Security Deposit Dilemma for Landlords
Security deposits are becoming a rare occurrence in Chicago because of all the rules surrounding them. Chicago enacted strict rules recently because some landlords were using the security deposits for other purposes. Chicago used a shotgun approach and if a landlord does not pay a few cents in interest now, the landlord may get a few thousand dollars in fines.
That is why many landlords in the city of Chicago are now doing non-refundable move-in fees. The move-in fee is typically much less than a security deposit but it does not incentivize the tenant not to damage the property because they will never see that money again regardless if they keep the property spotless or if they kick holes in the wall and steal the cabinets.
That is why it is important to understand what the rules are regarding security deposits if you are still interested in collecting them in Chicago.
6 Important Rules regarding Security Deposits in Chicago
1. The first rule is that the security deposit much be deposited into a federally insured account that is interest bearing of at least 0.013 percent interest. That is 13 cents a year for a $1,000 security deposit.
2. The account must be separate from personal accounts and accounts were rents are collected. We suggest opening a separate account for every single unit or residence.
3. The account must be titled to distinguish that it is an account for a security deposit and not a personal account.
4. If the tenant gives the security deposit and first months rent in one check, the security deposit must be separated into its own account within 5 business days.
5. The landlord/owner must pay the interest accrued within 30 days of the 12 month term and/or return the security deposit plus the interest accrued within 45 days of the tenant vacating.
6. The landlord/owner must give the tenant a receipt of the deposit when originally collected, the amount, the date, the person who collected the deposit, and the description of the apartment/residence.
In Conclusion
If you are not interested in following all of the above rules, it would be wise to start collecting non-refundable move-in fees as a landlord/owner. You do not want to get hit with ridiculous fines simply because you didn’t follow every rule exactly to the tee. They are strict rules and Chicago loves to make revenue for itself anyway it can.
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