Charging different Security Deposits for the type of Renter

12 Replies

I'm a new property manager and have a house listed on the market to rent.  I suggested to the homeowner that we charge one months security deposit for section 8 renters and one and a half months deposit for non-section 8 renters.  Is this legal in Illinois?  Can I do that?

Why would you do that? Seems counter intuitive to me. I don't operate residential rental property in Illinois, so I don't know about your laws, but it could be seen as discriminatory based on source of income.

It is important to set your Rental Criteria in advance of advertising and to make sure it is compliant with non-discrimination laws and the Fair Housing Act. Determine the base amount that you will require for a security deposit. In some states there are limits as to how much a security deposit can be. It needs to be reasonable. 

In my rental criteria there are certain conditions whereby a tenant would need to pay a higher security deposit if by accepting them I am taking on higher risk. That works in my area and may or may not work in yours. Our rental criteria is available to view in the BP File Place under the Resources Tab - File Place - Other Documents.  Also you can view our Tenant Screening Questions there. They are examples of what might be done, to give you some ideas.

Good luck! Welcome to Bigger Pockets!

As close to this as I get is charging a last month's rent as well at move-in if someone is higher risk. (1st time renter maybe, or income barely meeting 3x rent).  For animal-friendly places, we just go ahead and up the deposit requirement.  If they end up not having an animal, we can reduce.  I'm not going to argue with an applicant whether a dog is a dog or not and get in an argument about pet deposits.  One  other thing, we never have deposit equal to the rent.  It will be misunderstood as a last month's rent at some point.  Have it be a little less or a little more, but never the same.  

Thats a tough one. I would bet if you did it the other way around, somebody would squawk. Before you make this your policy, I would strongly recommend you check with an attorney. You don't want to open yourself up for a lawsuit.

You're not really gaining enough considering you're opening yourself up to a lawsuit. Doesn't mean I think they'd win. I have no clue. But it seems to be tricky these days to have two separate renting policies based on anything.....

That being said, isn't that exactly what section 8 does here in Illinois. If I list my property for 1,300, and they come back with 1,100, then they're basically telling me my rent is 1,300 if you don't have section 8 but 1,100 if you do. How is that fair?????

Thats why I'm not very fond of section 8. The inspections are a hassle to deal with and their rents are ALWAYS under market.  And the guaranteed payments are not that guaranteed. Typically, the tenants are responsible for a portion and lately section 8 has been cutting down what portion they'll pay. 

So now you're basically dealing with rent controls and double inspections (villages already inspect) and you still aren't truly getting guaranteed rents. So why would anybody deal with section 8?

Thanks everyone!  No @Jim B. I'm not a licensed broker.  As a matter of fact this is my first property, so I'm getting my footing.  I've spoken with a couple other people as well  and have decided NOT to charge different security deposits.  Everyone will pay the same amount.  I'm keeping things simple.... (this time)  LOL

@Phoebe Hodges-Carter  just food for thought, it's illegal to act as a property manager without a license.  Unless, of course, you're doing it for free....

"Broker" means an individual, partnership, limited liability company, corporation, or registered limited liability partnership other than a real estate salesperson or leasing agent who for another and for compensation, or with the intention or expectation of receiving compensation, either directly or indirectly:
(1) Sells, exchanges, purchases, rents, or leases real estate.
(2) Offers to sell, exchange, purchase, rent, or lease real estate.
(3) Negotiates, offers, attempts, or agrees to negotiate the sale, exchange, purchase, rental, or leasing of real estate.
(4) Lists, offers, attempts, or agrees to list real estate for sale, lease, or exchange.
(5) Buys, sells, offers to buy or sell, or otherwise deals in options on real estate or improvements thereon.
(6) Supervises the collection, offer, attempt, or agreement to collect rent for the use of real estate.
(7) Advertises or represents himself or herself as being engaged in the business of buying, selling, exchanging, renting, or leasing real estate.
(8) Assists or directs in procuring or referring of prospects, intended to result in the sale, exchange, lease, or rental of real estate.
(9) Assists or directs in the negotiation of any transaction intended to result in the sale, exchange, lease, or rental of real estate.
(10) Opens real estate to the public for marketing purposes.
(11) Sells, leases, or offers for sale or lease real estate at auction. 

Sec. 20?10. Unlicensed practice; civil penalty.
(a) Any person who practices, offers to practice, attempts to practice, or holds oneself out to practice as a real estate broker, real estate salesperson, or leasing agent without being licensed under this Act shall, in addition to any other penalty provided by law, pay a civil fine to OBRE in an amount not to exceed $25,000 for each offense as determined by OBRE. The civil fine shall be assessed by OBRE after a hearing is held in accordance with the provisions set forth in this Act regarding the provision of a hearing for the discipline of a license. 

@Phoebe Hodges-Carter  just food for thought, it's illegal to act as a property manager without a license.  Unless, of course, you're doing it for free....

"Broker" means an individual, partnership, limited liability company, corporation, or registered limited liability partnership other than a real estate salesperson or leasing agent who for another and for compensation, or with the intention or expectation of receiving compensation, either directly or indirectly:
(1) Sells, exchanges, purchases, rents, or leases real estate.
(2) Offers to sell, exchange, purchase, rent, or lease real estate.
(3) Negotiates, offers, attempts, or agrees to negotiate the sale, exchange, purchase, rental, or leasing of real estate.
(4) Lists, offers, attempts, or agrees to list real estate for sale, lease, or exchange.
(5) Buys, sells, offers to buy or sell, or otherwise deals in options on real estate or improvements thereon.
(6) Supervises the collection, offer, attempt, or agreement to collect rent for the use of real estate.
(7) Advertises or represents himself or herself as being engaged in the business of buying, selling, exchanging, renting, or leasing real estate.
(8) Assists or directs in procuring or referring of prospects, intended to result in the sale, exchange, lease, or rental of real estate.
(9) Assists or directs in the negotiation of any transaction intended to result in the sale, exchange, lease, or rental of real estate.
(10) Opens real estate to the public for marketing purposes.
(11) Sells, leases, or offers for sale or lease real estate at auction. 

Sec. 20?10. Unlicensed practice; civil penalty.
(a) Any person who practices, offers to practice, attempts to practice, or holds oneself out to practice as a real estate broker, real estate salesperson, or leasing agent without being licensed under this Act shall, in addition to any other penalty provided by law, pay a civil fine to OBRE in an amount not to exceed $25,000 for each offense as determined by OBRE. The civil fine shall be assessed by OBRE after a hearing is held in accordance with the provisions set forth in this Act regarding the provision of a hearing for the discipline of a license. 

@Phoebe Hodges-Carter  just food for thought, it's illegal to act as a property manager without a license.  Unless, of course, you're doing it for free....

"Broker" means an individual, partnership, limited liability company, corporation, or registered limited liability partnership other than a real estate salesperson or leasing agent who for another and for compensation, or with the intention or expectation of receiving compensation, either directly or indirectly:
(1) Sells, exchanges, purchases, rents, or leases real estate.
(2) Offers to sell, exchange, purchase, rent, or lease real estate.
(3) Negotiates, offers, attempts, or agrees to negotiate the sale, exchange, purchase, rental, or leasing of real estate.
(4) Lists, offers, attempts, or agrees to list real estate for sale, lease, or exchange.
(5) Buys, sells, offers to buy or sell, or otherwise deals in options on real estate or improvements thereon.
(6) Supervises the collection, offer, attempt, or agreement to collect rent for the use of real estate.
(7) Advertises or represents himself or herself as being engaged in the business of buying, selling, exchanging, renting, or leasing real estate.
(8) Assists or directs in procuring or referring of prospects, intended to result in the sale, exchange, lease, or rental of real estate.
(9) Assists or directs in the negotiation of any transaction intended to result in the sale, exchange, lease, or rental of real estate.
(10) Opens real estate to the public for marketing purposes.
(11) Sells, leases, or offers for sale or lease real estate at auction. 

Sec. 20?10. Unlicensed practice; civil penalty.
(a) Any person who practices, offers to practice, attempts to practice, or holds oneself out to practice as a real estate broker, real estate salesperson, or leasing agent without being licensed under this Act shall, in addition to any other penalty provided by law, pay a civil fine to OBRE in an amount not to exceed $25,000 for each offense as determined by OBRE. The civil fine shall be assessed by OBRE after a hearing is held in accordance with the provisions set forth in this Act regarding the provision of a hearing for the discipline of a license. 

Thanks @Jim B. , that is something I did not know!  I started doing this to help out a a friend who didn't want to deal with the back and forth of the property.  I am not working for a licensed broker and assisting him with his properties and bringing in new business.