Tenant Guide: What You Need To Know About Security Deposits
A security deposit is money you are required to pay up-front to protect the landlord against damage to the apartment or non-payment of rent. The typical security deposit is one-month’s rent, although some landlords may request more, because there no law limits the amount of security deposit that a landlord may require or hold. Some landlords even require the first month’s rent, the last month’s rent, and the security deposit to be paid simultaneously at the inception of the lease. This is less common, however, and tenants with good credit should think long and hard before committing to such an arrangement.
The Chicago Residential Landlord and Tenant Ordinance (or CRLTO) requires a landlord to hold all security deposit funds in a federally-insured, interest-bearing, segregated account, to provide the tenant with a security deposit receipt, and to disclose the identity of the financial institution at which the funds are held. The CRLTO also requires the landlord to pay annual interest on the security deposit (at a rate determined annually by the City of Chicago) if the funds are held longer than six months. Within 30 days of the conclusion of the tenancy, the landlord is also required to supply a statement of the cost of repairing any damage caused at the apartment (ordinary wear and tear excepted) and to refund the balance of the security deposit (or the entire deposit) within 45 days.
If the landlord commingles the security deposit, fails to pay annual interest, or fails to refund the balance of the deposit within 45 days after the termination of the lease, the tenant may recover an amount equal to double the security deposit, plus interest and reasonable attorneys’ fees. This punitive and draconian ordinance is legendary in Chicago, and more than a few landlords have been taken to the cleaners for failing to comply.
In fact, because the CRLTO imposes such harsh penalties, and because lawsuits based on technical violations are so common, landlords have begun moving away from security deposits. It is now increasingly common for landlords to demand a nonrefundable “move in fee.” (This is separate from the “move-in fee” that high-rises sometimes impose on new tenants to compensate for loading dock and elevator usage or for repairs to anticipated nicks and dents.) A move-in fee assessed as an alternative to a security deposit can be steep, sometimes as much a half a month’s rent. It eliminates the need to tie up a substantial amount of cash for a full year, but it’s a hefty price to pay, and you don’t get the money back even if you vacate the apartment in pristine condition. In fact, you’ll still be legally liable for any damage.
To ensure the maximum possible refund of your security deposit, carefully inspect the apartment for any damage before or immediately after you move in. bring the damage to the landlord’s attention immediately and, if possible, take photographs to protect the record.
For more information, tenants (and landlords seeking to avoid unpleasant surprises) are advised to consult the domu Security Deposit Guide.