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How Chicago Residential Landlords Should Handle Security Deposits

Written by: Barry Benjamin Kreisler

Reputation Level 11

Landlord / Tenant Real Estate

Posted almost 3 years ago. Applies to Chicago, IL, 2 helpful votes, 0 comments

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Who is subject to the ordinance?

Chicago’s Residential Landlord and Tenant Ordinance (“RLTO”) has very specific requirements as to the handling of security deposits by Chicago residential landlords and significant penalties for violation. RLTO is applicable to most Chicago residential landlords, the exceptions being: • apartments in owner-occupied buildings containing six (6) units or less, • housing in facilities such as hospitals, convents, extended care facilities or school dormitories, • a dwelling unit occupied by a purchaser prior to transfer of title pursuant to a real estate purchase contract or by a seller after transfer of title, • an apartment occupied by an employee of a landlord whose right to occupancy is conditioned upon employment in or around the premises or • an apartment in a cooperative building occupied by a holder of a proprietary lease.

Requirement of Receipt for the Deposit.

Chicago's RLTO is very specific as to the requirement that a receipt be given for the security deposit. The receipt must be given when the deposit is made. It must be signed by the person receiving the deposit and must include the name of the person receiving the deposit and the name of the landlord, if the person receiving the deposit is not the landlord. The receipt must also include the amount of the deposit, the date it was made and a description of the apartment for which the deposit was made. If a receipt meeting these requirements is not given, the tenant is entitled to return of the security deposit and to damages against the landlord of double the amount of the security deposit plus interest at 5% per annum.

Requirements foor Holding the Security Deposit.

A landlord may not use the tenant's security deposit in any way until after the tenant has vacated the apartment. Until then, the landlord must keep the security deposit in a federally insured bank account, completely separate from the landlord’s other funds. The landlord may not even accept payment of the tenant's first month's rent and security deposit in a single check, because by depositing that check the landlord is commingling the security deposit funds with his own funds. The landlord must pay the tenant interest each year on the security deposit (if held more than six months) within 30 days after the end of each 12 month rental period at a rate set by the City of Chicago annually. If a landlord fails to meet these requirements, he may be liable to the tenant for damages of double the amount of the security deposit plus interest at 5% per annum.

Requirements for Return of the Security Deposit

A Chicago landlord must return the tenant's security deposit within 45 days after the tenant vacates the apartment. The landlord may only make deductions from the amount of the security deposit for unpaid rent validly withheld or deducted, or for the reasonable amount necessary to repair any damage the tenant caused, not counting reasonable wear and tear on the apartment from the tenant's use. If a landlord does deduct any amount for damage, he must provide the tenant with an itemized statement of the repair costs, supported by paid receipts or certifications, for any work performed by the landlord's employees. If the landlord fails to meet these requirements, he may be liable to the tenant for damages of double the amount of the security deposit plus interest at 5% per annum plus the tenant's attorney fees and court costs.