THE CHICAGO RESIDENTIAL LANDLORD
AND TENANT ORDINANCE (RLTO)

SELECTED PROVISIONS AND COMMENTARY

By: Paul Bernstein, Attorney at Law

Section 5-12-080 - Security Deposits. (a) 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 security deposit and interest due thereon shall continue to be the property of the tenant making such deposit, shall not be commingled with the assets of the landlord, and shall not be subject to the claims of any creditor of the landlord or of the landlord's successors in interest, including a foreclosing mortgagee or trustee in bankruptcy.

Commentary: These requirements are very precise:

All security deposits must be held in a federally insured, interest bearing account,

In a bank or savings and loan association or other financial institution,

Within the State of Illinois.

No commingling of the security deposit and interest thereon is allowed.

Thus, landlords must maintain all security deposit money in a separate account and only security deposit money and interest thereon may be in said account.

(b) Any landlord or landlord's agent 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 an 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. Failure to comply with this subsection shall entitle the tenant to immediate return of security deposit.

Commentary: A proper receipt must be given for the security deposit. If a receipt is not given, the tenant can obtain the immediate return of the security deposit.

(c) A landlord who holds a security deposit or prepaid rent pursuant to this section for more than six months, after the effective date of this Chapter shall pay interest to the tenant accruing from the beginning date of the rental term specified in the rental agreement at the rate of five percent per year. 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.

(This section has recently been revised and provides for a lower rate of interest.)

Commentary: Interest at per annum rate specified by in the RLTO is due to be paid or credited to the tenant every twelve months. In the case of a lease for several years, interest must be paid annually.

(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 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 and interest due thereon for the following:

Commentary: The security deposit must be returned as provided for within certain time limits.

(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 for 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.

Commentary: Note the procedures set forth. Also note that 'reasonable wear and tear' is excluded from what the landlord may charge the tenant for.

(e) In the event of a sale, lease, transfer or other direct or indirect disposition of residential real property, other than to the holder of a lien interest in such property, by a landlord who has received a security deposit or prepaid rent from a tenant, the successor landlord of such property shall be liable to that tenant for any security deposit, including statutory interest or prepaid rent which the tenant has paid to the transferor.

Commentary: The successor landlord is liable to the tenant for any security deposit the tenant provided to the original landlord.

The successor landlord shall, within 10 days from the date of such transfer, notify the tenant who made such security deposit by delivering or mailing to the tenant's last known address that such security deposit was transferred to the successor landlord and that the successor landlord is holding said security deposit. Such notice shall also contain the successor landlord's name, business address, and business telephone number of the successor landlord's agent, if any. The notice shall be in writing. The transferor shall remain jointly and severally liable with the successor landlord to the tenant for such security deposit or prepaid rent, unless and until such transferor transfers said security deposit or prepaid rent to the successor landlord and provides notice, in writing, to the tenant of such transfer of said security deposit or prepaid rent, specifying the name, business address and business telephone number of the successor landlord or his agent within 10 days of said transfer.

Commentary: In addition to the new landlord being liable to the tenant, the former landlord continues to be liable as well unless and until the former landlord transfers the security deposit to the successor and sends the tenant written notice as provided for.

(f) If the landlord or landlord's agent 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 five percent. This subsection does not preclude the tenant from recovering other damages to which he may be entitled under this Chapter.

Commentary: Damages to the tenant for the landlord's failure to comply with 'any provision of Sub-Sections (a) to (e)' is two times the amount of the security deposit, plus interest at five percent. These damages apply even to the failure to pay the interest on the security deposit.