Chicago Residential Landlord & Tenant Ordinance
Section 5-12-080 Security Deposits
(a) (1) 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.
(2) Notwithstanding subsection (a)(1), a landlord may accept the payment of the first month's rent and security deposit in one check or one electronic funds transfer, and deposit the check or electronic funds transfer into one account, if within 5 business days of the acceptance of the check or electronic transfer, the landlord transfers the amount of the security deposit into a separate account that complies with subsection (a)(1).
(3) The name and address of the financial institution where the security deposit will be deposited shall be clearly and conspicuously disclosed in the written rental agreement signed by the tenant. If no written rental agreement is provided, the landlord shall, within 14 days of receipt of the security deposit, notify the tenant in writing of the name and address of the financial institution where the security deposit was deposited.
If, during the pendency of the rental agreement, a security deposit is transferred from one financial institution to another, the landlord shall, within 14 days of such transfer, notify the tenant in writing of the name and address of the new financial institution.
(4) Notwithstanding subsection (a)(1), a landlord shall not be considered to be commingling the security deposits with the landlord's assets if there is excess interest in the account in which the security deposits are deposited. “Excess interest” means the amount of money in excess of the total amount of security deposits deposited into the account plus any interest due thereon.
(b) (1) Except as provided for in subsection (b)(2), any landlord 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 the 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.
(2) Upon payment of the security deposit by means of an electronic funds transfer, the landlord shall give the tenant a receipt that complies with subsection (b)(1), or an electronic receipt that acknowledges the receipt of the security deposit. The electronic receipt shall set forth the date of the receipt of the security deposit, the amount of the deposit, a description of the dwelling unit and an electronic or digital signature, as those terms are defined in 5 ILCS 175/5-105, of the person receiving the deposit.
(c) A landlord who holds a security deposit or prepaid rent pursuant to this section for more than six months shall pay interest to the tenant accruing from the beginning date of the rental term specified in the rental agreement at the rate determined in accordance with Section 5-12-081 for the year in which the rental agreement was entered into. 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.
(d) The landlord shall, within 45 days after the date that the tenant vacates the dwelling unit or within seven 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, or successor landlord, may deduct from such security deposit or interest due thereon for the following:
(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 of 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.
(e) In the event of a sale, lease, transfer of ownership or control or other direct or indirect disposition of residential real 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.
The successor landlord shall, within 14 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 ten days of said transfer.
(f) (1) Subject to subsection (f)(2), if the landlord 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 a rate determined in accordance with Section 5-12-081. This subsection does not preclude the tenant from recovering other damages to which he may be entitled under this chapter.
(2) If a landlord pays the interest on a security deposit or prepaid rent within the 30-day period provided for in subsection (c), or within the 45-day period provided for in subsection (d), whichever is applicable, but the amount of interest is deficient, the landlord shall not be liable for damages under subsection (f)(2) unless:
(A) the tenant gives written notice to the landlord that the amount of the interest returned was deficient; and
(B) within fourteen days of the receipt of the notice, the landlord fails to either:
(i) pay to the tenant the correct amount of interest due plus $50.00; or
(ii) provide to the tenant a written response which sets forth an explanation of how the interest paid was calculated.
If the tenant disagrees with the calculation of the interest, as set forth in the written response, the tenant may bring a cause of action in a court of competent jurisdiction challenging the correctness of the written response. If the court determines that the interest calculation was not accurate, the tenant shall be awarded damages in an amount equal to two times the security deposit plus interest at a rate determined in accordance with Section 5-12-081.
Commentary
Chicago landlords covered by the RLTO are required to handle tenant security deposits and prepaid rent properly. This is important because many landlords treat security deposits like their own money, making tenants involuntary partners in landlords' bad investments. This is not fair. Landlords often keep money from deposits and invent false reasons for the deductions in order to cover their own losses in a falling realty market. Or charge $2.50 per light-bulb.
A security deposit has been defined as "money a tenant deposits with a landlord as security for the tenant’s full and faithful performance of the lease terms." Starr v. Gay, 354 Ill. App. 3d 610, 613 (1st Dist. 2004). The Illinois Security Deposit Return Act (765 ILCS 710) and Interest Act (765 ILCS 715) both describe a security deposit as:
"a security deposit from a lessee to secure the payment of rent or to compensate for damage to the leased property "
The term "security deposit" is not itself defined in the RLTO definitions section (030).
The RLTO 080 rules have been found in some cases to apply to pet deposits, rent deposits, key deposits, "damage deposits," elevator deposits, and any other deposits that are refundable. Non-refundable payments and fees are not subject to these rules.
Under 080(c), landlords have to pay interest on tenant security deposits. This should come as little surprise. The deposit is still the tenant's money, even though the landlord holds it. Since ancient times interest has been paid for the use of money. The "birth of money from money" is natural (what's going on these days with zero interest rate policy, or "ZIRP," is unnatural). Damage deposits are not meant to be an exception to interest growth.
Under 080(d), landlords have to follow rules in order to legally withhold from tenant security deposits after move-out. This section seems to require accounting for prepaid rent just like security deposit, according to section 110(g)(3) of the RLTO:
"the landlord shall return all security and all prepaid rent in accordance with Section 5-12-080(d)"
Finally, under 080(e), landlords have to give tenants written notice of any transfer in ownership of the property within 10 days of that transfer. This section also restates Illinois state law, which holds transferor and transferee landlords jointly-and-severally liable to the tenant for the tenant's deposit and interest. For transfers until May 12, 2010, the transferee landlord might not be liable to the tenant for the security deposit if the transferee landlord was a lienholder. After May 12, 2010, this exception does not apply under the Chicago RLTO.
080(f) is the penalty provision that awards tenants the damages equal to two-times the deposit amount if the landlord fails to comply with any of the above rules.
What are the definitions of terms like "digital signature" that the 2010 amendment to Section 080(b) is talking about under 5 ILCS 175/5-105 ?
"Digital signature" means a type of electronic signature created by transforming an electronic record using a message digest function and encrypting the resulting transformation with an asymmetric cryptosystem using the signer's private key such that any person having the initial untransformed electronic record, the encrypted transformation, and the signer's corresponding public key can accurately determine whether the transformation was created using the private key that corresponds to the signer's public key and whether the initial electronic record has been altered since the transformation was made. A digital signature is a security procedure.
"Signed" or "signature" includes any symbol executed or adopted, or any security procedure employed or adopted, using electronic means or otherwise, by or on behalf of a person with intent to authenticate a record.
