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:
- Give the tenant written notice that the fee is non-refundable,
- Charge an amount no more than half of the monthly rent,
- Require payment of the fee prior to the move-in date (or prior to lease execution, if possible), and
- 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.