BERNSTEIN, ESQ., ON CHICAGO TENANTS' RIGHTS
By: Paul Bernstein, Attorney At Law
© Paul Bernstein, Esq. 1998, All Rights Reserved
Chapter 7: INTEREST ON SECURITY DEPOSITS
Beginning when the RLTO was passed by the City of Chicago, tenants of residential apartments in Chicago were entitled to annual payment of interest on their security deposits equal to 5% of the amount of the deposit. That percentage was changed in 1997 to an amount directly related to interest rates available to landlords for savings accounts and the amount of interest now due on such deposits is currently in the 3.25% to 3.75% range; however, the damages that a landlord can be made to pay tenants if the landlord fails to make even those payments are still very significant.
The purpose of section 5-12-080 of the Chicago Ordinance is to require landlords to pay interest on those security deposits to tenants - after all, the money does belong to the tenant. Experience demonstrated, however, that some landlords would often not make those payments to tenants and because the sums at issue were so small, some landlords were able to retain the interest on security deposits properly due their tenants.
In an effort to overcome this improper and unintended result, the ordinance provides for substantial damages if the payments of interest are not made or not made in a timely fashion.
Interest on Security Deposits must be paid to tenants
Section 5-12-080 (c) of the Ordinance provides that a landlord who holds a security deposit or prepaid rent for more than six months must pay the interest within 30 days after the end of each 12-month rental period. That payment can be by cash or credit to be applied to rent due. Subsection (f) provides that if the landlord or the landlords agent fails to comply, the tenant shall be awarded damages in an amount equal to two times the security deposit plus interest.
Note that the damages are not just two times the amount of the interest that the landlord failed to pay, but two times the amount of the security deposit itself.
As an example, suppose you have a $500.00 security deposit and the landlord fails to pay you interest - even at a 5% interest rate, that would only be $25.00; however, not only does your landlord owe you the twenty-five bucks, but you are entitled to additional damages equal to $1,000.00 (two times the security deposit).
Tenants legal fees to be paid by the landlord
Even so, you may ask "what lawyer is going to handle a thousand dollar case?" Well, our alderman thought the same thing, so they put into the Ordinance section 5-12-180 that says that the prevailing plaintiff (you) in any action arising out of a tenant's pursuing of their rights or remedies under the ordinance shall be entitled to all court costs and reasonable attorney's fees. This provision reasonably assures you that you will be able to find an attorney to represent you in such situations.
Steps to follow when pursuing claims for interest on your security deposit
A few items to be aware of.
Although the ordinance does not require the giving of any notice to the landlord that you did not get your interest and are demanding it, recent cases in the Illinois Appellate Courts require an element of "willfulness" on the part of the landlord. I am not in agreement with this rule of law, as the RLTO makes no reference to "willfulness" whereas, under the laws of the State of Illinois (which apply outside the City of Chicago and/or to properties in Chicago not subject to the RLTO), an element of willfulness must be proven. Indeed, the case that held for an element of wilfullness in cases under the RLTO appeared to involve an unsophisticated landlord who owned a very small building -compare that to a landlord who is a professional apartment building manager with a long history of leasing and that has knowledge of the RLTO and its requirements as evidenced by the terms of the leases in use or the proper providing of a copy of a summary of the RLTO to each tenant as required by law. Clearly here, in my opinion, the landlord who clearly knows or should know of the law is acting wilfully if that landlord (or their agent) does not comply with the timely payment of interest requirements.
Accordingly, be certain to write your landlord a letter (and keep a copy), demanding that the landlord pay you your interest. If the landlord fails to do so after notice, then willfulness should be present.
3. Section 5-12-020 provides several exceptions to the coverage of the Chicago Ordinance. The most common one is that if you live in a six flat or less unit building and if the building is owner occupied, the Chicago Ordinance doe not apply. However, even a home that is rented out, including a condominium unit, are covered.
Statutes of Limitations
A statute of limitations, simply stated, is a period of time during which a tenant may bring a lawsuit against a landlord for breach of the RLTO, where the tenant is requesting "penalty" damages from the landlord that is, damages in an amount over and above the basic loss of money by the tenant. Thus, as noted above, if the landlord fails to pay you interest on your security deposit, then the damages to which you are entitled under the RLTO is equal to two times the amount of your security deposit, plus the interest, plus court costs and plus attorneys fees. If you do not file a lawsuit within the statute of limitations time period, the landlord has a defense against your claim.
The theory of a statute of limitations is that lawsuits should be filed promptly or not at all.
4. Thus, and as noted, in the law there is what we lawyers call a "statute of limitations." You have a limited amount of time to sue your landlord if you are due interest. The Ordinance does not tell us how much time a tenant is allowed to file a law suit. However, another 1997 Illinois appellate court decision known as Namur vs. Habitat appears to tell us that the Statute of Limitations in tenants claims under the RLTO for "penalty" damages is two years from the date of the facts giving rise to the cause of action in the first place.
Most tenants in Chicago residential apartments are entitled to their interest. The City of Chicago has provided the ways and means for you to get it. There are lawyers who will take on your case for the small amounts of interest due you, as the RLTO provides that their legal fees will be paid.
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