Chicago Security Deposit Law

Chicago security deposit law is among the most protective of tenants’ rights in the nation. If your landlord:

  • Stole your security deposit;
  • Made excessive deductions;
  • Failed to pay interest; or
  • Is taking an unreasonable time to give it back.

An attorney can pursue the landlord for:

  1. Return of the deposit;
  2. Double damages; and
  3. Attorney fees and court costs.

Not ready to talk to a lawyer yet? I developed an automated claim evaluation program that quickly determines whether a tenant has a Chicago security deposit claim in most cases. Click the button below to try it out.

Summary of Chicago Security Deposit Law

Chicago Security Deposit Law Protects Your Money
Chicago Security Deposit Law Protects Your Money

Due to rampant security deposit abuse by landlords across the country, many states have enacted laws to force landlords to deal with deposits fairly. Illinois has its own law called the Security Deposit Return Act, which applies to all buildings in the state that have 5 or more units. Though the Security Deposit Return Act is powerful when it applies, it pales in comparison to Chicago’s local law, the Residential Landlord and Tenant Ordinance (commonly called the “RLTO”).

The RLTO is generally regarded as extremely tenant friendly and is one of the most powerful statutes in the country. Its strength comes from the fact that it is strict liability, has attorney fee and cost shifting, has statutory penalties, and most violations are not curable.

As explained more fully below, Chicago security deposit law grants nine primary rights to tenants. These tenants’ rights include:

  1. Having the deposit segregated from the landlord’s own funds;
  2. Having the deposit placed in an interest bearing account;
  3. Being told what bank has your deposit;
  4. Receiving a receipt for the deposit at the time it is given to the landlord or his agent;
  5. Receiving interest on your deposit after every 12 month period;
  6. Having the deposit returned 45 days after vacating the unit;
  7. Receiving actual paid receipts for any deductions due to damage;
  8. Receiving a two-times the security deposit penalty for violations;
  9. Receiving reasonable attorney fees and court costs.

 The Security Deposit must be Segregated

Landlords almost always mix security deposits with their own funds. The reason this is prohibited is because landlords, like anyone else, can run into financial trouble and if a tenant’s security deposit is mixed in with the landlord’s personal funds, the landlord’s creditors may take the tenant’s money to satisfy a judgment against a landlord.

Chicago security deposit law specifically states that the security deposit must be kept in an FDIC insured bank account located in the state of Illinois and shall not be commingled with the assets of the landlord. The deposit must not be subject to the claims of the landlord’s creditors including a foreclosing mortgagee or bankruptcy trustee.

Essentially, the landlord has to put a tenant’s deposit in an FDIC insured trust account that does not include any of the landlord’s funds. In our experience, this is almost never done unless the landlord a very savvy corporate landlord.

The Security Deposit Must Be Placed in an Interest Bearing Account Under Chicago Security Deposit Law

Even though a landlord is holding the tenant’s security deposit, the money still belongs to the tenant. As such, the tenant has a right to the earnings generated by those funds. Though interest rates are currently pathetic, Chicago security deposit law mandates that all deposits be kept in an interest bearing account.

Location of the Security Deposit must be Disclosed
Location of the Security Deposit must be Disclosed

The Bank Holding Your Deposit must be Identified

Chicago security deposit law requires that the landlord place the name and the address of the financial institution that is holding the tenant’s security deposit on the written rental agreement signed by the tenant. If there is no written rental agreement, the landlord must provide the tenant with a written notification of the name and address of the bank holding the deposit within 14 days of receipt of the deposit.

The Landlord must Provide the Tenant with a Deposit Receipt

When the landlord takes a security deposit, he must give the tenant a receipt for the deposit at the time the deposit is received. This receipt must contain the following information:

  • Amount of the security deposit
  • Name of the person receiving the security deposit
  • Name of the landlord (if someone other than the landlord is receiving the deposit)
  • Date the deposit was received
  • A description of the apartment
  • The signature of the person who received the deposit

Chicago Security Deposit Law Requires Monthly Interest

Chicago security deposit law requires that landlords pay interest on security deposits at a statutory rate. Though the interest on deposits is currently very small, failure to pay interest is a serious violation. Interest on the security deposit must be paid within 30 days after the end of each 12-month rental period and can only be paid in cash or credit applied to rent due. Landlords are not permitted to retain the interest until the tenant moves out.

Security Deposits must be Returned in 45 days

After a tenant moves out, a landlord has 45 days to return the security deposit. If the lease was terminated due to fire or other casualty loss, the landlord is only given 7 days to return the deposit. The landlord is only able to deduct unpaid rent and damage beyond ordinary wear and tear from the deposit.

The Landlord must give the Tenant Paid Receipts for Deductions

Chicago security deposit law requires that the landlord prove the cost of repairing the unit. If a landlord is going to deduct money from the security deposit for damages, the landlord must deliver an itemized statement of damages and the estimated or actual cost of repair to the tenant within 30 days of vacating the unit. If the landlord does not provide this statement, the landlord is prohibited from deducting damages from the deposit. If the actual cost is given, the landlord must attach paid receipts to the statement.

If the landlord only provides an estimate of the cost of repairs within the initial 30 days, the landlord has 30 days from the initial estimate to provide the tenant with copies of paid receipts for the repairs or replacements. If the landlord or his employees perform the repairs themselves, a certification of actual costs of repairs is required.

Chicago Security Deposit Law Provides Penalties for Violations

If a landlord violates Chicago security deposit law, the landlord is liable for two times the security deposit as a penalty. The two times deposit penalty is in addition to the deposit itself, if the tenant is entitled to its return. Moreover, in the case of a failure to provide a proper deposit receipt, the landlord must immediately return the deposit, even if he would otherwise have a right to keep it.

Chicago Security Deposit Law makes Landlords pay Attorney Fees

If a tenant is successful in pursuing a claim against the landlord, the landlord is legally responsible for the tenant’s reasonable attorney fees and court costs. This allows tenants, who are often in a worse financial position than landlords, to stand up for their rights without having to worry about obtaining money to pay their attorney.

Tenants Aren’t Alone in Chicago Security Deposit Disputes

It can be intimidating to assert your rights against a landlord that has stolen your money. Luckily, you do not have to dispute the deductions alone. Hiring a lawyer that is experienced in security deposit disputes makes your landlord take you seriously, forces them to face the reality of writing checks to their own lawyer, and saves you from having those uncomfortable phone conversations with your abusive landlord. If you would like to have your case reviewed by an attorney, click here to send a message.