December 16, 2015

The Decision is in: A Move-In Fee is Not a Security Deposit or Pre-Paid Rent

To avoid the harsh penalties imposed by the Chicago Residential Landlord Tenant Ordinance (RLTO) for security deposit infractions, many landlords have chosen to charge a flat “move-in” fee in lieu of a security deposit. However, until recently, it was not clear whether this practice was legal. Some concerns included:

  • What can a landlord reasonably charge a tenant for a move-in fee? 
  • Must a landlord incur administrative costs to justify a “move-in” fee?
  • What steps are necessary to ensure that the fee is a “move-in” fee and not a security deposit?
  • And will trial judges rule consistently on this issue?

A recent Appellate Court’s decision appears to answer these questions and gives landlords guidance on collecting move-in fees as an alternative to security deposits.

In deciding that a move-in fee is neither a security deposit, nor prepaid rent, the Appellate Court discussed guidelines of what constitutes an acceptable move-in fee that would not be subject to the security deposit provisions of the RLTO.

A landlord who chooses to require a move-in fee rather than a security deposit from a tenant should:

  1. Give the tenant written notice that the fee is non-refundable,
  2. Charge an amount no more than half of the monthly rent,
  3. Require payment of the fee prior to the move-in date (or prior to lease execution, if possible), and
  4. Do not refer to the move-in fee as security for any obligations under the lease. 

Landlords who follow these guidelines from the Appellate Court should feel confident in the practice and minimize their risk of RLTO violation complaints.     

A remaining question when accepting a move-in fee rather than a security deposit is how to recover repair costs when the tenant leaves the unit in a less-than-desirable condition. Although the landlord will not have a security deposit to offset the costs, he or she can still file a breach of contract lawsuit against the tenant once repairs are completed. If the landlord prevails, the trial court will award a judgment against the tenant for the repair charges, plus attorneys’ fees and court costs – which are not recoverable in an eviction action in Chicago. This judgment can then be collected through wage or bank garnishment.

Jessica Ryan is an attorney with Kovitz Shifrin Nesbit. She has extensive experience in forcible entry and detainer issues, covenant and rule enforcement, and collection of damages and fees. Jessica has successfully argued before the Second District Appellate Court and prevailed over Motions brought in the Illinois Supreme Court. She has extensive experience with landlord/tenant litigation and is well-versed in the Chicago Residential Landlord Tenant Ordinance (RLTO).

Disclaimer: Domu, LLC is not a law firm. Domu does not provide legal advice in its newsletter, blog, or in any other forum. Any opinions expressed by Jessica L. Ryan are her own. She is not an agent of Domu. 

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Kirk says

Sun, 02/07/2016 - 11:05pm
Just wanted to say thank you for all the services and information that you provide. I've listed my properties a number of times with domu, and have relied on your documents, information and insight countless times. Thank you for being a resource for us mom and pop landlords to rely on so that we have an equal and fair opportunity to run our businesses in Chicago without getting blindsided by a technicality in the law.

Domu says

Mon, 02/08/2016 - 9:27am
Hi Kirk, we're happy to help and glad to hear that you find the resources on our website helpful. Thanks for your feedback!

Mike.Yager says

Tue, 08/30/2016 - 4:25pm
Can you have both a move in fee and a security deposit if the total is under 1 months rent?

carKamm says

Thu, 06/01/2017 - 2:56pm
I am renting out a unit in a high rise. They require a move-in fee and move-out fee for reserving the elevator, which the tenant pays. I understand that I am able to also charge a "cleaning" fee rather than even go near a security deposit. Also, how do I even word a receipt? is this a separate form?

Domu says

Mon, 06/05/2017 - 2:29pm
Check out Domu's security deposit receipt here: http://bit.ly/2ru4Ev5

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