Rent a Chicago apartment and you used to expect to have to pay a security deposit: an amount, often equivalent to a month’s rent, to be handed over to the landlord as insurance you wouldn’t damage the walls or scuff up the floors or break the appliances before you move out.
We’ve collectively rented a lot of Chicago places and can tell you that it was not always easy to get that entire deposit returned, but that we almost always got a hefty percentage of it back. Landlords will tell you that many tenants damage some aspect of their apartment and that docking the deposit to pay for, say, a paint and patching job is only reasonable.
These days, security deposits have gone the way of the paper lease. In their place have arisen “move-in fees,” which are cash payments of up to $1,000 demanded by landlords before tenants move in.
What’s the difference? A security deposit got returned to you, all being well. Landlords take and keep the entire move-in fee. Nothing is returned, even if you hire your own painter and cleaner (as we have done) and leave the place spotless.
What happened? The city of Chicago created such onerous regulations surrounding security deposits in its Residential Landlord and Tenant Ordinance that most landlords gave up on them. The issue isn’t so much that security deposits must be kept in a separate account at a “federally insured financial institution in Illinois” and not commingled with rent; that’s not terribly burdensome. Nor is the requirement that deposits be returned within 45 days, which seems to us necessary to prevent bad actors. It’s the ease with which lawyers could sue if landlords failed to comply with any tiny aspect of the regulations, even unwittingly, and even if they quickly corrected their clerical mistakes.
Said regulations are all part of a complex system. Mixing up even a tiny portion of the rules opens you up to lawsuits. For example, one rule states that a landlord must give tenants a signed receipt at the time of collecting a security deposit that includes the deposit amount, the date, a description of the unit, and the names of both the person receiving the deposit and the landlord. Seems straightforward, right? Wrong.
Failing to comply with total precision (say, missing a signature or getting a date wrong on the receipt) meant the landlord was on the hook to pay the tenant twice the value of their deposit. Plus interest. Lawyers learned this and trolled for business.
So landlords turned to “move-in fees,” which are not subject to this regulation. Not only do they not have to pay interest on the deposit, they can keep the fee in its entirety. Now tenants are complaining about the growth in such fees, which, they understandably point out, are assessed precisely when renters are on the hook for moving costs and other outlays.
Simply put, refundable security deposits turned into nonrefundable move-in fees because the city’s regulations and penalties became too onerous.
So what to do? Regulate move-in fees? Landlords would just then increase rents.
The problem here was regulatory overreach. Reasonable people understand that landlords incur costs when apartments turn over. But the great thing about security deposits was that they incentivized renters to take care of their places, helpful to both the landlord’s interests and their building and community at large. Move-in fees do no such thing. The money is gone either way, and the renters who take great care of their places are then forced to subsidize those who do the opposite.
We asked Chicago Housing Commissioner Lissette Castañeda about this situation in an editorial board meeting Thursday. She acknowledged there was a problem and said a working group had been convened to discuss the landlord-tenant relationship and that everything was under review.
Good. Renters need basic protections from landlords running off with their deposits, but such bad actors are a small percentage of property owners. The city should loosen the regulations, fight off the lawyers and incentivize everyone to return to security deposits over move-in fees.
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