Wednesday, January 2, 2013

New 2013 Illinois and Chicago security deposit interest rates

The new rate for Illinois security deposits under the Interest Act is 0.005%, and the new rate for Chicago security deposits under the RLTO is 0.023%.

Sunday, November 25, 2012

New Evanston security deposit return case in 2012

An unpublished order of the Appellate Court came out this year called Foster v. Tucker, 2012 IL App (1st) 111048U.  It affirmed the trial court's ruling that the landlord violated the Evanston Landlord Tenant Ordinance (ERLTO) by failing to return or account for a security deposit within 21 days after the tenant moved out.

There are two points the Appellate Court discussed that might have been worth mentioning in a published opinion.

First, the Appellate Court affirmed that:

"Where landlord failed to return balance of security deposit to former tenant along with itemization of damages, award of treble damages to tenant under city's ordinance was warranted, and record did not support landlord's claim of additional damage to the unit; the judgment of the trial court was affirmed."  P1.

Sometimes courts have questioned the "twice the amount" penalty damages under the ERLTO.  The Foster Court says the tenant getting back their actual security deposit is not half of the double-deposit-sized penalty damages.  It is separate, so the award is truly "treble damages."  It was nice to see this conclusion expressed, even if unpublished.

Second, the Court discussed the question of holdover tenancy.  This is an issue that most tenants bringing a security deposit claim will have to face.  Confronted with a tenant's suit, many landlords resort to anything they can think of as a counter claim.  One favorite is to allege that the tenant was a hold over tenant, and owes rent for an extra month after they moved out.  Why?  Often because the tenant did not move out on or before the last day of their lease.  In this case the tenant did move out but did not return the keys to the apartment until several days later.

The Appellate Court said:

Here, the report of proceedings demonstrates that the trial court, relying in part on Hoopes, rejected defendant's argument that plaintiff created an extension of her lease by retaining a key for between four and seven days after the lease's expiration. According to the testimony of both defendant and his wife, plaintiff moved out of the unit on March 31 and returned only to walk through the empty residence and return the key. Plaintiff's actions did not exhibit an intent to continue occupying the unit after March 31. Thus, the evidence supported the trial court's conclusion that no holdover tenancy was created."  P22.

We cannot count the number of times a landlord has claimed that the tenant "held over" by leaving some furniture or garbage, or not returning the key, or moving out a few days after the last day of their lease.  The
Foster case cannot be cited as precedent, pursuant to Illinois Supreme Court Rule 23.  But it still is worth reading if you deal with residential tenancies in Cook County.

What to know about Vacation Rentals in Chicago

There are a lot of websites now that let individual condo owners rent out their units like hotel rooms, by the night.  In fact, even tenants who are already renting a condo or apartment have been found online trying to rent out their units to someone else at a profit.  Where do they stay in the mean-time?  Maybe with parents.

If you are coming to Chicago and want to opt for a "vacation rental" instead of a traditional hotel, keep the following in mind:

(1)  Your occupancy will not be protected by the Chicago Residential Landlord and Tenant Ordinance unless your total stay is for 32 or more consecutive nights.

(2)  Because your stay will not be protected by that local ordinance, the "RLTO", you will have very little recourse against the landlord for their failure to live up to their end of the agreement.  Sure you can sue them for breach of a contract, but that means you pay your own lawyer fees and the most the landlord can probably lose is whatever you already paid them.

(3)  Also because you will not be protected by the RLTO, you are at risk of losing your "reservation deposit" or whatever else the up-front money you paid was called.  Some of the services that connect vacation renters with vacation landlords do offer a kind of guarantee that protects your deposit up to a certain amount, like $1,000.

(4)  As mentioned above, we are aware that some of the people posing as a vacation landlord on the internet are not actually the owners of the proposed vacation rental unit.  They may not be allowed to be renting it out to you.  They might not even be renting the unit, but somehow are able to get you into it and take your money!  You cannot protect yourself completely but some resources that a prospective renter can rely on include the Cook County Assessor website, which can be used to find the property identification number (PIN) for the unit or building they might rent.  The PIN can be plugged into a search on the Cook County Recorder of Deeds website, which can let you know the title holder of record (owner). 

(5)  Finally, remember, your vacation condo landlord might not have paid their mortgage, or condominium assessments, and that may result in an unwelcome surprise during your stay.  The good news is that nothing moves particularly fast in the court system, and we are not suggesting that the sheriff will interrupt your vacation to remove you from the premises.  But, while the RLTO requires that any landlord disclose a pending foreclosure to a prospective tenant before an agreement is entered into, your putative vacation landlord doesn't have to.  The virtual absence of this risk is probably why vacation rentals are cheaper than staying at a real hotel.

Saturday, November 26, 2011

Chicago Rents Going Up

We recently published a note about seasonality in Chicago rents based on predictable peaks and troughs in renter demand every year, in the summer and winter respectively. The same graph of internet searches for "Rental" in Chicago showed a rising baseline for that search starting in 2008.

We guessed this was related to everyone (1) losing their home, (2) no longer qualifying for a loan to buy a home, or (3) feeling afraid to buy a home.

And indeed, Chicago rents for 2 bedroom apartments are going up since bottoming out in 2007 (when everyone finally figured out that anyone could buy a few condos). Modest gains every year are to be expected as part of inflation, but the pronounced increase from 2008 to the present might be evidence of a new trend based on fundamental changes in the economy.

Developers appear to believe the trend is long term. However, many developers and banks that lent to them also thought the boom in condominium sales would last longer than it did.

The Loop has seen construction of three apartment towers finished since 2009: at 161 W. Kinzie, 227 W. Washington and 210 N. Wells. Until these, there were not new apartment buildings in the Loop for a long time.

Other projects not far from the Loop that initially called for construction of condominiums have been reformed in favor of rental apartments. Next to the condominium tower finished at 860 W. Blackhawk, a neighboring tower at 840 W. Blackhawk that was initially expected to house more condo units is now being finished as an apartment tower.

The lenders financing these projects must believe Chicago is in for a protracted period of healthy rental demand, at least near the Loop. Only time will tell. After boasting an 8.8% unemployment rate slightly under the national average in October, 2010, Chicago's unemployment rate has risen above the national average to sit around 9.7% in October 2011. Apartment buildings full of people who can't pay rent are worse collateral than empty houses.

The message for renters? Don't sign up for a longer lease like two or more years just because rents are going up and you want to "lock in" a good rent. You might lock in a bad one. Instead, if you can, try to find a Chicago apartment and sign the lease between Thanksgiving and Christmas. The key advantage to renting over owning is flexibility. Now is not a bad time to "stay liquid." Good luck.

Thursday, September 22, 2011

Evanston Security Deposit Law Requires a Real "Amount" in 21 Days, not "TBD"

After a 2010 move-out, the landlords kept a whole $2650 security deposit from a group of three Northwestern University students in Evanston, and interest. The landlord claimed to have sent the tenants an e-mail within 21 days after they moved out, which stated that the whole deposit was being kept for various listed items in the amount of "TBD" (to be determined).

After a trial the judge in Skokie held that the tenants were not entitled to any of their deposit back, or relief under the Evanston Residential Landlord and Tenant Ordinance (ERLTO) because the landlord did not have to account for the damage within the 21-day accounting requirement if the property damage took more than 21 days to fix.

On appeal, the Court of Appeals reversed the judgment against the tenants. The Court of Appeals opinion is here. This opinion is subject to petition for rehearing and/or review by the Illinois Supreme Court and so is not necessarily final.

The Court of Appeals held that "the trial court erred when it found that defendants were not required to include a dollar estimate of the damages when they notified plaintiffs that they intended to withhold part of the security deposit. Defendants' use of 'TBD' as a placeholder was insufficient to satisfy the ERLTO."

The Court of Appeals concluded, saying:

"Defendants failed to give plaintiffs proper notice of deductions from their security deposit and failed to return the balance of the security deposit within 21 days as required by section 5-3-5-1(C) of the ERLTO. Defendants failed to prove their affirmative defense of compliance with the ERLTO, and they are therefore liable to plaintiffs. Moreover, defendants are not entitled to any setoff of plaintiffs' damages because they did not assert a counterclaim against plaintiffs. It was therefore error for the trial court to enter judgment in favor of defendants. We accordingly reverse and remand with directions to enter judgment for plaintiffs and for the determination of damages and reasonable attorney fees pursuant to section 5-3-5-1(F) of the ERLTO."

Wednesday, September 14, 2011

Best time to rent an apartment in Chicago?

Supply and demand dictate the market rent for an apartment. Demand can be estimated from the volume of Chicago internet searches for "apartments":
It's a landlord's market out there in America, and especially Chicago. Foreclosures, layoffs, wiped out savings, and destroyed credit are pushing more and more people into renting instead of owning. Also, people who otherwise would have bought a first home in the last two years have seen the news and reconsidered an "investment" in real estate, opting to rent instead. Even if they wanted to buy, lending requirements are too stringent for many to qualify.

While home values remain depressed, monthly rental rates are healthy and rising. If you're a renter, one thing you can do to strengthen your position is start your search in the winter, not the summer.

The scramble to find an apartment in Chicago consistently peaks in late June, and bottoms out around Christmas. You can confidently rely on the fact that, around New Years, you are competing with significantly fewer apartment hunters. That means you ought to be able to negotiate a lower rent, more flexible term, or beneficial utility payment arrangement.

Finally, the graph does demonstrate that since December, 2008 the baseline volume of searches for apartments in Chicago on the internet has increased. Seasonality still rules, but overall competition for units in the City is increased and increasing since stock markets dove in the winter of 2008-2009. Especially after expiration of the first time home buyer "tax credit" in April 2010, the hunt for Chicago apartments has intensified.

Sunday, August 28, 2011

New Law Requires Most Cook County Landlords to Change Locks With New Tenancy

An amendment has passed to the Illinois Landlord and Tenant Act which creates a new Section 765 ILCS 705/15 "Changing or rekeying of the dwelling unit lock."

The new Section requires that landlords in Counties with more than three million people (Cook County) change or rekey the locks for a rental unit at the start of each new tenancy, unless it is an owner occupied building with four or fewer units. This new law does not just apply to Chicago or Evanston, but all of Cook County.

If the landlord does not comply with this new rule, which will take effect January 1, 2012, then that landlord may be liable to the tenant for damages sustained because of stolen property by someone with the old tenants' key.

The Section says:

(a) A lessor of a dwelling unit shall comply with the

provisions of this Section regarding the changing or rekeying

of the dwelling unit lock. For the purposes of this Section,

"dwelling unit" means a room or suite of rooms used for human

habitation and for which a lessor and a lessee have a written

lease agreement.

(b) After a dwelling unit has been vacated and on or before

the day that a new lessee takes possession of the dwelling

unit, the lessor shall change or rekey the immediate access to

the lessee's individual dwelling unit. For the purposes of this

Section, "change or rekey" means:

(1) replacing the lock;

(2) replacing the locking or cylinder mechanism in the

lock so that a different key is used to unlock the lock;

(3) changing the combination on a combination or

digital lock;

(4) changing an electronic lock so that the means or

method of unlocking the lock is changed from the

immediately prior tenant; or

(5) otherwise changing the means of gaining access to

the lessee's locked individual dwelling unit so that it is

not identical to the prior lessee's means of gaining access

to the lessee's locked individual dwelling unit.

(c) If a lessor does not change or rekey the lock as

required in this Section, and a theft occurs at that dwelling

unit that is attributable to the lessor's failure to change or

rekey the lock, the landlord is liable for any damages from the

theft that occurs as a result of the lessor's failure to comply

with this Section.

(d) The provisions of this Section do not apply if the

lessee has obtained the right to change or rekey the dwelling

unit lock pursuant to a written lease agreement.

(e) The provisions of this Section do not apply to (i) an

apartment rental in an apartment building with 4 units or less

when one of the units is occupied by the owner or (ii) the

rental of a room in a private home that is owner-occupied.

(f) This Section applies only in counties having a

population of more than 3,000,000.

Under part (b)(5), the Illinois Legislature protected this law from becoming outdated by doors that rely on biometric locks or keyless locks. Essentially, whatever mechanism the door uses for security, its means of access must be changed or reset so that the new tenant, and only the new tenant, has access (in addition to the landlord and authorized agents of the landlord). This will certainly stimulate the economy for locksmiths in Cook County.