Sunday, September 21, 2008

Five and Six Unit Owner-Occupied Chicago Apartment Buildings

The Chicago Residential Landlord & Tenant Ordinance (RLTO) does not apply to owner-occupied buildings with six or fewer units. RLTO § 5-12-020. That means that if you rent in a Chicago apartment in a building with 2, 3, 4, 5, or 6 units, and the owner lives in it, you will not be protected by the RLTO. From the landlord's perspective this is great, since they have a lot less to worry about. As a renter, it means you are barred from all of the protections offered by the RLTO.

One class of Chicago renters that is overlooked are renters in owner-occupied buildings with five (5) or six (6) apartments. These renters are not covered by the RLTO, but still have the rights available to tenants statewide under the
Illinois Security Deposit Return Act. The Return Act applies to all rentals in the state at buildings with five or more units. Owner-occupancy is irrelevant under the Return Act. Chicago landlords who live in their five and six-unit buildings do not have to comply with Chicago's strict security deposit rules, but they can still get into trouble under the state law.

Tenants protected by just the Return Act in Chicago still have to prove their landlord provided a written statement of deductions in bad faith, or refused to provide the statement with supplemental copies of paid receipts, and then failed to return the security deposit within 45 days after move-out. Successfully proving bad faith or refusal can win the tenant damages equal to twice the amount withheld from them, plus court costs and attorney fees.

Can a tenant in a Chicago building with five or more units that is covered by the RLTO also recover damages under the Return Act? We think so, but there is no published answer to this question yet.

Landlords and tenants alike should evaluate their Chicago rental in light of both the RLTO and state law. Ignoring Illinois law in Chicago can mean missed opportunities for tenants and disaster for landlords.

Chicago Condo Tenants Posing as Landlords Scam

A couple tenants have called in with the following situation:

They saw a Chicago condo unit for rent advertised on Craigslist or another place. They gave a security deposit or rent to someone posing as the owner of a condo unit, pursuant to a "lease." Turns out the "landlord" was themselves renting the condo unit as a tenant, from the real owner. In one case the tenant "landlord" had gotten three or more security deposits for "leases" he entered into with three different people to start in a month.
It's not hard for a condo renter to pose as the owner of the unit, because they'll have the keys and be able to show the unit to tenants. A condo renter can print a generic apartment lease off of the internet as easily as most real condo landlords do. Frighteningly, there's really nothing that makes this fraud hard to accomplish.

Once the tenant con artist was gone, with the money, the real landlord usually was not wiling to accept responsibility for their tenant's actions. Even if the real landlord provides contact information or the real identity of the imposter landlord, that imposter is not likely to still have the tenant's money. This type of individual has spent it already, and is likely judgment-proof.

Is the real landlord liable to the tenant for anything? As an owner of the unit, the real condo owner would be defined as a "landlord" under section 5-12-030(b) of the Chicago Residential Landlord & Tenant Ordinance (RLTO). Does this mean the real landlord could be liable to the duped tenant for two times their whole security deposit if it was commingled, or taken without issuance of a proper reciept, or otherwise handled in violation of RLTO § 5-12-080? Is the landlord at least liable for the deposit itself? It's unknown.

People need to protect themselves against this. First of all, just because it is on Craigslist doesn't mean it checks out. Craigslist is the first one to tell you that. It's a great place to start. The prospective tenant is urged to look up the property AND the person claiming to be its owner on the Cook County Recorder of Deeds website. To search by property you will need the PIN of the property. For a condo, the best way to do this is to plug in the street address to the Cook County Assessor's website, then find your unit number amongst the results, and there you will see your PIN. Then plug that PIN into the Recorder of Deeds PIN search and see who owns it. Second of all, make sure the lease you are presented with has the alleged landlord's home address on it. Make sure it's not just a PO Box, and make sure they really own THAT address (using the Deeds and Assessor sites, if the address is in Cook County). Finally, maybe it's worth asking to see their driver's license.

Saturday, September 20, 2008

Mount Prospect Renter Rights

It's not great, but it's unique. The village of Mount Prospect in Illinois has its own local code governing the landlord tenant relationship: Title 18, Chapter 23. It applies to all rentals with few exceptions, even covering single-family homes, condo units, duplexes, and owner-occupied buildings.

RENTAL AGREEMENTS IN MOUNT PROSPECT

All rental agreements and renewals in Mount Prospect have to be in writing, signed and dated by everyone, and given to everyone at the time of exection, according to section 23.1804(A)(3) which mandates that:

"All rental agreements between landlords and tenants, including renewal rental agreements to the extent not otherwise excepted in subsection B of this section, must be in writing, dated and signed by both parties with signed copies provided to both at the time of signing."

The rest of Illinois (except DeKalb and Oak Park) recognizes unwritten rental agreements; even Chicago.

Section 23.1804 also prohibits waivers of tenants' rights under the Mount Prospect code, providing at subpart (C) that:

"1. Except as otherwise provided by this article, no rental agreement may provide that the tenant or the landlord:

a. Agrees to waive or to forego rights or remedies under this article"

This subpart can make Mount Prospect interesting because:

"2. A provision prohibited by subsection C1 of this section included in a rental agreement is unenforceable. If a landlord deliberately attempts to enforce any provision in a rental agreement which is prohibited, the tenant may recover an amount totalling not more than two (2) months' rent and such damages, costs and fees as a court shall determine and award."

The C1(a) prohibition lets a tenant or their lawyer get creative, scouring rental agreements for provisions that purport to waive any of a tenant's rights under the rest of the Mount Prospect code. If it can be proven the landlord "deliberately attempted" to enforce the waiver provision, the tenant can collect up to two months' rent as penalty damages plus their court costs and attorney fees.

SECURITY DEPOSITS IN MOUNT PROSPECT

The Mount Prospect security deposit rules are somewhat unique also, extending deposit return regulation to all units in the village (not just buildings with five or more units, like the statewide Illinois Security Deposit Return Act). The Mount Prospect code requires at section 23.1806(A)(2)-(4) that:

"2. Upon termination of the tenancy, property or money held by the landlord as security or prepaid rent may be applied to the payment of accrued rent and to the payment of actual damages, which the landlord has suffered by reason of the tenant's noncompliance with section 23.1805 of this article, provided the landlord, within thirty (30) days of the date that the tenant has vacated the rental unit, delivers upon tenant a written notice, which shall include the reason for retaining the security deposit or portion thereof, including an itemized statement for any claim of unpaid rent and an itemized statement of any damages, together with copies of the actual paid damage, repair or replacement receipts or the estimated cost therefor, and provided further that the landlord has complied with any requested walk through inspection, as provided in subsection A3 of this section, and has included, as part of such notice, any inspection checklists disclosing that the damage in question occurred while the rental premises were occupied by the tenant. If an estimated cost is given, the landlord shall furnish the tenant with paid receipts or copies thereof within thirty (30) days from the date the statement showing an estimated cost was furnished to the tenant, as required by this subsection. In the event no such notice or notices with the required statements, checklists, and evidence of estimated costs, if required, is furnished to the tenant as provided herein, then the landlord shall return the security deposit in full to the tenant within forty five (45) days of the date that the tenant vacated the rental unit. For purposes of this provision, the decorating of a rental unit after a tenant's departure, including painting and rug shampooing, shall not be considered as damage and the cost thereof shall not be charged to the security deposit unless the rental agreement specifically provides that painting and rug shampooing are included as a part of the tenant's cleaning responsibility upon vacating the rental unit.

3. Where requested by either party to a rental agreement, a walk through inspection shall be made by the landlord and tenant, prior to the commencement of the rental term and/or again at the termination thereof and an inspection checklist of all damaged or missing items shall be made at the time of the walk through inspection and a copy thereof furnished to each party. Such request shall be in writing, shall be personally served not less than forty eight (48) hours, or mailed not less than five (5) business days before the date of the requested inspection and such inspections shall be conducted, unless otherwise agreed, on the landlord's regular business days and during his regular business hours. Items, which are checked as missing or damaged prior to commencement of the rental term, shall not be charged against the security deposit of the tenant. Upon request of the landlord or tenant, a representative of the village's environmental health department may accompany the parties on such walk through inspections.

Where a walk through inspection is requested, as provided herein, no portion of a security deposit shall be applied against damages incurred to a rental unit, unless the notice of damages required in subsection A2 of this section, includes the completed inspection checklist(s) showing the occurrence of such damage during the rental term.

4. Landlord's notice of the reasons for retaining the security deposit, as set forth in subsection A2 of this section, and either party's request for a walk through inspection, as set forth in subsection A3 of this section, must be sent certified mail, receipt requested, or served personally, in which case the party receiving the request, which may include the respective landlord, landlord's agent, lessee, or member of the household over the age of twelve (12), must be requested to sign in receipt thereof on a duplicate copy of the notice or request. Evidence that the notice or request was sent certified mail and signed for or otherwise returned, or that receipt of the notice or request was acknowledged on a duplicate copy, shall create a rebuttable presumption of delivery."

Only Mount Prospect and Evanston require that a landlord account in writing for their withholding from a deposit for rent. The rest of Illinois, and even Chicago do not require this. Also, only Mount Prospect and DeKalb require that a walk-through be granted a tenant who requests it. Only Mount Prospect requires that the landlord deliver their written itemized accounting for the tenant's security deposit by certified mail, or personal delivery. Finally, like only Urbana, this village code confirms that redecorating or carpet shampooing are not to be withheld for (unless the lease expressly says they are going to be).

However, it is unclear what remedy the tenant has under Mount Prospect's code when a landlord fails to comply with any of these requirements. This is why it is worth coming up with a way that the landlord's lease waives one of these requirements (not the redecorating or carpet shampooing limitations though, since those apparently can be waived), and then coming up with an argument that the landlord deliberately attempted to enforce that lease provision. This will at least get the tenant a shot a two-months' rent penalty damages plus their costs and attorney fees.

LANDLORD ENTRIES IN MOUNT PROSPECT

The code provides at section 23.1806(E) that:

"1. The landlord shall not abuse the right of access to the rental unit or use it to harass the tenant. Except in cases of emergency, the landlord shall give the tenant reasonable notice of his or her intent to enter and if at all practical may enter the unit only between eight o'clock (8:00) A.M. and eight o'clock (8:00) P.M. The landlord may enter a rental unit only for the following purposes:

a. To conduct a necessary inspection of the premises,
b. With the Village during the authorized annual license inspection or during the investigation of a complaint of violations of this Code,
c. To make necessary or agreed repairs, decorations, alterations or improvements,
d. To supply necessary or agreed services, or
e. To show the dwelling unit to prospective purchasers, mortgagees, tenants or workers.


2. The landlord may enter the rental unit without consent of the tenant in case of emergency. For purposes of this provision, the term "emergency" shall refer to a situation wherein access to the rental unit is necessary in order to prevent damage or destruction to the unit, or to the fixtures, equipment, appliances, furniture and other personal property contained therein, or in order to protect any person from injury. Nonpayment or delinquent payment of rent shall not constitute an emergency."


If a landlord or tenant are bad, and don't follow the above rules for giving notice about, and allowing, apartment entries, then they may be subject to the civil penalties of section 23.1811(C), "Abuse of Access by Landlord and Tenant" which mandates that:

"1. If the tenant refuses to allow lawful access, the landlord may obtain injunctive relief to compel access or terminate the rental agreement. In either case, the landlord may recover an amount equal to two (2) months' rent and such actual damages, costs and fees as a court shall determine and award.

2. If the landlord makes an unlawful entry or a lawful entry in an unreasonable manner or makes repeated demands for entry otherwise lawful, but in a manner which has the effect of harassing the tenant, the tenant may obtain injunctive relief to prevent the recurrence of the conduct or terminate the rental agreement. In either case, the tenant may recover an amount equal to not more than two (2) months' rent and such actual damages, costs and fees as a court shall determine and award. "

There is a lot to remember in the access rules, but most commonly occurring are landlord entries to show a unit to prospective renters or buyers without giving the tenant at least two days' advance notice. This may entitle the tenant to the damages equal to two months' rent plus costs and attorney fees. A landlord's lease provision purporting to allow apartment showings on 24 hours' notice, for example, is a waiver of the rules under section 23.1806(E) and unenforceable.

LEASE TERMINATIONS IN MOUNT PROSPECT

Like Chicago, and to a lesser extent Evanston, Mount Prospect offers tenants a number of ways they can take advantage of their landlord's failures to comply with the code's disclosure requirements (of the landlord's address and phone number, for example) and send a written notice demanding the required disclosure in 14 days. Failures to provide essnetial services (gas, water, electric) or failure to maintain, or failure to deliver possession (former tenant is still in the unit) can all be reasons a tenant can deliver the 14 day notice. Tenants should look at section 23.1808 for details about terminating their lease in Mount Prospect.

The foregoing does not cover all of the Mount Prospect code, but highlights the most likely encountered sections when assisting renters in that village.

Security Deposit Interest in Urbana


Urbana has it's own local ordinance for the landlord tenant relationship that regulates security deposits. Chapter 12.5 of the Urbana City Code, "Landlord-Tenant Relationships" applies to almost every rental in town, including houses, owner-occupied buildings, condo units, etc. Next door in Champaign students are only covered by the statewide Illinois Security Deposit Return Act (must be 5 or more units in the building) and Illinois Security Deposit Interest Act (must be 25 or more units in the building or complex).

One special source of confusion in Urbana is its security deposit interest rule. Section Sec. 12.5-19 of the Urbana City Code regulates security deposit interest. It requires that:

(a) A landlord who receives a security deposit of one hundred dollars ($100.00) or more from a tenant to secure the payment of rent or to compensate for damage to property shall pay interest to the tenant, computed from the date the deposit is paid, at a rate equal to the interest paid by the largest commercial bank, as measured by total assets, having its main banking premises in Champaign County, Illinois, on minimum deposit passbook savings accounts as of the thirtieth of June immediately preceding the inception of the rental agreement on any such deposit held by the landlord for more than six (6) months.

(b) The landlord shall, within thirty (30) days after the end of each twelve-month rental period, pay to the tenant any interest, by cash or credit to be applied to rent due, except when the tenant is in default under the terms of the lease. For the purposes of this provision, default shall mean nonpayment of rent or a successful claim by the landlord for possession of the premises for good cause other than nonpayment of rent. A landlord who willfully fails or refuses to pay the interest required by this article shall, upon a finding by a circuit court that he/she has willfully failed or refused to pay, be liable for an amount equal to the amount of the security deposit, together with court costs and reasonable attorney's fees.


Urbana therefore requires ALL landlords to pay interest on security deposits, no matter how many apartments are in their building, if the security deposit is $100 or more. The "Security Deposit Return Summary" from a fairly large Champaign-Urbana rental company shows a common mistake:

The security deposit taken by the company is $590, but they expressly state that there is an interest credit of $0 because "Building has less than 25 units, no interest is due according to State of Illinois Law." It's true the state of Illinois law wouldn't require this landlord to pay interest on the $590 security deposit because the building has only 5 apartments. However, Urbana law does. This landlord's obvious familiarity with security deposit interest law would likely be enough evidence to show they "willfully failed" to pay the interest due under the Urbana City Code, and subject the landlord to penalty damages for the tenant equal to the whole security deposit, plus costs and attorney fees.

On the flip-side, we have also been contacted by tenants at large apartment complexes in Urbana with more than 25 units. Their management companies extract $99 security deposits and do not pay interest. These landlords obviously feel that, because the Urbana law does not apply, they are free to pay no interest. However, it is unlikely that compliance with the Urbana law can relieve these landlords from complying with the Illinois Security Deposit Interest Act, which requires payment of interest on security deposits of any amount at complexes with 25 or more units.

With few exceptions, every Urbana landlord has to pay interest on security deposits of $100 or more, and every Urbana landlord of a complex with 25 or more units must pay interest on security deposits of any amount.

What is the amount "Wrongfully withheld" under Evanston RLTO?

The Evanston Residential Landlord and Tenant Ordinance (ERLTO) is unique in Illinois. It applies to almost all rental agreements in the city; condos, houses, and even apartments in owner occupied buildings with fewer than six units. The ERLTO requires a landlord to account for and/or return a tenant's security deposit within 21 days after the tenant vacates. This 21 day rule is the shortest timeframe in the state. Even in Chicago, and every other place in Illinois, a landlord has 30 days to account for a deposit in writing after the tenant moves out, and another 15 days after that (45 days after move-out) to return whatever is coming back to the tenant from their deposit.

The ERLTO provides at ERLTO § 5-1(C) that:

“Upon termination of the tenancy, property or money held by the landlord as security or prepaid rent may be applied to the payment of accrued rent and the amount of damages which the landlord has suffered by reason of the tenant’s noncompliance with section 5-3-4-1 of this chapter, all as itemized by the landlord in a written notice delivered to the tenant together with the amount due twenty one (21) days after the tenant has vacated his unit. Any security or prepaid rent not so applied, and any interest on such security due to the tenant, shall be paid to the tenant within twenty one (21) days after the tenant has vacated his unit.”

Under ERLTO § 5-1(F):

“If the landlord fails to comply with subsection (C) of this section, the tenant may recover the property and money due him together with damages in an amount equal to twice the amount wrongfully withheld and reasonable attorney fees.”

Note that, unlike the statewide
Illinois Security Deposit Return Act, there is no requirement that a tenant prove their landlord's failure to comply with subsection (C) was willful, a refusal, or even knowing. This section is strict-liability like section 080 of the Chicago Residential Landlord and Tenant Ordinance.

We have had a case where the deposit was accounted for in writing and partially returned 22 days after the tenants moved out. At trial, the court awarded the tenants $1,750 out of their mostly withheld $3,300 security deposit plus interest. The trial court refused to award the tenants twice the amount wrongfully withheld or attorney fees though, since the landlord's failure to comply was only by one day.

The case had to go up to the
court of appeals yielding a Rule 23 Order reversing the trial court's refusal to award twice the amount wrongfully withheld plus attorney fees.

On remand, the trial court had to decide what the amount "wrongfully withheld" was. We argued it had to be twice the whole $3,300 security deposit plus interest. The landlord of course argued it was only the $1,750 that should be doubled. Our argument in support of doubling the whole deposit in this case was as follows:


The ERLTO talks about twice the amount "wrongfully withheld" and also refers to return of the amount "due." These must have different meanings because “when the legislature uses certain words in one instance and different words in another, it intends a different meaning.” Blue Cat Lounge v. License Appeal Comm’n, 281 Ill. App. 3d 643, 646 (1st Dist. 1996). Under the Illinois Security Deposit Return Act, the tenant can recover twice the amount "due." The appellate court has held that this just means twice the amount the landlord kept and shouldn't have. In contrast, the amount "wrongfully withheld" is the amount that was not returned or accounted for within 21 days after the tenants move out, under the ERLTO. In a case where a landlord doesn't mail their written accounting for all the deposit they are withholding until 22 days after the tenant moves out, they have wrongfully withheld all of the deposit and interest. This again makes the ERLTO unique, because it does not entitle a tenant to two times the full amount of their security deposit in all cases (unlike the Chicago RLTO, which does). But the ERLTO also does not limit the tenant to two times the amount of deposit "due" (unlike the Return Act, which does).

In our case the trial court did enter judgment for the tenants for their $1,750 due, plus penalty damages equal to twice the whole $3,300 plus interest "wrongfully withheld" more than 21 days, plus attorney fees. This was the proper result.