More musings on the first-time Chicago landlord

1sttimeHere I go again. Sometimes, when I write a blog article like this one, I wonder if anyone actually ever reads it.  I really hope that people do.  In fact, I hope that new and first-time landlords find this article before they sign a lease. It is a cautionary tale. It is a story I have told before and will tell again.

Daily, in my eviction practice, I speak to Illinois landlords about their rental issues. I regularly speak to a “new” landlord who has rented out his or her house because of depressed housing-market conditions. Invariably, that landlord comes to our conversation with at least three preconceived notions: first, that as a property owner, the landlord has the upper hand in the landlord-tenant relationship; second, that the landlord has been “prudent” because he or she relied upon the help of a real estate agent, usually the same agent who had tried to help sell the now-rental property; finally, that the landlord is ignorant of the landlord-tenant laws, but that special concessions will be made for the landlord because he or she is not “running a business” but merely “renting a property out because the market conditions are bad”.

Confession: I hate that phone call.

Why? Well, because I need to go back to the beginning. Not exactly to the Adam and Eve beginning, but to “Landlording 101”. Most of the time, these first time landlords do not know the very first thing about landlord-tenant law. They view themselves as “victims” of the financial crisis. The trouble is, the crisis began into 2008.  With the vibrant rental market in Chicago, the crisis, for most landlords, is, largely, over today.

These first-time landlords, affected by the housing bubble, feel an entitlement because of the circumstances surrounding the decrease in value of their property. They largely believe they are exempt (or at least will be granted a special exception) not only from the law, but also from the obligation to educate themselves about the law!  After all, “they’ve never done this before and they are only doing it because their property value declined and they can’t sell their property.”

That’s nice. Tell it to the judge.

I have said it over and over. (In fact, regular readers, please bear with me because I am probably boring you!): landlording is a business. Whether you have one unit or one thousand units, it’s a business. Chicago landlording is the most dangerous form of that business! The city of Chicago, Cook County, the State of Illinois, and the federal government of the United States of America have all passed laws that affect landlords and those laws have significant and extreme penalties for those landlords who run afoul of them. Watch this blog or my twitter feed for just a few weeks and you will see how much risk is in landlording for the unwary.

Notwithstanding this fact, hundreds maybe even thousands of people every year rent out their properties without knowing even the first thing about the law.  Those people would protest that I’m being too harsh. They would defend themselves saying that they engaged a real estate agent, presumably an expert in real estate, to assist them. And, after all, Isn’t that enough?

Quite frankly, it is not. Did those first time landlords research whether or not the agent they relied upon had experience in rental issues? Frankly, most of the agents who I respect with regard to their knowledge of real estate, would, as part of their first act representing a first-time landlord, point out the severity and complexity of the various laws that affect landlords and would begin some landlord education.  Most would refer their client to an attorney for help with the fine points.

But that’s not how it is supposed to work, right?  After all, the first time landlord is already paying a month’s rent as a commission.  Why would they want to pay an attorney $750 for a lease or some legal advice?  Well, I am sorry to say that from my vantage point, landlord education is obviously not happening.  Not among the first time landlords and not among lots of real estate agents who don’t even know the risks.  (FYI, I am trying to change this, as I regularly give seminars and training to many of Chicago’s top real estate brokerage houses who, thankfully, do know the importance of getting their people up to speed!) But, based on the number of leases that pass before my eyes for review that contain numerous, multiple, and costly violations of state, county,’s city, and federal law, more education is required.

So, let’s cut to the chase and turn this from a complaint session into something more constructive.

First time landlords need to do their homework.  At a bare minimum, Chicago landlords need to read and understand the Chicago Residential Landlord Tenant Ordinance. They need to be aware of the obligations and duties it imposes on them.  They need to look into the other laws that apply to them (fair housing, tenants at foreclosure, lock change, building code, etc.). They need to do an appropriate amount of due diligence on the agent and the attorney (if they get one) who helps them.  Are these people qualified? Do they know what they are talking about? They should ask the agent helping them whether or not they have any experience with leasing issues and for how long. If the agent doesn’t know about the CRLTO or rental laws, the agent is probably going to make a mistake that could cost the landlord. (Most agents who don’t know about the CRLTO screw up security deposit receipts and disclosures and that should not come as a surprise).  They should not assume that because a lease says the word “Chicago” at the top, that it is a “standard” lease and is sufficient to protect them.  Most of those leases are not.  Landlords should get a good lease.  That means actually knowing what it says and probably amending it so that it serves the landlord’s needs.  Any landlord who does not do at least this much is asking for a heap of trouble!  If all of that is just too much, don’t be a landlord.

Here’s the state of landlord in Chicago right now today. There are lots of laws. Those laws are no joke. Some of those laws impose absolute and strict liability on a landlord for a violation. For those laws, a judge may not have any discretion to “give a break” to a landlord who ran afoul of those laws because the landlord didn’t take their rental business seriously.  When that happens, the landlord will pay the price.  Don’t be that landlord.  Get educated. Use experienced people. Just because a landlord is a first-time landlord doesn’t mean they have to act like one!

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