Can your Chicago landlord ask you for a deposit?

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August 4, 2020

Security deposits for rentals in Chicago are subject to strict rules. We can tell you how landlords must handle security deposits.

What’s a security deposit?
Are security deposits legal in Chicago?
When can a Chicago landlord keep your deposit?
What a Chicago landlord can and can’t do with your deposit
Penalties if a landlord in Chicago mishandles a security deposit
Do you have to pay for damages without a security deposit?

What’s a security deposit?

A security deposit is an extra payment collected by a landlord when a tenant moves in. The landlord must return this deposit to the tenant when they move out, but can deduct the costs to repair damages to the apartment or unpaid rent from the deposit if necessary. A security deposit is typically equal to one-month’s rent. In Chicago, there are strict regulations on security deposits. Landlords must promptly return deposits, and have limits on how much they can deduct. 

Security deposits vs. move-in fees

More Chicago landlords are charging move-in fees instead of collecting security deposits. What are the differences?

Security deposit:

  • Refunded when the tenant moves out
  • Usually one month’s rent
  • Higher up-front cost to move in (must front security deposit)

Move-in fee

  • Non-refundable
  • Usually less than half of one month’s rent
  • (Possibly) higher total cost, when including non-refundable fee

Move-in fees are generally less expensive than a security deposit. Therefore, the total up-front cost for a tenant to move in to a new place is lower. However, the landlord must refund the security deposit when a tenant moves out but doesn’t have to refund move-in fees.

Security deposits are legal in Chicago but are subject to strict rules. Landlords are allowed to collect security deposits from tenants but must handle those funds in accordance with city and state laws and return the deposit promptly after a tenant moves out. Any mishandling or improper administration of a security deposit could mean a landlord is liable to pay penalties to a tenant.

Complete guide to security deposit

What about move-in fees?

Non-refundable move-in fees are also legal in Chicago and have become more common as landlords seek to avoid the legal risks they face in collecting security deposits. Move-in fees, sometimes called administrative fees, are a one-time charge for moving in to a building. Landlords must be explicit that this is a non-refundable fee, not a security deposit. The fee should generally be less than half of one month’s rent.

When can a Chicago landlord keep your deposit?

In Chicago, a landlord is only legally allowed to withhold from a security deposit the amount of unpaid rent or the actual cost of repairs to an apartment caused by a tenant. If a landlord keeps money from the deposit to repair damages, they must provide the tenant with actual receipts or a certification of the costs to make repairs. If a landlord withholds extra money from the deposit, or if they fail to properly document the actual costs of repairs, they are in violation of Chicago’s strict Residential Landlord and Tenant Ordinance; a tenant who does not get the proper deposit returned can hold the landlord liable for double the full amount of the deposit.

What a Chicago landlord can and can’t do with your deposit

A landlord must return your deposit within 45 days.

Landlords must return any security deposit to the tenant within 45 days after the tenant vacates their unit. If a lease is terminated because of fire or casualty loss, the landlord must return the deposit within 7 days.

A landlord may deduct unpaid rent and damages.

A landlord may only deduct unpaid rent and the cost to repair damages beyond ordinary wear-and-tear. The landlord must demonstrate the actual cost or repairs. If they don’t do that, they are not allowed to withhold any amount from the security deposit for damages.

Within 30 days after the tenant vacates the unit, the landlord must present the tenant with an itemized statement of damages with estimated or actual cost for repairs. Another 30 days after providing the initial estimate, the landlord must provide copies of paid receipts for repairs or replacements. If the landlord or the landlord’s employees perform the work, the landlord must provide a certification of actual cost.

A landlord must keep deposits separate from their own funds.

The landlord is required to keep deposits in accounts that are legally separate from personal accounts, and are not allowed to spend security deposit funds as their own for any reason. In case the landlord runs into financial trouble, the law shields security deposit funds from the landlord’s creditors.

A landlord must place the security deposit in an interest-bearing account.

Although a landlord may collect a security deposit, they must hold these funds on the tenant’s behalf. The landlord must place a security deposit into an interest-bearing account and must notify the tenant of which bank holds the deposit. The tenant should write the name and address of the bank on the signed rental agreement. 

A landlord must annually pay tenants interest on security deposits.

Each year the landlord must pay out the accrued interest on the security deposit to tenants. The landlord may not keep the interest until the tenant moves out (if the tenant remains in an apartment for more than 1 year).

Each year the city sets a rate based on the interest available on deposits by banks in Chicago. For 2020 the rate is only 0.01 percent. This means for a $3,000 security deposit, a landlord must earn and send to the tenant $0.30 in annual interest. In this era of very low interest rates, the required rate has remained very low—set at 0.01 percent each of the last five years. Although the annual interest is next-to-nothing, a landlord’s failure to earn this interest and return it each year to tenants is a serious breach of the Chicago Residential Landlord and Tenant Ordinance and can result in legal action and penalties against the landlord.

A landlord (or agent) must provide a receipt for the deposit at the time it is received.

At the time a tenant has to hand over a deposit (or when a landlord or agent receives the check), the tenant should receive a written receipt with:

  • Amount received
  • Name of person receiving deposit
  • Name of landlord
  • Date received
  • Description of unit rented
  • Signature of person who received deposit

Penalties if a landlord in Chicago mishandles a security deposit

Chicago’s Residential Landlord and Tenant Ordinance can impose punishing penalties on landlords for even minor infractions. The ordinance requires landlords to pay the tenant double the security deposit for almost any violation. The landlord is also responsible for paying the tenant’s legal fees. The penalty is double the entire security deposit, even if the infraction is only over a small amount, such as the annual interest payment. Lawyers representing tenants often seek to bring a class action on behalf of all tenants in a building, which could put landlords on the hook for paying penalties to each tenant.

Do you have to pay for damages without a security deposit?

Even if a tenant does not pay a security deposit, they are still on the hook for any damages they cause to the apartment and for paying rent. Landlords still have legal recourse to try to recover rent or costs for damage. That said—it may be more costly or cumbersome for them to do so without already holding a security deposit. 

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