Sunday, January 18, 2009

Breaking a Lease in Illinois

More and more since October, 2008, we're getting tenants who need to break their leases because of job transfers, terminations, layoffs, and general financial ruin. For tenants outside Chicago and Oak Park, there's little we can do.

Outside the above-named municipalities, tenants don't have a lot to rely on when hoping to avoid a lease. There is not likely a statutory provision to rely on, except in cases of an imminent threat of violence at the rental dwelling (under the Illinois Safe Homes Act). One option, and it's not a great option, is to see if living conditions are so bad that the tenant can claim "constructive eviction."


Don't try this at home. A tenant can claim they are not liable for rent under the remainder of a lease term if they can prove they were “constructively evicted.” That requires showing that they were unable to use the rented premises cannot be used for dwelling; that it’s “untenantable.”

“Untenantability exists when the interference with occupancy is of such a nature that the property cannot be used for the purpose for which it was rented.” JMB Properties Urban Co. v. Paolucci, 237 Ill. App. 3d 563, 566 (3d Dist. 1992).

But a tenant can’t just claim the place became uninhabitable. They’ll have to prove that, and they’ll have to also prove that they moved out and surrendered possession to the landlord within a reasonable time after the condition of untenantability arose. Waiting too long to move out will constitute a waiver of the tenant’s right to raise the constructive eviction defense to the lease.

Illinois cases usually also require the tenant to show that they gave the landlord a reasonable notice of the allegedly untenantable condition and a chance to cure it. Only after giving notice, a chance to cure that the landlord blows, and moving out, can a tenant hope to defend an action for rent by the landlord. Obviously, if the tenant caused the problem, they’re not going to get to avoid the lease because of it.

Who decides whether the place was really uninhabitable, whether reasonable notice and a chance to cure were given the landlord, and if the tenant moved out in a reasonable time? The judge, if it’s a bench trial, or a jury if it’s a jury trial.

The reason we don’t suggest relying on constructive eviction is that it’s very subjective, and often devolves into a tenant’s word vs. landlord’s word argument.

Unless your unit was provably flooded, flattened by a tornado or tsunami, or burned down (through no fault of your own), constructive eviction may not be for you.

Saturday, January 10, 2009

What's a "Willful Failure" to Pay Interest under the Illinois Security Deposit Interest Act?

The Illinois Security Deposit Interest Act ("ISDIA") requires landlords of apartment complexes with 25 or more units (except public housing) to pay interest on tenants' security deposits within 30 days after the end of each of each tenants' 12-month rental periods. It has to paid at a rate that changes each year, and at the right time (based on when each particular tenant's 12-month rental period began). The ISDIA applies statewide, not just Chicago or Cook County.

But a landlord is only penalized under the ISDIA, in an amount equal to the tenant's whole security deposit, plus costs and attorney fees, if they willfully fail or refuse to pay the interest required by the ISDIA. Where this leaves landlords and tenants under the ISDIA is not settled.

We get a lot of motions to dismiss claiming that, since the landlord didn't know about the law, or misunderstood the law, their failure to pay the interest properly wasn't a "willful failure or refusal."

What is?


If a tenant has to ask for interest, and doesn't get it, that's a refusal. That's easy.

But the ISDIA penalizes a landlord who willfully fails or refuses to pay the interest. Use of the word "or" means the legislature intended "willfully fails" to mean something different than "refuses". People v. Diane N. (in Re C.N.), 196 Ill. 2d 181, 211 (2001) ("disjunctive use of 'or' indicates a choice between alternatives").

Tenants don't need to prove a refusal. That's good, because even fewer tenants know their rights under the ISDIA than landlords. So what's a willful failure?


Our court of appeals for the first district, which covers Cook County (including Chicago), has held since 1989 that:

“the purpose of section 2 [of the ISDIA] was to set forth a penalty for lessors who ignored the mandate of section 1 of the Act.”

Gittleman v. Create, Inc., 189 Ill. App. 3d 199, 203 (1st Dist. 1989). This interpretation of the ISDIA is tenants' favorite. It sounds like an even lower burden for the tenant to prove their landlord "ignored" the ISDIA than to prove the landlord willfully failed to pay the required interest. In Gittleman, the court observed that, because the landlord's lease mentioned security deposit interest, the landlord was presumably aware of its legal obligation to pay the interest.

Gittleman also tells us what a willful failure is not. Many landlords argue that "willful" implies the landlord must be proven to have had an evil intent to violate the law. Proving that is hard, of course. But in Gittleman the majority of justices rejected the dissenting opinion of justice Jiganti, who believed a willful failure meant:

“willful is voluntary and intentional with the specific intent ‘to do something the law forbids, or with the specific intent to fail to do something the law requires to be done; that is to say, with bad purpose either to disobey or to disregard the law.'"

Gittleman, 189 Ill. App. 3d at 205-206. Fortunately for tenants, the interpretation of justice Jiganti was not adopted, thus lowering the bar for ISDIA claims.

Landlords' desire for an “excusable neglect” exception to the ISDIA also runs contrary to a fundamental rule of law in Illinois - that “individuals are still charged with knowing and abiding by the law. It is a time-honored maxim that ignorance of the law is not a defense.” People v. Karberg, 356 Ill. App. 3d 500, 503 (2nd Dist. 2005). “It would be impossible to administer the law if ignorance of its provisions were a defense thereto.” Id., citing Utermehle v. Norment, 197 U.S. 40, 55 (1905).

The above construction of "willful failure" may seem like strict liability, but it isn't. Application of the principals set forth above make a willful failure easy to prove, but still leave a landlord protected from penalties when unanticipated circumstances arise. All the landlord has to do is show their will to succeed in paying the interest.


In our biased opinion, the ISDIA willfulness requirement only protects a landlord who can show they had a will to succeed in paying the interest required by the ISDIA, but still failed. Examples of such would be a landlord who writes checks for the interest payments and intends to mail them at the right time but fails to because of a car accident on the way to the post office. Or, a landlord who pays interest at the right time, but the interest check bounces (the landlord would have to promptly re-issue new checks that clear). Such landlords would be able to show their will to succeed in paying the interest, thus proving their failure would not be willful.

Take it from the United States Supreme Court - ignorance of the law is not a defense.
Take it from the Illinois court of appeals - ignoring the ISDIA merits its penalty.