Any Landlord Here Who Decides NOT to Take Security Deposit?

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Any Landlord Here Who Decides NOT to Take Security Deposit?

Unai La Salle
Investor · San Francisco, CA · Member since 2016 · 25 posts · 4 votes

I recently closed on a property where I inherited tenants and my lawyer is very adamant that I return all the security deposit to the tenants asap.  His reasoning is that there are too many esoteric rules about the deposit, landlords get sued over it all the time, and it's just more trouble than it's worth.  

In the end, I didn't listen to him, but that makes my wonder if any landlord here indeed opt to forgo this standard practice.  What do you do in its place?  How do you ensure that the tenants keep the place reasonably neat and how do you protect yourself when (god forbid) a tenant trashed your unit? 

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  • Kimberly H.
    Residential Real Estate Broker · Chicago Suburbs, IL · Member since 2013 · 1k+ posts · 594 votes
    9y

    Many landlords in Chicago are not taking security deposits because they can be sued and lose something like 3x the deposit. Read Chicago landlord tenant law. That's what your lawyer was talking about.

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  • Jeff Burdick
    Investor · Chicago, IL · Member since 2016 · 515 posts · 247 votes
    9y

    Yes.  I do a one time "move in fee" in lieu of a security deposit.  I believe this is fairly common in Chicago.  

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  • Kim Meredith HamptonBusiness Member
    Real Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
    9y

    @Unai La Salle I do a couple of things prior to the tenant moving in; I have a professional inspection done with a licensed inspector (third party) and everyone gets a copy, very transparent. I then do one again at renewal and move out. Stands up a lot better in case we need to go to court

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  • Jeff B.
    Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    9y

    OUCH!  and I thought California was tough

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  • Brie SchmidtBusiness Member
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    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    9y

    @Unai La Salle - I am in Chicago and I offer the option of either.  I know the rules of the RLTO so I don't feel it is risky to take a SD, I just follow the rules.  That being said, after a couple of years of pretty much giving the entire SD back because there was no damage, I felt more comfortable with the move in fee.  So my tenants are half and half, I don't see a difference in either and have't shot myself in the foot by not taking a SD.  

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  • Josh Kundrat
    Chicago, IL · Member since 2015 · 77 posts · 39 votes
    9y
    For those who choose to do move in fees, how much do you usually charge, like half months rent or whole months rent?
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  • Sam T.
    Chicago, IL · Member since 2017 · 39 posts · 33 votes
    9y
    I do a non-refundable move in fee. I usually charge half the rent. There is a big headache involved with security deposits in Illinois.
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  • Federico Gutierrez
    Realtor · Cleveland, OH · Member since 2015 · 2k+ posts · 857 votes
    9y

    What is the issue with SD in Chicago? Could someone please advise as I am now steping into this market

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  • Chris Titcomb
    Real Estate Attorney · Chicago, IL · Member since 2014 · 89 posts · 66 votes
    9y

    The ordinance is strict liability, meaning if the landlord fails to comply with any minor requirements (e.g., name the financial institution where the money is being held, provide interest on the deposit to the tenant, give a security deposit receipt, etc...), the LL is liable for double the security deposit as damages plus reasonable attorney fees and court costs.  Again, this is STRICT LIABILITY, so just a small mistep means the LL is liable.  That's why no one take a SD in Chicago.  Read Section 5-12 of the Chicago Residential Landlord Ordinance (RLTO), specifically 5-12-080.

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  • Brie SchmidtBusiness Member
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    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    9y

    @Josh Kundrat - I think if it is more than 1/2 month the city will consider it a SD under the law, even though you call it a non-refundable move in fee

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  • Account Closed
    Investor · Indianapolis, IN · Member since 2015 · 117 posts · 39 votes
    9y
    A move in fee also opens you up to a bigger pool of tenants. If I had to choose a $350 mif Versus a $725 ad all other things being equal, what would you do? You still have to properly screen. In the Chicago market most renters live month to month . The move in fee is desirable. When I did take sd most people insisted on getting their deposit back even after trashing the place.
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  • Sam T.
    Chicago, IL · Member since 2017 · 39 posts · 33 votes
    9y
    Donald that is so true. Bad tenants will wreck a place and fight you on getting their deposit back. Most bad tenants know the law regarding it and to make it worse there are attorneys making living off landlords not fully complying with the security deposit law. So for me its totally worth doing the move in fee.
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  • Crystal SmithPro Member
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    Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
    9y
    Originally posted by @Unai La Salle:

    What do you do in its place?  How do you ensure that the tenants keep the place reasonably neat and how do you protect yourself when (god forbid) a tenant trashed your unit? 

     We stopped taking Security deposits in Cook County years ago.  We charge a non-refundable move in fee.  It's one less thing to have to worry about legally.  A security deposit does not protect your property from being trashed by a tenant.  Someone w/ that kind of mind set will trash your place security deposit or not.

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  • Nick Patterson
    Real Estate Agent · Chicago, IL · Member since 2013 · 386 posts · 218 votes
    9y
    We Never take a deposit Never ever Too many bad experiences We charge a move in fee Life is easy
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  • Nicole Duran
    Real Estate Broker · Chicago, IL · Member since 2016 · 23 posts · 7 votes
    9y
    My attorney's always say not to take security deposit and just do a non refundable move in fee. Chicago tenant rights completely benefit the tenant. Even if they do mess up the place you have to go through an entire process to keep any of the money anyway. Read all the requirements and follow all steps or they can sue you or even get out of their lease if they need to find a loophole. If you are really worries make them get renters insurance and you get insurance too and call it a day. One big thing landlords don't know about security deposit is that it has to be in a completely separate account with no other money besides other security deposits. This also has to be an interest bearing account so you need to have tenant fill out a w-9. And always give receipts for security deposit. I would also do a walk through video and get on camera the condition of place bc if you plan on keeping any of that money you have to be able to prove it if needed.
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