A Brief History of the Chicago Residential Landlord-Tenant Ordinance

For Millennials and many others, the optionality of renting one’s residence has seen a dramatic increase. Whether it’s the real estate crash of 2008, the economic climate of the State of Illinois and City of Chicago or the changing tax laws that limit the deductibility of state and local taxes, the number of people renting where they reside has and is sure to increase.

On the other side of every renter is a landlord and the lease agreement that both the landlord and tenant sign and many municipalities including the City of Chicago have municipal ordinances and laws that govern the lease agreement and the landlord-tenant relationship. While most tenant-landlord relationships are amicable and mutually beneficial, there are times when the parties are at odds.

A Brief History of Landlord-Tenant Relations in Chicago

Residential rental properties have always flourished in Chicago

In the not-so-distant past, City of Chicago landlords held most of the power in the relationship with tenants. Renters had few ways to address disputes over the habitability of a unit, refusal to rent based on race, gender and ethnicity or the ability to fight perceived wrongs in court.

Chicago-area tenant rights organizations grew out of the 1960’s and were formed initially to address the plight of African-Americans, Jews and other minorities who were regularly refused rental housing. Many of those in disadvantaged groups who could find rental housing found themselves in poorly maintained, often uninhabitable structures. Should they withhold rent or even complain, landlords often took them to court where they were routinely forced to pay rent even when services required for basic health and hygiene were not provided.

Chicago has a history of landlord-tenant friction. Photo: Bob Rehak

It was all too easy for unscrupulous landlords who wished to take advantage of the disadvantaged. Being poor made renters easy prey for property owners empowered by centuries-old common law and expensive lawyers who had the knowledge to prevail in court.

The Civil Rights movement of the 1960’s set the foundation for the eventual eradication of the systematic rental housing discrimination based upon race or religion. Dr. Martin Luther King’s march for through Marquette Park in 1966 in support of fair housing encouraged community groups seeking racial equality to expand their efforts into tenant advocacy, helping to change the law, offering protections to all renters.

Evanston Leads the Way With Chicago’s First Real Estate Landlord Tenant Ordinance

For years activists in the urban environs of Chicago had pressed legislators in Springfield to adopt tenant protections in the form of the Uniform Residential Landlord-Tenant Act (URLTA). Originally drafted by University of Chicago Professor Julian Levi, under the auspices of a national organization of attorneys that drafted sample laws for states to consider, the URLTA offered a set of residential landlord-tenant rules that could be used as the basis for states to write their own rental property laws.

While at the time fifteen states used the URLTA as the basis for state-wide landlord-tenant laws, the Illinois legislature, dominated by rural interests, was not disposed to solving the City’s problems. URLTA went nowhere in Springfield.

All of this changed in the 1970 when Illinois adopted a new constitution that afforded any municipality with more than 25,000 residents the ability to govern as a home rule unit. Home rule empowered local governments to pass laws and govern themselves – as long as they act within state and federal constitutions. No longer could Springfield wield veto power of Illinois cities and their populous.

The first municipality to take advantage of home rule to shape landlord-tenant agreements was Evanston in 1975. Evanston hand been experiencing a dramatic drop in the number of rental units owing to a flood of building conversions from rental to condominium. This trend and tenant activism driven by Northwestern University students and faculty led to the adoption of the Evanston Residential Landlord Tenant Ordinance. Inspired by the URLTA, Evanston crafted Illinois’ first substantive rules to define the relationship between residential landlord and tenant.

Chicago Passes Its Own Landlord-Tenant Ordinance

It took the City of Chicago a decade to follow Evanston’s lead and to pass its own residential landlord-tenant ordinance. Why did it take so long? In short, City Council politics and the moneyed and powerful real estate lobby successfully kept reforms at bay. It wasn’t until the ascension of anti-machine “reformers” like David Orr and Harold Washington that the City Council agreed to the adoption of Chicago’s Residential Landlord-Tenant Ordinance (CRLTO).

Highlights of the original, adopted rules include:

• Renters could not be forced to waive protections granted by the City, state or federal law
• Retaliatory evictions were prohibited if a renter were to complain to the government or press.
• Renters could make necessary repairs and deduct the cost of those repairs from their rent
• Two-days-notice is required for non-emergency entry into a unit by a landlord
• Renters could pay reduced rent if an apartment was damaged by an outside event
• Landlords could not consider an apartment abandoned and could not confiscate a renter’s possessions for at least 21 days of renter absence, unpaid rent and no communication from the renter
• Tenants are able to recover attorney fees if they prevail in a CRLTO legal action against a landlord

The final protection, the ability to recover attorney fees, seemed reasonable at the time when the ordinance was adopted. Previously, landlords often wrote into leases that their own legal fees must be covered by a tenant, even if the tenant prevailed in a case! The activists who authored the CRLTO knew that landlord coverage of a successful tenant-litigant’s legal fees was necessary if the ordinance were to have any bite. They rightly assumed that attorneys would need this financial encouragement to take up tenant cases against landlords.

As various legal challenges to the CRLTO worked their way through the courts, landlords and the real estate lobby were shocked not only at their losses, but also that the Illinois Supreme Court imposed “strict liability” on landlords who violated specific provisions of the ordinance.

The most noteworthy example of this strict liability is Section 5-12-080 of the CRLTO that covers the collection, handling and return of security deposits.

The CRLTO Pendulum Swings Against Landlords: Section 5-12-080

Countless legal, landlord and tenant websites have covered Section 5-12-080 of the CRLTO in detail. The ordinance is both specific and, frankly, unnecessarily complex, a combination that invites lawyers to become involved.

I’ve included a list of resources at the end of this blog post where you can jump down the residential rental deposit rabbit hole. As an attorney who represents landlords in disputes, I’m more concerned with the practical implications of the ordinance, how it has been interpreted by the courts, and how residential rental property owners can protect their interests.

To illustrate how Section 5-12-080 can be morphed into a cudgel for tenants seeking to punish landlords for even the smallest infraction, one need only refer to the watershed case of Lawrence v. Regent Realty Group, Inc. et. al. in 2001.

In this case the litigant, Auerelia Lawrence, lived in a Regent Realty property for approximately six years. In addition to her initial deposit covering one month’s rent, she made an additional pet deposit of $100. For the first year Regency appropriately credited Lawrence for the statutory 5% interest on both her apartment and pet deposits. For subsequent years, Regency failed to pay the five dollars in interest on the pet deposit that were required by the ordinance. Based on this seemingly minor infraction, Lawrence brought suit against Regency seeking twice her deposit plus interest and attorney’s fees as prescribed in Section 5-12-080.

By the word of the ordinance, Regency was in violation, even though the defendant claimed the missed interest on the pet deposit was unintentional. Yet, rather than settle, Regency decided to fight in court.

Had Regency known what lay ahead for them I’m sure they would have gladly paid the paltry sum owed to Lawrence. Perhaps because of hubris, poor advice, or a belief that landlords rarely lose in court, Regency pushed forward. After initially winning in the Chancery court, Regency must have felt very confident that any appeal by Lawrence and her attorneys would be rejected. Much to their dismay, the opposite was the case.

Subsequent courts not only ruled in favor of Lawrence, but also when the Illinois Supreme Court handed down their opinion in favor of Lawrence they interpreted the CRLTO in such a way that opened the floodgates to Section 5-12-080 litigation.

The Illinois Supreme Court determined that it did not matter whether Regency willfully refused to pay interest on the $100 pet deposit or not. Whether a simple accounting error or something intentional, the tenant was due two times the pet deposit plus interest. More importantly, having been victorious, Lawrence was also to be reimbursed for her attorney fees which by the time the appeals had been won were likely tens of thousands of dollars.

The explosive combination of a landlord’s strict liability with regard to even minor, unintentional violations of Section 5-12-080, and the fact that attorneys would recover their fees if litigation was successful, led to a tidal wave of cases and judgements against landlords that resulted in hundreds of thousands of dollars in legal fees owed to the litigant’s lawyers.

Practical Advice For Chicago Residential Landlords

When residential landlords seek my advice when facing litigation over minor infractions of Section 5-12-080, I almost always suggest that unless they have detailed, irrefutable documentation, that they pay the tenant the prescribed two times the deposit plus interest. In the end, the cost of the time to document their case and the legal fees to present their case will overwhelm the present value of the likelihood that they might win.

More to the point, I often recommend that rental property owners not require a security or other deposit on a property, opting instead for the lesser security of the first two months rent paid in advance. Because the CRLTO is less onerous with respect to how landlords are required to handle prepaid rent, they are much less likely to fall prey to minor infractions that could land them in court.

Of course, every situation is different and deposits, when handled properly, can provide the most protection. The question simply becomes is the protection afforded by a deposit worth the time and effort required to insure compliance.

If you have a question about the Chicago Residential Landlord Tenant Ordinance, please feel free to reach out to me for my thoughts on your unique situation.