Chicago landlords must identify security deposit bank

I have often told landlord clients that the Chicago Residential Landlord Tenant Ordinance is simple in pieces and complex as a whole.  There is no one provision of the ordinance that is unduly difficult to comply with.  However, the law is packed full with tiny requirements and the penalty for noncompliance with tiny requirements is large.  In July of 2010, the Chicago City Council amended the section of the CRLTO related to security deposits.  Among the changes was a simple new requirement.  Read about it after the break.

The ordinance was amended to require that landlords holding a security deposit must disclose the name and address of the financial institution where a tenant’s security deposit is being held.  As most Chicago landlords (who are aware of the CRLTO) know, the most common trouble from tenants results from the landlord’s improper care and handling of the security deposit.

Among the modifications to the law, effective August 28, 2010, was the creation of a new subsection of Section 080 of the CRLTO as follows:

(a)(3) The name and address of the financial institution where the security deposit will be deposited shall be clearly and conspicuously disclosed in the written rental agreement signed by the tenant. If no written rental agreement is provided, the landlord shall, within 14 days of receipt of the security deposit, notify the tenant in writing of the name and address of the financial institution where the security deposit was deposited.

If, during the pendency of the rental agreement, a security deposit is transferred from one financial institution to another, the landlord shall, within 14 days of such transfer, notify the tenant in writing of the name and address of the new financial institution.

Let’s break this down.

As my readers hopefully know, Section 5-12-080(a)(1) of the CRLTO requires landlords to hold all security deposits in a federally insured interest-bearing account in a bank, savings and loan association or other financial institution located in the State of Illinois that is not commingled with the landlord’s own assets and which remains the property of the tenant.

The new law supplements this obligation with a disclosure requirement.  So, the CRLTO covered landlord is now obligated to disclose the (1) name and (2) address of the financial institution where the security deposit will be deposited.  It is not necessary to include an account number.

The disclosure, if the rental agreement is written, needs to be “clearly and conspicuously” disclosed.  To me, this means landlords would be smart to put the disclosure on the face of the lease agreement in large type.

The ordinance is quite specific that the disclosure must be made in the written rental agreement that is actually signed by the tenant. What if the disclosure is made on the security deposit receipt?  That’s probably not good enough!  The law requires the disclosure on the lease itself.

This leads into another interesting point. Far too many landlords keep messy, bad, or no records!  Landlords cut down their liability risk by keeping clear and correct records.  This means actually obtaining and storing for safekeeping a copy of the signed lease.  If a landlord cannot produce a signed lease that includes the financial institution disclosure, that landlord could be in for trouble.

CRLTO covered Landlords who make an oral lease (not a good idea!) still have to provide a written notification to the tenant within 14 days after receipt of the security deposit.

Finally, if the landlord changes banks during the course of a lease, the landlord must notify the tenant in writing within 14 days after the transfer of the name and address of the new financial institution.

Simple, right?

So, what happens if a landlord fails to comply with this tiny little section of the ordinance?  Just like all of the other requirements of Section 5-12-080, Section 5-12-080(f)(1) provides that if a landlord fails to comply, with 5-12-080(a)(3), the tenant shall be entitled to damages from the landlord equal to two times the security deposit plus interest.  In addition, Section 5-12-180 will give the tenant the right to recover their attorney’s fees and costs.

So, for any lease executed in 2012, a landlord who forgets to disclosure the name and address of the financial institution where the security deposit will be held will be “on the hook” for double the deposit plus interest, attorney’s fees, and court costs.  It is way less costly to comply!

Landlords looking for help with CRLTO lease compliance should feel free to give us a call to see if we are a match for an engagement.  We regularly help landlords prepare leases that comply with the CRLTO and provide landlord counseling on best practices.

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