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Deposits vs. Fees: Read Your Lease!

Posted by CTM Legal Group | Apr 28, 2023 | 0 Comments

By Attorney Sarah Albert 

If you've been a renter in the City of Chicago for some time, you may have noticed a trend: landlords are more inclined to take a one-time, nonrefundable move-in fee from you in lieu of a security deposit. Why does that matter? Your rights to that money, and your landlord's obligations under the law, vary dramatically based on the classification of those funds.

A security deposit is typically one month's rent and is due to your landlord before your lease term starts. In Chicago, there are laws that limit how much your landlord can demand as a security deposit. And the Residential Landlord and Tenant Ordinance (“RLTO”) has many provisions that attempt to ensure that money is handled properly. Section 5-12-080 of the RLTO outlines the following relevant obligations:

  • Your landlord must deposit the money into an interest-bearing account apart from any other funds;
  • Your landlord must give you a receipt indicating the amount tendered, the date, the person receiving it and a description of the unit;
  • Your landlord must notify you if he moves your deposit to another bank;
  • Your landlord must put the specific bank branch address on the face of your lease;
  • Your landlord must pay the interest that accrues on the account to you; and
  • Your landlord must return the deposit within a certain amount of time after your move-out.

Essentially, if a landlord demands to hold onto that much money as an extra layer of security (ensuring they are covered in case of damage to the space or non-payment of rent), they're responsible for complying with a whole host of responsibilities. Many landlords do not carefully follow the RLTO in their handling of those funds, and in doing so, they violate the law and open themselves up to additional monetary damages as penalty. Our office frequently handles lawsuits pertaining to mishandled and unlawfully withheld deposits.

Because coming up with a large security deposit (on top of first month's rent) can deter otherwise qualified tenants from leasing a space, and because landlords don't want to take on the additional obligations under the RLTO and risk being penalized, landlords sometimes choose to collect a one-time move-in fee. Move-in fees cover what the landlord anticipates will be damage done to the unit during your tenancy, but in a much more conservative amount. One benefit to renters is this amount is typically a fraction of one months' rent, meaning it's more affordable than a security deposit. The main drawback, however, is the RLTO doesn't protect that money, and once you pay it, the landlord does not return it. So while paying a move-in fee is the more affordable option, regardless of if you leave the unit spotless at move-out, it is nonrefundable.

If you intend on having a pet live with you, your landlord may also request a pet deposit or a pet fee. While these may sound identical, pet deposits are refundable and pet fees – in addition to “pet rent,” which some landlords tack onto monthly rent per animal – are not. This can get tricky because most people use “deposit” and “fee” interchangeably, but pet deposits act like a security deposit for purposes of enforcing the RLTO.[1] Accordingly, withholding that pet deposit, or not paying interest on it, are both considered violations of the RLTO, and suit can be brought to recover it in addition to damages. A pet fee, on the other hand, is treated like a move-in fee: your landlord will not refund it regardless of the condition of the unit upon move-out.

Landlords are only supposed to apply money from your security deposit to damage beyond normal wear and tear, then return the rest. They have certain additional obligations if they intend to keep any portion of it. But a move-in fee is as good as gone once you pay it. Keep in mind, however, that if you damage any of your landlord's property beyond normal wear and tear, regardless of what kind of deposit or fee your landlord collected, he or she could sue you for damage that far exceeds your deposit. It is always best to keep your modifications of a space to a minimum – or at least easily reversible – and take photos of your space before you move in and after you move out. This can help ensure that, if litigation over property damage or a wrongfully withheld security deposit ensues, the fight goes beyond he-said, she-said (or in this case, landlord-said, tenant-said).

These concepts can be very nuanced so it is always best to reach out to your attorneys at CTM Legal Group to review your lease, answer any questions you may have about deposits and fees, and of course if you think your landlord may have violated your rights.

[1] See Lawrence v. Regent Realty Group, Inc., 754 N.E.2d 334 (Ill. 2001)

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