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Breaking a Lease in Chicago

Breaking a lease in Chicago (or anywhere else) before the end of its term is risky and you should always consult a lawyer knowledgeable in Chicago landlord-tenant law before attempting to end your lease. This article aims to provide general legal information (and not advice specific to your situation) about breaking a lease in Chicago.

We are only taking security deposit cases right now, but we have a large referral network.

Most leases in Chicago are for a one year term, often with a summer starting and ending date. This is a good arrangement for both landlords and tenants because the term provides certainty and moving in the summer is far easier than in the winter. This article will focus on yearly leases as ending a month-to-month lease before the end of its term doesn’t come up often.

In any discussion about tenants’ rights in Chicago, including breaking a lease in Chicago, we have to address the applicability of the Residential Landlord and Tenant Ordinance (“RLTO”).

The RLTO is the primary source of renters’ rights law in Chicago. It applies to most apartments in Chicago, but does not apply to suburban Cook County. The largest exception to the RLTO is for owner-occupied buildings that contain less than 7 dwelling units. If your building has 7 or more units, the RLTO likely applies and if you live in a smaller building where the owner lives somewhere else, the RLTO probably applies. For a lengthy discussion of the RLTO, click here.

Tenant Liability for Rent Generally

Before discussing ways to end a lease, it is important to understand what happens when a tenant stops paying rent and moves out (this is not an article about eviction).

When a tenant and landlord execute a written yearly lease, the tenant is promising to pay monthly rent for the term of that lease. The obligation to pay monthly rent does not end simply because a tenant moves out and turns over the keys.

If a tenant in Chicago stops paying rent and moves out (abandons the unit) the landlord has a duty to make reasonable efforts to find a new tenant, we call this mitigating the landlord’s loss. The landlord then has a claim against the abandoning tenant for rent for the entire remaining term, plus costs of mitigation (advertising ect.), minus rent obtained from the new tenant. This is best illustrated by way of example.

Landlord and Tenant sign a one year lease for a Chicago apartment at a rental rate of $1000.00 a month, Tenant has an obligation to pay $12,000.00 over the course of a year. Tenant then gets a new job in New York, and moves out at the end of month 6 leaving the apartment in pristine condition and returning the keys to Landlord. Landlord hires a real estate agent to find a new tenant (as is his common practice) and a new tenant is found at the end of month 7. However, the new tenant is only paying $800.00 a month as the rental market is softer in the winter. Landlord pays the real estate agent their one month fee and asks Tenant to pay for Landlord’s loss.

In this scenario, the rent for the entire term was $12,000.00, Tenant paid $6,000.00 while he lived there and Landlord recouped $4,000.00 from the new tenant. Landlord lost one full month of rent and also had to pay $1,000.00 in marketing costs to the real estate agent. Liability would be ($12,000-$6,000-$4,000+$1000) = $3,000.00. Thus, Landlord would have a claim for $3,000.00 against Tenant and could sue Tenant in court if Landlord chose to do so.

 Chicago Lease Breaking Options

There are several options to consider when deciding how to break a lease, they are:

  • By written agreement with the landlord;
  • Buyout clauses;
  • Subleasing;
  • Re-renting;
  • Violations of the RLTO.

 Breaking a Lease in Chicago by Written Agreement

Breaking a lease by written agreement with the landlord is by far the best option. The reason this option is superior is because the rights and remedies of the parties are resolved with finality and, if properly drafted, nothing will haunt the tenant in the future.

Some landlords are very understanding and willing to terminate a lease early, especially if the tenant gives advance notice and the termination occurs in the summer months. Landlords may simply release the tenant from the lease, attempt to negotiate some financial compensation, or request that the tenant find a suitable tenant so the landlord can re-rent the apartment.

In Chicago tenants often have some financial leverage if the landlord has violated the RLTO. When a tenant has claims for financial recovery under the RLTO, the tenant may be able to negotiate full or partial release of these claims in exchange for lease termination.

If a tenant has to break their lease, they should discuss their options with their landlord as soon as possible. If the parties come to an agreement, it must be in writing and ideally drafted by the tenant’s attorney.

Buyout Clauses

We are seeing more and more leases that contain buyout clauses. These clauses are especially common when the landlord is a large corporation. Buyout clauses commonly give the tenant the option to end their lease early for the payment of a fee – usually equal to two or three month’s rent.

In some cases the buyout fee is excessive, but, if the tenant has no other options, it minimizes their risk. If a tenant intends to exercise a buyout clause, they should first have an attorney read it to make sure that the landlord is giving up their right to sue the tenant for unpaid rent. After review, the attorney can draft a settlement agreement properly breaking the lease.

Subleasing

Tenants in Chicago have the right to sublease if the property is subject to the RLTO. A landlord can require permission for the tenant to sublease, but that permission may not be unreasonably withheld. Essentially, the tenant may sublease, but the landlord can require that the new tenant has a source of income, decent credit score and no criminal record.

Subleasing (as opposed to re-renting) is when the original tenant becomes the new tenant’s landlord. The original tenant signs a lease with the new tenant, collects rent from the new tenant, and continues to be obligated to the original landlord for rent payments and damage to the property.

Subleasing in Chicago is strongly discouraged. Being a landlord in Chicago is not a casual endeavor as there are many laws that must be followed and evicting a subtenant can take months. The original tenant is putting their own financial well-being in the hands of someone they don’t know. If the new tenant stops paying rent, the original tenant may be sued. If the new tenant destroys the property, that is also the original tenant’s responsibility. Moreover, when the original tenant becomes a landlord, the original tenant has to comply with the RLTO, something that even professional landlords find difficult.

Re-Renting

Re-renting is different than subleasing and is much preferred. A lot of landlords and tenants use the term interchangeably, so it is important to clarify what the landlord is willing to agree to. Unlike subleasing, landlords are not required to re-rent under Chicago law.

Re-renting is when the terminating tenant finds a new suitable tenant for the landlord and the landlord terminates the lease with the old tenant and signs a new lease with the new tenant. The old tenant is then absolved of all liability under the original lease. Most landlords that say they will allow the tenant to sublease will also allow a re-lease as it simplifies the relationship.

Terminating for Violations of the RLTO

(CHICAGO RLTO REGULATED PROPERTIES ONLY)

The RLTO has several provisions that, if violated, allow for lease termination. Terminating for RLTO violations is not ideal because the landlord may later sue the tenant claiming that the termination was not proper or that the required procedures were not followed. As always, when breaking a Chicago lease, legal counsel is essential. The following provisions allow for lease termination:

Unlawful Entry (5-12-050 and 5-12-060)

Except in emergency or when a repair elsewhere in the building unexpectedly requires access to the tenant’s unit, a landlord must give 48 hours notice before entering. The entry must be at a reasonable time (between 8am and 8pm) unless the tenant agrees to a different time. The entry must be for a legitimate purpose and not simply to harass the tenant.

Landlords must also not make unreasonable and harassing demands for lawful entry or make lawful entry in an unreasonable manner.

If a landlord violates the access provisions of the RLTO, the tenant has several remedies, including breaking their lease.

Failing to Identify the Owner and Agents (5-12-090)

Pursuant to the RLTO, a landlord must provide the following information in writing, on or before the commencement of the tenancy:

  1. The name address and telephone number of the owner or person authorized to manage the premises; and
  2. The name, address and telephone number of the person authorized to act for and on behalf of the owner for the purpose of service of process and for the purpose of receiving and receipting for notices and demands.

Often the landlord fails to disclose the information required by bullet 2 above. Failure to comply with 5-12-090 gives the tenant remedies including lease breaking.

Failing to Notify of a Foreclosure Action (5-12-095)

Though a foreclosure action does not in itself terminate a lease or relieve a tenant’s obligation to pay rent, a landlord subject to the RLTO must provide a very specific notice to the tenant before the tenant enters into a rental agreement or within seven days of being served with a foreclosure complaint.

Landlords almost never make the legally required disclosure and, if they don’t, the tenant may terminate the rental agreement.

Failing to Notify of Conditions Affecting Habitability (5-12-100)

A landlord must disclose the following in writing to the tenant prior to entering into or renewing  a rental agreement:

  1. Code violation citations issued by the City and any code enforcement litigation or compliance board proceedings in the 12 months prior to the date the landlord and tenant enter into a rental agreement. The written notice must contain, as applicable:
    1. The case number of the litigation;
    2. The identification number of the compliance board proceeding; and
    3. A listing of any code violations cited.
  2. Any notice of intent to terminate water, gas, electrical or other utility issued by the City of Chicago or the utility provider. The disclosure must state:
    1. The type of service to be terminated;
    2. The date of termination; and
    3. Whether the termination will effect the apartment, the common areas or both.

If a landlord fails to comply with these obligations, the tenant may break the lease.

Material Non-Compliance With the Lease and Other Conditions Issues (5-12-110)

Breaking a lease in Chicago for conditions issues is always troublesome. Outside of Chicago, the conditions of the unit must be truly deplorable to terminate. Chicago places more responsibility on landlords, but whether a tenant may break their Chicago lease due to conditions problems isn’t always clear and the required procedural steps must be followed. Though we always recommend hiring a lawyer to handle your lease termination, this is especially true when relying on conditions issues.

Landlords have a duty to maintain the apartment and common elements in the building. If the landlord is in material non-compliance with the lease or the Chicago Municipal Code, the tenant may break their lease, after proper written notice, if the landlord does not correct the problem. The notice required is key, breaking a Chicago lease without proper notice can leave you liable for unpaid rent and abandonment damages.

Casualty Damage

The clearest cases of material non-compliance involve “casualty damage”. If the apartment burns to the ground, has a semi plow through it or floods to the point of being destroyed, the tenant may immediately vacate and notify the landlord that the lease has terminated within 14 days of vacating the premises. Fire is by far the most common type of casualty damage.

Failure to Deliver Possession

If a landlord does not deliver possession of the apartment on the date specified in the rental agreement, the tenant may give written notice of termination and terminate the lease.

Failure to Provide Essential Services

The next most clear case of material non-compliance is the failure to provide an essential service. Essential services include:

  • Heat;
  • Running water;
  • Hot water;
  • Electricity;
  • Gas;
  • Plumbing; and
  • An other non-compliance that constitutes an immediate danger to the health and safety of the tenant.

For purposes of termination, it is not a failure to provide an essential service if it is due to the utility provider being unable to provide service (downed power lines after a storm or broken/frozen water mains). It is also not a failure to provide essential services if a utility is terminated due to the tenant not paying the bill of the utility provider for which the tenant is responsible. Tenants should also use extreme care when considering terminating for other non-compliance that constitutes an immediate danger to the health and safety of the tenant as that provision is inherently subjective in all but the most extreme cases.

In order to terminate for failure to provide essential services, the tenant must provide the landlord a written notice, delivered to the address provided for service of notices (or last known address if none is provided). If the condition is not corrected within 72 hours after the tenant gives notice, the tenant may terminate the lease by written notice and then vacate the premises within 30 days after the expiration of the 72 hour notice.

Other Material Non-Compliance or Failure to Maintain Issues

The vast majority of conditions issues are more minor than those above and the landlord is allotted 14 days to correct them. The list of possible issues subject to 14 day notice termination is nearly endless, the more common issues we see are:

  • Insect and rodent infestations;
  • Minor plumbing issues;
  • Minor flooding and sewage back-up;
  • Missing smoke detectors;
  • Broken windows;
  • Non-functioning appliances;
  • Roof leaks;
  • Missing window screens;
  • Missing window locks;
  • Leaky or broken windows;
  • Dangerous porches;
  • Missing deadbolt locks; and
  • Missing peepholes;

If a tenant wants to terminate for one of these more minor conditions issues, the tenant must issue a written 14 day notice to the landlord specifying the defects/conditions and stating that the rental agreement will terminate on a date not less than 14 days after receipt of the notice unless the non-compliance is remedied. The tenant will then have 30 days to vacate the premises and tender possession to the landlord after termination.

 Unlawful Retaliation (5-12-150)

The anti-retaliation provisions of the RLTO are seldom used when breaking a lease in Chicago. The reason for this is the most common forms of unlawful retaliation are filing an eviction, threatening to file an eviction, increasing rent, or refusing to renew a rental agreement. Generally, the tenant wants to stay in the apartment and the landlord is trying to get them out. Thus, though possible, victims of unlawful retaliation seldom want lease termination as a remedy.

Failure to Provide the RLTO Summary and Interest Rate Disclosure (5-12-170)

When breaking a lease in Chicago, tenants commonly rely on violations of 5-12-170. This provision of the RLTO requires that the landlord attach the following documents, prepared by the Commissioner of the Department of Planning and Development, to each written rental agreement at the time it is initially offered to the tenant:

  1. A summary of the RLTO, describing the respective rights, obligations and remedies of landlords and tenants;
  2. A summary describing the respective rights, obligations and remedies of landlords and tenants with respect to security deposits, including the new interest rate as well as the rate for each of the prior two years.

If the rental agreement is oral, the summaries must be provided at the time the oral rental agreement is offered to the tenant.

Landlords often provide old copies of the summaries or no copies at all, either of which entitle the tenant to terminate their lease.

Conclusion

When considering breaking a lease in Chicago, talk to a lawyer as soon as possible! Though there are many ways to break a Chicago lease, mistakes can be expensive. Lawyers go to school for many years to learn how to interpret and apply the law; moreover, we are often able to negotiate and properly document a voluntary lease termination. The more time we are provided to arrange for a termination, the higher the likelihood of a successful outcome.

We are only taking security deposit cases right now, but we have a large referral network.

 

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