While these mortgage types may have had somewhat of a bad rap, they actually can be highly beneficial for a variety of clients with different backgrounds, when taken on with a bit of knowledge and care. Here is what you should consider.
A new unfurnished apartment lease form was recently introduced by the Chicago Association of Realtors. It includes disclosure forms for tenants to acknowledge they've been informed about lead paint, radon, and bedbugs. It also sports a new cover page that warns landlords about the risks of accepting security deposits.
According to the Chicago Tribune, this is the first time that the association is advising Chicago landlords to stop requiring security deposits.
The issue at hand has to do with the Chicago Residential Landlord and Tenant Ordinance. Landlords feel that this document extensively protects renter's rights. Under the city's ordinance, landlords are required to pay interest each year on security deposits (or unpaid rent) that is held for at least 6 months. The city sets their annual interest rate, and for 2014, it comes in at 0.013%.
Upon the tenant move out, the landlord must additionally provide an itemized list of damages within the unit within 30 days of the move out. The landlord must also return the security deposit (with the accumulated interest), after subtracting unpaid rent and damage expenses, within 45 days of the move out day.
If the landlord fails to comply with ANY of the ordinance's provisions, the tenant can be awarded damages that are equal to two times the deposit PLUS interest, attorney fees, and court costs.
In other words, if any lawsuit ensues, the expenses could be rather severe.
While the association acknowledges that deciding to not include a security deposit could put a landlord in the position of acquiring damage costs after their tenant moves out, they believe these expenses will not typically be as costly as a lawsuit.
President of the local Realtors association Matt Farrell commented that the association was "[...] starting to feel like our members were at risk. We haven't been able to change the [ordinance] yet, so we're taking steps to protect [landlords]."
Many landlords are choosing to instate move-in or administrative fees in place of a security deposit to avoid the liability. Ultimately, landlords should consult with an attorney before making this decision.
Thinking of becoming a landlord? Already a landlord but thinking of changing your current procedure? Don't hesitate to send us an email or a call, and we'll be happy to discuss your situation.
