Saturday, July 23, 2011

"Owner Occupied Building" under RLTO 5-12-020(a)

What is an owner occupied building with six or more units under Section 5-12-020(a) of the Chicago Residential Landlord & Tenant Ordinance ("RLTO")

The RLTO does not apply to a rental in a building if the owner of the property lives in the building AND the building has only six units, or fewer. ("Rental of the following dwelling units shall not be governed by this chapter... Dwelling units in owner occupied buildings containing six units or less"). RLTO 5-12-020(a).

Whether or not units are actually occupied by renters does not matter, just that the building contains the right number of apartments. See Meyer v. Cohen, 260 Ill. App. 3d 351, 358 (1st Dist. 1993).

Even though a separate coach house doesn't have its owner living in it, if the owner lives in the main house, then that coach house will be considered "owner occupied". The tenants renting in the coach house will not be protected by the RLTO if it does not have at least seven (7) units. See Berven v. Marquette Nat'l Bank & Trust No. 14662, 394 Ill. App. 3d 22 (1st Dist. 2009).

We wonder, what if the whole property has more than seven (7) units including the main house and also the coach house together? In the Berven case there were not seven units even combining both the coach house and the main house.

If there are five (5) or more units on the whole property, even in different buildings, tenants renting at both buildings should be covered by the Illinois Security Deposit Return Act even if an owner lives there. See Hoffman v. Altamore, 352 Ill. App. 3d 246, 256 (2d Dist. 2004) ("'residential real property' for purposes of section 1 of the Security Deposit Return Act is limited to buildings on the same parcel of real property"). No law says the Illinois Return Act doesn't apply in Chicago too.

The RLTO in Chicago will usually apply to a rental of a single family home, because the owner of the house doesn't live there. Only the tenant lives there. This is also true for a condominium that is rented out by its owner at a large building. Even if the landlord only owns that single unit in the building, they are covered by the RLTO because the building is not six or fewer units, despite being owner occupied. See VG Marina Mgmt. Corp. v. Wiener, 378 Ill. App. 3d 887 (2d Dist. 2008).

The question of who is an "owner" is answered by Section 030, which defines "owner" as anyone with a beneficial interest in the property and right to present enjoyment. In other words, even if a trust holds the title to the property, its beneficiaries are "owners" even though their name appears nowhere on the deed. Also, there can often be multiple owners, and non-human owners like LLC or corporation owners. In other words, the person or company you pay rent to is not necessarily the only owner, or even an owner. In Detrana v. Such, 368 Ill. App. 3d 861, 869 (1st Dist. 2006), it was held that a partial owner who lived in a basement but didn't get any income from the property, or manage the property, was still an owner. So the RLTO didn't apply to the building.

Town houses in a row that share the same roof are considered separate buildings under the RLTO. Allen v. Lin, 356 Ill. App. 3d 405, 413 (1st Dist. 2005). So if there is a row of five town-homes and your landlord lives in one, and you rent the one next-door, you may still be protected by the RLTO. On the other hand, if you rent a unit in a duplex, and the owner lives in the other unit, you are not protected by the RLTO. But if the building has seven or more units and the landlord lives in the same building, you are still protected.

The much thornier issue is what it means for an owner to "occupy" a building. We represented a tenant in a case before the trial court and the court of appeals where this was the problem. Reversing the trial court, the court of appeals held that a landlord did not occupy the building where our client rented, and called it the "case of the missing landlord." The court of appeals explained:

"we find that in order to 'occupy' a building, there must at least exist a degree of 'living,' as set forth in Berven, sufficient to effectuate the aforementioned purposes of the owner-occupied exception. * * * An absentee landlord could keep a unit in numerous properties and claim to be occupying all of them if he occasionally visited the location and had mail sent there. The only possible evidence of occupation relates to the information on [Landlord's] driver's license and her testimony that she voted in Cook County. The remainder of her testimony and arguments on appeal amount to nothing more than a cynical attempt to prevent her tenant from obtaining the beneficial effects of the ordinance. Furthermore, there is plenty of evidence that clearly shows that [Landlord] was living in Joliet during the relevant times at issue and spent the vast majority of her time there. [Landlord], for all intents and purposes, was an absentee owner under these circumstances as she would be unaware and inaccessible should any tenant-related issues arise, which is contrary to the purposes of the owner-occupied exception carved out by city council."

This isn't precedent, but it should come as no surprise that the owner cannot live in a house in Joliet but say their Chicago apartment building is "owner occupied."