control or on the premises with the tenant’s consent, reasonable wear and tear excluded. In case of such damage, the landlord shall deliver or mail to the last known address of the tenant within 30 days an itemized statement of the damages allegedly caused to the premises and the estimated or actual cost for repairing or replacing each item on that statement, attaching copies of the paid receipts for the repair or replacement. If estimated cost is given, the landlord shall furnish the tenant with copies of paid receipts or a certification of actual costs of repairs of damage if the work was performed by the landlord’s employees within 30 days from the date the statement showing estimated cost was furnished to the tenant.
As should be apparent from a perusal of this section, the security deposit requirements are onerous and quite difficult to fully comply with. Even professional management companies often fall short of full compliance despite best efforts. Unfortunately, the consequences for violating these regulations can be severe. CRLTO section 5-12-080(f)(1) provides the statutory penalty for violations of 5-12-080 security deposit regulations, and states that:
Subject to subsection (f)(2), if the landlord fails to comply with any provision of Section 5-12-080 (a) — (e), the tenant shall be awarded damages in an amount equal to two times the security deposit plus interest at a rate determined in accordance with Section 5-12-081. This subsection does not preclude the tenant from recovering other damages to which he may be entitled under this chapter. Emphasis added.
The Illinois Supreme Court has found that subsection (f) of section 5-12-080 imposes automatic liability for a violation of its terms. See Landis v. Marc Realty, LLC, 919 NE 2d 300 – Ill: Supreme Court 2009. Furthermore, a landlord’s duty to comply with the statute is absolute. Lawrence v. Regent Realty Group, Inc., 754 NE 2d 334 – Ill: Supreme Court 2001, at 339. Emphasis added. This means that even inconsequential and unintentional violations of the CRLTO will make landlord automatically liable to tenant for 2 times the security deposit. If this weren’t enough, CRLTO 5-12-180 provides that a prevailing tenant can also make the Landlord be responsible for his or attorneys fees and costs incurred in the litigation.
Given the serious exposure to liability as outlined above, The Law Offices of Vladimir A. Uman, P.C. strongly discourages most residential landlords in Chicago from taking security deposits. The risks are generally not worth the financial protection the security deposit offers. Call our office today at 773-521-7201 or contact attorney Uman via email at firstname.lastname@example.org for a consultation regarding your rights and obligations under the CRLTO or to review your lease for compliance.