As I mentioned a few weeks back, the rental world is getting to be “cluttered” with first time landlords. These landlords are born onto the scene, usually, after their real estate sits unsold on the market for six or ten months. Eventually, the property owner decides to enter the world of landlording.
Most of these first time landlords arrive at the decision to become a leasing mogul at the suggestion of their real estate agent. It goes something like this:
Disgruntled Seller: Any bites on my downtown Chicago condo? I don’t know how long I can keep paying that second mortgage. It’s hard enough to make payments on my Naperville house.
Real Estate Agent: No, nothing. The market still stinks. Did you ever think of renting that unit to get you by until things pick back up? You’ll be able to buy some time until things get better and it will get you some cash flow to help pay your mortgage, tax, insurance, and other costs.
Future Landlord (formerly Disgruntled Seller): Hey, that’s a great idea, why didn’t I think of that? You can find me a renter and help with the lease, right?
Real Estate Agent: Sure, we take a fair commission for our service and would be happy to help out…
Fast forward three months. Former Disgruntled Seller is now First Time Landlord. The tenant that looked great three and a half months ago is now one month in arrears on rent after paying a security deposit, first, and second month’s rent and First Time Landlord is getting ready to evict the tenant.
First Time Landlord has really only been paid one month’s rent because Real Estate Agent collected the first month’s rent as commission. Unfortunately, neither Real Estate Agent nor First Time Landlord were intimately aware of the Chicago Residential Landlord Tenant Ordinance (in fact, one of them might have even said “oh, that? it doesn’t apply because you only have one unit”) and, unfortunately, First Time Landlord just found out from Eviction Law Attorney that Landlord and Agent both made numerous mistakes that are violations of the CRLTO that will make eviction a risky and possibly costly proposition.
Upon being presented with that troubling news, First Time Landlord says “my agent is to blame”, he’s the real estate professional, not me. Real Estate Agent says he is not a lawyer and the First Time Landlord should have obtained legal advice before becoming a landlord.
Tenant does not care though. Tenant relies upon the Chicago Residential Landlord Tenant Ordinance Section 5-12-030(b) that says:
“Landlord” means the owner, agent, lessor or sublessor, or the successor in interest of any of them, of a dwelling unit or the building of which it is part.
As far as the tenant is concerned, anything the landlord’s agent did, the landlord also did. Agent forgot to give a security deposit receipt? landlord is responsible. Agent forgot to disclose the location of the security deposit on the face of the lease? landlord is responsible. Agent failed to disclose any building code violations? landlord is responsible.
Whether or not the agent has responsibility to the landlord probably depends on the landlord’s agreement with agent, but one thing is for certain, landlord is on the hook for anything the agent did. Smart agents and landlords will clearly define their expectations, duties, and responsibilities when it comes to lease preparation and formation in order to avoid these sorts of problems. Even smarter agents and landlords will get familiar with the Chicago Residential Landlord Tenant Ordinance and may even consult with an attorney to get up to speed on the legal requirements for landlords in Chicago.