Knowing your rights regarding security deposits can equal time and, more important, money. In this equation, however, more is less, and more is more.
In other words: The more you know about security deposits, the less time you’ll spend hassling with your landlord over them. And the more you know about security deposits, the more money you’ll likely get back when you move out.
That process begins upfront, before a renter forks over the cash that will be held as a kind of collateral for possible damages that may be inflicted on the apartment during the lease term. It’s up to the landlord and tenant to negotiate the amount of the security deposit, though one month’s rent is common in the Chicago area, according to local housing experts.
After the initial negotiation and payment of the deposit, most renters probably don’t think about the security deposit again until they decide it’s time to move. A bit of elbow grease and a touch of Spackle on the walls later, many renters move on to their new abode and wait by the mailbox for the check. Unfortunately, many renters are disappointed when: (a.) They get a check for less than they expected, or (b.) They don’t get any check at all.
Meanwhile, most feel they deserved (c.) A refund of the full amount. It’s usually about that time that renters start researching the law as it pertains to security deposits. Fortunately, for Chicago-area apartment dwellers, security deposit laws-and the penalties for breaking them-are very well-defined.
Under Chicago’s Residential Landlord-Tenant Ordinance, landlords are required to keep each tenant’s security deposit in a federally insured savings account, and the lessor is required to pay the renter 5 percent interest annually on the security deposit.
The security deposit provisions of the ordinance, however, do not apply to owner-occupied buildings of six or fewer units. Likewise, some suburbs, such as Evanston and Mt. Prospect, have their own local ordinances with specific rules relating to security deposits.
In both exempted Chicago units and suburbs that don’t have individual ordinances, state statutes on security deposits apply.
Unlike the Chicago ordinance, which requires landlords to pay 5 percent annual interest on deposits, the Illinois law requires owners of buildings or connected complexes with more than 25 units to pay interest on the deposit based on bank passbook interest rates, which are running less than 2 percent.
The main security deposit provisions of the Illinois statutes require owners of more than 5 units to deliver a statement of any deductions made because of damage to the tenant within 30 days of when the apartment is vacated. Under the Illinois law, all landlords-even those who own fewer than 5 units-must return the deposit within 45 days unless they have documented damage.
The Chicago ordinance requires that covered landlords pay back the security deposit to the tenant within 45 days after the end of the lease term; however, landlords must notify tenants-in writing-within 30 days if there are going to be any deductions. A notification of deductions should also include copies of receipts for repairs that have been made or estimates of work that will need to be done. If the landlord provides estimates, he or she must, within an additional 30 days, provide receipts and certification that the work was done.
While those basics have been in place since the Landlord-Tenant Ordinance was first passed in the mid-1980s, the laws were amended in January 1992 with several provisions relating to security deposits that “many landlords and tenants still aren’t totally aware of,” says William Wilen, director of housing litigation for the Legal Assistance Foundation of Chicago.
The amendments
First, the amended ordinance clarifies the date that interest on a security deposit begins accruing. Under the revised ordinance, interest begins accruing from the beginning of the lease term, even if the tenant pays the security deposit before that date, Wilen says.
While the law allows a landlord 45 days after the tenant has vacated the apartment to return the deposit, the amended ordinance cuts that period to seven days if the rental agreement is terminated in the event of a fire or catastrophic occurrence. “The thinking is that if people can’t live in the building because of a fire (or some other catastrophe), they need the security deposit to move into a new place,” Wilen says.
Another ordinance change helps remove a landlord’s liability when he or she sells the building. The new rule requires a building owner to transfer the deposits to the new owner and notify tenants of the transfer after the building has been sold. This way, Wilen says, “the selling landlord can protect himself from a subsequent lawsuit and the tenant has some proof that there has been a transfer of the (security) deposit.”
The amended ordinance also requires that landlords pay interest on both security deposits and prepaid rents. In the past, Wilen says, some landlords required tenants to pay what they referred to as “last month’s rent” instead of a “security deposit,” Wilen says. “The last month’s rent is a security deposit for all practical purposes.”
There is one important situation where the distinction between “last month’s rent” and “security deposit” does apply, however: when tenants live out the last month of their lease on their security deposit instead of paying rent.
“A regular security deposit is not the same thing as paying the last month’s rent in advance,” says Julia Goode, fair housing coordinator for the Metropolitan Tenants Organization. “Unless something’s been worked out between the landlord and tenant in advance, the tenant doesn’t have any legal right not to pay the last month’s rent.”
Goode notes that even though a tenant who doesn’t pay the last month’s rent may move out before an eviction can be completed, the landlord can still go to court. “A court judgment against you will probably affect your credit rating,” she says.
While a black mark on a tenant’s credit may be a slap on the wrist, the penalties for landlords who violate the ordinance’s provisions on security deposits are much harsher. If a landlord is guilty of any violation of the security deposit provisions of the ordinance-whether it be a failure to pay interest, not keeping the money in a separate bank account or not following the procedures and time frames-renters can sue in either pro se or small claims court for twice the amount of the deposit, interest owed and legal costs.
While both pro se and small claims court are easily navigated by the average renter, both require upfront fees for filing costs. And often in pro se court, judges will award tenants the amount they’re disputing and court filing fees, but not twice the amount of the deposit, says Ralph Scott, executive director of the Rogers Park Tenants Organization.
While that may seem a disincentive to some renters who may not want to hassle over $30 in security deposit interest or $100 in deductions, Scott points out that federal appeals courts have been more consistent in awarding the full amount that is outlined in the ordinance.
Even with recent changes in security deposit laws, the problems that most tenants encounter remain the same as they have been for years, Scott and others claim.
Most common among the problems is that a landlord has failed to give back the security deposit without any explanation or has made bogus or exorbitant deductions for work that is considered decorating, Scott says.
“Landlords are only allowed to use security deposit money for damage done to the apartment, not the normal wear and tear that comes with living there,” Scott says. “I think some landlords bank on tenants not knowing that they can’t be charged for cleaning appliances or shampooing carpets that were left” reasonably clean.
The other common problem many tenants face is from landlords who don’t pay interest on the rent, says Goode. “A good percentage” of Chicago landlords don’t pay interest on security deposits, Goode says, adding that “some don’t (pay interest) because they’re violating the law, and some don’t pay because they don’t know.”
