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On Chicago Tenants' Rights - Chapters
Table of ContentsPAUL BERNSTEIN, ESQ., ON CHICAGO TENANTS' RIGHTS

By: Paul Bernstein, Attorney At Law

Paul Bernstein, Esq. 1998, All Rights Reserved

Chapter 8: COMMINGLING OF SECURITY DEPOSITS

In the last chapter, I discussed interest on your security deposit. Other provisions of the Chicago Ordinance require that the landlord clearly recognize a security deposit as your money and treat that money accordingly. As with the failure to pay interest on your security deposit , the improper handling of your money causes the landlord to be exposed to a claim for damages. Here's the details:

Security Deposit requirements of the RLTO

Section 5-12-080 (b) of the Chicago Ordinance requires that any landlord or landlord's agent who receives a security deposit shall give you, at the time of receiving the deposit, a receipt showing the amount of the deposit, the name of the person receiving it and the name of the landlord for whom the deposit is received and the date and a description of the apartment. The receipt must be signed by the person receiving the deposit. If there is a failure to comply with this subsection, you are entitled to an immediate return of your security deposit.

Section 5-12-080 (a) requires the landlord to hold your security deposit in a federally insured interest-bearing account in a bank or savings and loan (or other financial institution) located in Illinois. That deposit and interest on it is your money and is not to be commingled with the assets of the landlord. This is to protect you from the claims of the landlord's creditors as, if your money is commingled with other money of the landlord and your landlord goes broke or bankrupt or gets into trouble with Uncle Sam, then the creditor may grab your security deposit money too along with other money of the landlord.

In order to make certain that the landlord complies with subsection (a), the Ordinance provides in subsection 5-12-080 (f) that you shall be awarded damages equal to two times the amount of the security deposit, plus five percent interest, plus, as provided in Section 5-12-180, your attorney's fees. You need not have lost your security deposit to be entitled to these damages.

Proving commingling

Proving commingling is very difficult, if you paid your security deposit in cash. Further, if you paid both the security deposit and first month's rent with one check or money order, it is also difficult to prove commingling.

It is far better to pay the security deposit with one check or money order and the first month's rent with a separate check or money order. By looking at the reverse side of your canceled checks or money orders, you can determine if your landlord has deposited both amounts in the same bank account. If they have, you are well on your way to proving commingling.

Get your cancelled checks back from your bank

It wasn’t too long ago that all banks returned to you all cancelled checks with your monthly bank statements and without any additional fees for so doing. In recent years, banks and other financial institutions (such as money market funds) are just not returning your cancelled checks.

To me, whatever reasonable price your financial institution requires, if any, so that you get your cancelled checks back with your monthly financial statements is well worth the reasonable cost. It is by checking endorsements on those cancelled checks that you can tell if there has been some apparent commingling of security deposits monies of a tenant with other money of the landlord.

Some landlord's lawyers have historically had their landlord clients maintain a separate interest bearing account holding a total sum equal to or greater then the amount of all tenants' security deposits. Their position is that they should not have to deposit each security deposit received from a tenant into that separate account and they just put these deposits into the building's operating account - the same account out of which the landlord pays the usual expenses of running a building. There is no Illinois decision that this writer is aware of that informs us whether or not this procedure is acceptable and in my opinion, it is totally an incorrect reading of the law. The point is that even if your cancelled checks show apparent commingling, if the landlord has a separate instate bank or financial institution where there are funds are held that always equal or exceed the amount of tenants’ security deposits and that account is, indeed separate and apart from other monies of the landlord, then the landlord may have a potential defense to any claim for commingling.

However, if I were a landlord’s lawyer, which I am not, I would advise my landlord clients to maintain those separate and distinct tenants’ security deposits accounts and, indeed, have the tenants’ security deposits flow into and out of that separate and distinct account.

In case of doubt, you should write to your landlord (retain a copy of your letter for your files) and request information as to where the security deposit account is held.

Remember, the security deposit and interest on it is your money. It is imperative that your landlord have your security deposit in a separate account for your benefit, else, you may lose your deposit due to no fault of your own. Ask your landlord about this, get the facts and protect your interests.

Paul Bernstein
Attorney At Law
333 E. Ontario St.
Chicago, IL 60611
(312) 951-8451
Fax: (312) 280-8180

Internet: paulbernstein@yahoo.com

Internet Home page: http://members.delphi.com/bernsteinp/

On Chicago Tenants' Rights - Chapters

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