What Chicago landlords can (and cannot) deduct from security deposits

What Chicago landlords can (and cannot) deduct from security deposits

Posted on July 5th, 2024. 

As a landlord in a bustling city like Chicago, managing rental properties requires attention to numerous details. One crucial aspect to consider is handling security deposits. It is essential to understand the specific guidelines laid out in the Chicago Residential Landlord Tenant Ordinance (RLTO) to ensure a fair and hassle-free process for both you and your tenants. 

The rules in Chicago are clear about what can be deducted from security deposits. Following these guidelines not only helps maintain a good relationship with your tenants but also protects your financial interests. If you want to learn more about what can and cannot be deducted from security deposits as a landlord, keep reading! 



Legal Framework for Security Deposits in Chicago 

The legal framework for deducting from security deposits in Chicago is primarily governed by the Chicago Residential Landlord Tenant Ordinance (RLTO). This ordinance lays out the rules that landlords must follow when handling security deposits, ensuring that both the landlord and tenant rights are protected. According to RLTO, landlords cannot just deduct at will; there are specific circumstances that justify using a security deposit. These include unpaid rent, damages beyond normal wear and tear, and certain lease breaches which can reasonably lead to financial costs. Normal wear and tear refers to the gradual deterioration expected with everyday use, such as minor carpet wear or small nail holes for picture hanging. On the other hand, damages like broken windows, large holes in the walls, or significant carpet stains fall under improper tenant behavior and justify a deduction from the security deposit. 


Adhering to these laws is essential for landlords to avoid disputes and potential financial penalties. The RLTO requires landlords to provide an itemized list of damages and estimated repair costs within 30 days after a tenant vacates the property if deductions from the security deposit are made. This transparency helps mitigate misunderstandings and disputes. Flouting these regulations can attract substantial fines and even legal action, emphasizing the importance of following the law meticulously. Therefore, as a landlord, familiarizing yourself with what you can and cannot deduct from a security deposit is crucial. Not only does it help maintain a good relationship with your tenants, but it also streamlines the property management process, making it more efficient and straightforward. Your attention to these legal details ensures the protection of your financial interests while upholding tenant rights, creating a balanced and fair rental environment for everyone involved. 



Permissible Deductions: What Landlords Can Deduct 

The RLTO specifies what landlords can deduct from security deposit when tenant moving out, primarily focusing on unpaid rent, significant property damage beyond normal wear and tear, and costs resulting from lease breaches. Normal wear and tear, such as slight carpet discoloration, minor scuffs on walls, or faded paint, is the landlord’s responsibility. However, unpaid rent is a clear form of deduction—the tenant agreed to a rental amount for their stay. If that amount remains unpaid as they depart, landlords can use the security deposit to cover this deficit. Additionally, major damages fall within permissible deductions. For instance, if a tenant leaves behind broken window panes, substantial holes in the walls, or deeply stained carpets, these go beyond normal wear and tear. Such damages necessitate repair costs that rightfully come out of the security deposit. Don't forget about lease breaches; costs arise from scenarios like unauthorized alterations to the property or allowing pets in a pet-free property. Security deposits can lawfully cover expenses necessary to restore the property to its original condition. 

Moreover, cleaning costs can be deducted under particular conditions. Normal cleaning after tenant vacates is typically the landlord's duty. Yet, if the tenant leaves the property excessively dirty, deduction from the security deposit is justifiable. Imagine moving out and leaving heaps of trash or failing to clean appliances, leading to damage or pest infestation. These situations compel landlords to hire professional cleaning services, which deductibles fall under. Yet, landlords must provide an itemized breakdown of damages, including cleaning costs, clearly stating the necessity for each charge. Here’s where RLTO really emphasizes transparency. Within 30 days after tenant vacates, landlords must furnish an itemized list detailing damages and estimated repair costs. This legal mandate ensures tenants understand exactly why deductions are made, minimizing disputes. This clarity is crucial—failure to comply could lead to significant fines and potential legal action. Therefore, understanding the nuances of what you can and cannot deduct from a security deposit not only safeguards your financial interests but also fortifies your relationship with your tenants. By adhering closely to these rules, both landlords and tenants find a fair, balanced rental experience, free from unnecessary conflict. 



Impermissible Deductions: What Landlords Cannot Deduct 

When considering what can landlords deduct from security deposit legally, it is crucial to understand what constitutes impermissible deductions. According to the RLTO, landlords cannot deduct for normal wear and tear. This refers to the minor deteriorations that naturally occur over time with regular use of the property. Examples include slight carpet discoloration, minor scrapes on walls, and faded paint. These are not grounds for deductions and fall under the landlord’s maintenance responsibilities. Routine tasks like cleaning the property post-tenancy are also the landlord’s duty unless the tenant leaves the place excessively dirty. So, if the tenant has followed standard housekeeping norms, deductions for cleaning costs should not be made. 

Another key area is routine maintenance. Tasks such as fixing a faucet, replacing burnt-out light bulbs, or tending to the wear of fixtures are part of regular upkeep and, therefore, cannot be deducted from the security deposit. Furthermore, landlords are usually responsible for minor repairs like fixing cabinet doors or minor plumbing issues, unless they result from tenant negligence. 

Landlords must tread carefully when considering deductions related to using security deposit. Dishonest or mistaken deductions not only breach the RLTO guidelines but also risk disputes and legal action. While unpaid rent is a clear case for deduction, landlords cannot charge for speculative future losses or inconvenience caused by seeking new tenants. It's essential to refrain from deducting costs for upgrades or improvements that aren't directly related to tenant damage. For instance, repainting walls or replacing carpets purely for aesthetic purposes or to modernize the property should not come out of the security deposit. If you find yourself needing to replace appliances or undertake significant renovations that were not due to tenant misuse, absorbing these expenses as part of property enhancement is expected. Misinterpretation of these rules can be costly, leading to financial penalties and strained tenant relationships. Therefore, transparency is fundamental—always provide an itemized list of deductions, explaining each charge. This not only clarifies the situation for the tenant but also legitimizes your deductions, ensuring they are justified and compliant with RLTO. These clear guidelines help you create a fair and balanced rental experience, accommodating the interests of both parties without unnecessary stress and conflict. 



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Landlords who diligently follow these legal guidelines not only protect their investments but also foster goodwill and trust with their tenants. This responsive and transparent approach mitigates potential conflicts, making the leasing experience smoother for everyone involved. 

If you're ready to explore hassle-free property management and see what we can do for you, contact Rent 5469 LLC today at 773-988-5469 or email us at [email protected] us show you how our expertise can make a difference in your leasing strategy.

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