(a)(1) A landlord shall hold all security deposits
received by him in a federally insured interest-bearing account in a
bank, savings and loan association or other financial institution
located in the State of Illinois. A security deposit and interest due
thereon shall continue to be the property of the tenant making such
deposit, shall not be commingled with the assets of the landlord, and
shall not be subject to the claims of any creditor of the landlord or of
the landlord's successors in interest, including a foreclosing mortgagee
or trustee in bankruptcy.
(2) Notwithstanding subsection (a)(1), a landlord may
accept the payment of the first month's rent and security deposit in one
check or one electronic funds transfer, and deposit the check or
electronic funds transfer into one account, if within 5 business days of
the acceptance of the check or electronic transfer, the landlord
transfers the amount of the security deposit into a separate account
that complies with subsection (a)(1).
(3) The name and address of the financial institution
where the security deposit will be deposited shall be clearly and
conspicuously disclosed in the written rental agreement signed by the
tenant. If no written rental agreement is provided, the landlord shall,
within 14 days of receipt of the security deposit, notify the tenant in
writing of the name and
address of the financial institution where the security deposit was
deposited. If,
during the pendency of the rental agreement, a security deposit is
transferred from one financial institution to another, the landlord
shall, within 14 days of such transfer, notify the tenant in writing of
the name and address of the new financial institutions.
(4)
Notwithstanding subsection (a)(1), a landlord shall not be considered to
be commingling the security deposits with the landlord's assets if there
is excess interest in the account in which the security deposits are
deposited. "Excess interest" means the amount of money in excess of the
total amount of security deposits deposited into the account plus any
interest due thereon.
(b) (1) Except as provided for in subsection (b)(2),
any landlord who receives a security deposit from a tenant or
prospective tenant shall give said tenant or prospective tenant at the
time of receiving such security deposit a receipt indicating the amount
of such security deposit, the name of the person receiving it and, in
the case of the agent, the name of the landlord for whom such security
deposit is received, the date on which it is received, and a description
of the dwelling unit. The receipt shall be signed by the person
receiving the security deposit. Failure to comply with this subsection
shall entitle the tenant to immediate return of security deposit.
(2) Upon payment of the security deposit by
means of an electronic funds transfer, the landlord shall give the
tenant a receipt that complies with subsection (b)(1), or an electronic
receipt that acknowledges the receipt of the security deposit. The
electronic receipt shall set forth the date of the receipt of the
security deposit, the amount of the deposit, a description of the
dwelling unit and an electronic or digital signature, as those terms are
defined in 5 ILCS 175/5-105, of the person receiving the deposit.
(c) A landlord who holds a security deposit or
prepaid rent pursuant to this section shall pay interest to the tenant
accruing from the beginning date of the rental term specified in the
rental agreement at the rate determined in accordance with Section
5-12-081 for the year in which the rental agreement was entered into.
The landlord shall, within 30 days after the end of each 12-month rental
period, pay to the tenant any interest, by cash or credit to be applied
to the rent due.
(d) The landlord shall, within
45 days after the date that the tenant vacates the dwelling unit or
within 7 days after the date that the tenant provides notice of
termination of the rental agreement pursuant to Section 5-12-110(g),
return to the tenant the security deposit or any balance thereof and the
required interest thereon; provided, however, that the landlord may
deduct from such security deposit or interest due thereon for the
following:
(1) any unpaid rent which has not been validly withheld or
deducted pursuant to state or federal law or local ordinance; and
(2) a
reasonable amount necessary to repair any damage caused to the premises
by the tenant or any person under the tenant's control or on the
premises with the tenant's consent, reasonable wear and tear excluded.
In case of such damage, the landlord shall deliver or mail to the last
known address of the tenant within 30 days an itemized statement of the
damages allegedly caused to the premises and the estimated or actual
cost for repairing or replacing each item on that statement, attaching
copies of the paid receipts for the repair or replacement. If estimated
cost is given, the landlord shall furnish the tenant with copies of paid
receipts or a certification of actual costs of repairs of damage if the
work was performed by the landlord's employees within 30 days from the
date the statement showing estimated cost was furnished to the tenant.
(e) In the event of a sale,
lease, transfer or other direct or indirect disposition of residential
real of ownership or control by a landlord who has received a security
deposit or prepaid rent from a tenant, the successor landlord of such
property shall be liable to that tenant for any security deposit,
including statutory interest, or prepaid rent which the tenant has paid
to the transferor. The successor landlord shall, within 14 days from the
date of such transfer, notify the tenant who made such security deposit
by delivering or mailing to the tenant's last known address that such
security deposit was transferred to the successor landlord and that the
successor landlord is holding said security deposit Such notice shall
also contain the successor landlord's name, business address, and
business telephone number of the successor landlord's agent, if any. The
notice shall be in writing. The transferor shall remain jointly and
severally liable with the successor landlord to the tenant for such
security deposit or prepaid rent, unless and until such transferor
transfers said security deposit or prepaid rent to the successor
landlord and provides notice, in writing, to the tenant of such transfer
of said security deposit or prepaid rent, specifying the name, business
address and business telephone number of the successor landlord or his
agent within 10 days of said transfer.
(f) (1) Subject to subsection
(f)(2), if the landlord fails to comply with any provision of Section
5-12-080 (a) -- (e), the tenant shall be awarded damages in an amount
equal to two times the security deposit plus interest at a rate
determined in accordance with Section
5-12-081.
This subsection does not preclude the tenant from recovering other
damages to which he may be entitled under this chapter.
(2) If a landlord pays the
interest on a security deposit or prepaid rent within the 30-day period
provided for in subsection (c), or within the 45-day period provided for
in subsection (d), whichever is applicable, but the amount of interest
is deficient, the landlord shall not be liable for damages under
subsection (f)(2) unless: (A) the tenant gives written notice to the
landlord that the amount of the interest returned was deficient; and (B)
within fourteen days of the receipt of the notice, the landlord fails to
either: (i) pay to the tenant the correct amount of interest due plus
$50.00; or (ii) provide to the tenant a written response which sets
forth an explanation for how the interest paid was calculated. If the
tenant disagrees with the calculation of the interest, as set forth in
the written response, the tenant may bring a cause of action in a court
of competent jurisdiction challenging the correctness of the written
response. If the court determines that the interest calculation was not
accurate, the tenant shall be awarded damages in an amount equal to two
times the security deposit plus interest at a rate determined in
accordance with Section 5-12-081
Chicago
landlords covered by the RLTO are required to handle tenant security
deposits and prepaid rent properly. This is important because many
landlords treat security deposits like their own money, making tenants
involuntary partners in landlords' bad investments. This is not
fair. Landlords often keep money from deposits and invent false
reasons for the deductions in order to cover their own losses in a
falling realty market. Or charge $2.50 per light-bulb.
A security
deposit has been defined as "money a tenant deposits with a landlord as
security for the tenant’s full and faithful performance of the lease
terms."
Starr v. Gay, 354 Ill. App. 3d 610, 613 (1st Dist. 2004).
The
Illinois Security Deposit Return
Act (765 ILCS 710) and
Interest Act (765 ILCS
715) both describe a security deposit as:
"a security deposit from
a lessee to secure the payment of rent or to compensate for
damage to the leased property "
The term "security deposit" is not
itself defined in the RLTO definitions section (030).
The RLTO 080 rules have been found in some
cases to apply to pet deposits, rent deposits, key deposits, "damage deposits," elevator
deposits, and any other deposits that are refundable.
Non-refundable payments and fees are not subject to these rules.
Under
080(c), landlords have to pay interest on tenant security deposits.
This should come as little surprise. The deposit is still the
tenant's money, even though the landlord holds it. Since
ancient times interest has been paid for the use of money. The
"birth of money from money" is natural (what's going on these
days with zero interest rate policy, or "ZIRP," is unnatural).
Damage deposits are not meant to be an exception to interest growth.
Under
080(d), landlords have to follow rules in order to legally withhold from
tenant security deposits after move-out. This
section seems to require accounting for prepaid rent just like security
deposit, according to section 110(g)(3) of the RLTO:
"the landlord shall
return all security and all prepaid rent in accordance with
Section 5-12-080(d)"
Finally,
under 080(e), landlords have to give tenants written notice of any
transfer in ownership of the property within 10 days of that transfer.
This section also restates Illinois state law, which holds transferor
and transferee landlords jointly-and-severally liable to the tenant for
the tenant's deposit and interest. For transfers until May 12,
2010, the transferee landlord might not be liable to the tenant for the
security deposit if the transferee landlord was a lienholder.
After May 12, 2010, this exception does not apply under the Chicago
RLTO.
080(f) is
the penalty provision that awards tenants the damages equal to two-times
the deposit amount if the landlord fails to comply with any of the above
rules.
What are the
definitions of terms like "digital signature" that the 2010
amendment to Section 080(b) is talking about under 5 ILCS
175/5-105 ?
"Digital signature" means a type of
electronic signature created by transforming an electronic
record using a message digest function and encrypting the
resulting transformation with an asymmetric cryptosystem using
the signer's private key such that any person having the initial
untransformed electronic record, the encrypted transformation,
and the signer's corresponding public key can accurately
determine whether the transformation was created using the
private key that corresponds to the signer's public key and
whether the initial electronic record has been altered since the
transformation was made. A digital signature is a security
procedure.
"Signed" or "signature"
includes any symbol executed or adopted, or any security
procedure employed or adopted, using electronic means or
otherwise, by or on behalf of a person with intent to
authenticate a record.
