The Pros & Cons of a Move-In Fee vs Security Deposit
For tenants, a security deposit is preferable to a move-in fee. The deposit remains the tenant’s property even in the landlord's hands. Assuming the tenant doesn’t do any significant damage to the premises or withhold the rent improperly, the tenant will get that deposit returned. On the other hand, a move-in fee is money that the tenant will never see again – as soon as the tenant pays the move-in fee, it becomes the property of the landlord.
Though security deposits incentivize tenants to take care of the property, landlords generally prefer move-in fees because they aren’t regulated by the CRLTO or Illinois law. There are no administrative hassles associated with collecting them. But landlords should be careful to label the fee as “nonrefundable” on the lease, or tenants might later claim that they believed the fee to be a refundable security deposit.
A few years ago, when a tenant claimed that she was entitled to a refund of a move-in fee, the Illinois Appellate Court explained that the rules pertaining to security deposits could apply to move-in fees in certain circumstances – meaning that the landlord would be compelled to return the misnamed “fee,” if the “fee” was operating like a security deposit. To avoid this outcome, set the move-in fee to less than half the monthly rent and describe the fee as a non-refundable charge.
According to listings on Domu, a small minority of landlords charge both a move-in fee and a security deposit. Less than half of Chicago’s landlords majority charge a move-in fee only, and more than half of Chicago landlords listed on Domu charge move-in fees.