Chicago Landlords: Charging a fee for breaking lease and other?

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Chicago Landlords: Charging a fee for breaking lease and other?

Sam G.
Chicago, IL · Member since 2015 · 41 posts · 1 vote

Hi Guys,

I'm working on updating my leases for future tenants. I learned from on landlord on BP that charges a break lease fee that is almost close to the rent amount, thus allowing him to legally keep the security deposit in the case that the tenant breaks the lease. I understand that if this option was used, then the landlord couldn't try and collect any further damages for breaking the lease. I figured that collecting lost rent is an uphill battle, so I'd rather opt for the 1st option. Do any Chicago landlords see any issues with this?

I've also considered adding on a penalty for every day the tenant refuses to show the unit beyond 48 hours notice. I want something that will protect me from tenants that will just ignore requests for inspections and showings and I feel that a penalty will motivate them to be serious about working with me to be able to come see the unit. I'd really like to avoid unnecessary vacancies and would like to at least have the option of showing a unit as soon as I know the tenant won't be renewing. Whether they keep is tidy is another topic! Any thoughts on if this kind of penalty would be ok in Chicago?

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Sarah Ziehr
Real Estate Broker · Chicago, IL · Member since 2015 · 531 posts · 266 votes
10y

The Chicago RLTO is pretty strict and you should refer to that before you do anything. In short, you cannot mess with security deposits and you must give 48 hours notice before showings unless the tenant agrees to anything short of that.  

Tenants are due the right to quiet enjoyment, so I don't see you having any luck on the penalty for not showing for inspections (what inspections????). 

Lastly, after years of working in leasing full time I can tell you that you won't have any luck renting out a messy apartment. Best bet is to wait until tenants move out and then show it vacant.  

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  • John Van UytvenPro Member
    Property Manager · Oconee, IL · Member since 2014 · 536 posts · 202 votes
    10y

    One word :LAWYER

    Find a lawyer who specializes in this and is willing to back you up in court.

    In Indiana, the company I worked for charged 2 months of rent for the lease breakage fee. If they didn't pay, they were sent to small claims.

    @Sam G.undefined

    1Reply
  • Sarah Ziehr
    Real Estate Broker · Chicago, IL · Member since 2015 · 531 posts · 266 votes
    10y

    The Chicago RLTO is pretty strict and you should refer to that before you do anything. In short, you cannot mess with security deposits and you must give 48 hours notice before showings unless the tenant agrees to anything short of that.  

    Tenants are due the right to quiet enjoyment, so I don't see you having any luck on the penalty for not showing for inspections (what inspections????). 

    Lastly, after years of working in leasing full time I can tell you that you won't have any luck renting out a messy apartment. Best bet is to wait until tenants move out and then show it vacant.  

    3Reply
  • Ubaldo M Gomez
    Investor · Riverwoods, IL · Member since 2015 · 27 posts · 13 votes
    10y

    Oh Sweet Home Chicago! Tenants have more rights than Landlords has been like this since I can remember back in Mayor Harold Washington's days. Chicago renters know the game and always  rental lease addendums be best looked over by a Chicago Lawyer before you start pissing off your renters. Yes we Landlords want to protect our investment properties but in Chicago your tenants win if you don't play by the rules of tenant rights. Security deposits are not a Landlord's possession until a tenant literally damages the place is inspected by a professional contractor or handyman write you out a repairs estimate. Keep in mind the security deposit is not to be used as last month's rent belongs in the bank until the tenant moves out. What this means is the tenant vacates at end of lease and there is no damage, you have to give it back plus interest the bank gave for keeping security deposits. As for tenants breaking leases and not letting you entering their apartments is their right. It is why you need a Chicago Lawyer back you up with a well written Chicago Lease, period!

    1Reply
  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    10y
    Originally posted by @Sam G.:

    Hi Guys,

    I'm working on updating my leases for future tenants. I learned from on landlord on BP that charges a break lease fee that is almost close to the rent amount, thus allowing him to legally keep the security deposit in the case that the tenant breaks the lease. I understand that if this option was used, then the landlord couldn't try and collect any further damages for breaking the lease. I figured that collecting lost rent is an uphill battle, so I'd rather opt for the 1st option. Do any Chicago landlords see any issues with this?

    I've also considered adding on a penalty for every day the tenant refuses to show the unit beyond 48 hours notice. I want something that will protect me from tenants that will just ignore requests for inspections and showings and I feel that a penalty will motivate them to be serious about working with me to be able to come see the unit. I'd really like to avoid unnecessary vacancies and would like to at least have the option of showing a unit as soon as I know the tenant won't be renewing. Whether they keep is tidy is another topic! Any thoughts on if this kind of penalty would be ok in Chicago?

     I would check the RLTO on the first item, that may not be allowed in Chicago.

    The refusing entry is addressed in the RLTO and the summary has to be included with every lease.

    If you are owner occupied under 6 units you are exempt from the RLTO but I always suggest every landlord use a RLTO compliant lease like the 35 page CAR one that includes everything you need

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  • Sam G.
    OP
    Chicago, IL · Member since 2015 · 41 posts · 1 vote
    10y

    Thanks for the replies guys. It is under 6 units. I'll try and refer back to the RLTO and work that in the lease the best I can. Does anybody know how much a lawyer would take to look over a current lease and maybe give their input on anything I have missed or can't legally include?

    I've had to deal with stress of working around whether a tenant allows my workers to come in for necessary repairs, and would like to not deal with anything like that in the future. I thought a good lease would be the answer to that. By inspections I mean just checking to make sure the tenant hasn't trashed the unit and any problems can be taken care of before they become bigger. Something like checking the place out every 3 months would be more than enough for that purpose.

    Brie can you please give me some more info about the 35 page CAR lease? Dumb question sorry!

    0Reply
  • Linda Liberatore
    Real Estate Investor · Schaumburg, IL · Member since 2014 · 76 posts · 30 votes
    10y

    Hi Sam,

    Here is a link to the Chicago Realtor Lease updated annually which includes mandatory disclosure documents.

    http://chicagorealtor.com/wp-content/uploads/2015/...

    Here is a link to the RLTO
    http://www.cityofchicago.org/dam/city/depts/dcd/ge...

    We provide management classes with CIC and I would be happy to suggest a local REIA so you can network locally on some of your questions. Hope that helps Linda

    3Reply
  • Michelle E.
    Investor · Homewood, IL · Member since 2015 · 37 posts · 16 votes
    10y

    This is helpful. To Linda Liberatore how can I get more info on the management classes?

    0Reply
  • Linda Liberatore
    Real Estate Investor · Schaumburg, IL · Member since 2014 · 76 posts · 30 votes
    10y

    Hi Michelle, you can contact Taft West to register and find out the various locations they hold training sessions.  http://www.cicchicago.com/documents-training/prope...

    http://www.cicchicago.com/

    Let me know if you need more information.  Hope that helps Linda

    0Reply
  • Dan ShelhamerPro Member
    Realtor · Mesa, AZ · Member since 2015 · 163 posts · 99 votes
    10y

    Are the leases any different for Chicago suburbs or would it make the most sense to just use the Chicago Realtor Lease?

    0Reply
  • Sam G.
    OP
    Chicago, IL · Member since 2015 · 41 posts · 1 vote
    10y

    From what I understand most suburbs refer to or adapt Chicago ordinances so it would make sense to go by there rules? Maybe some suburban landlords can chime in on that. Thanks Linda

    0Reply
  • Sam G.
    OP
    Chicago, IL · Member since 2015 · 41 posts · 1 vote
    10y

    I'll have to check out courses that take place in the summer but that sounds like a great resource. 

    0Reply
  • David Dawodu
    Accountant · Chicago, IL · Member since 2013 · 18 posts · 2 votes
    10y

    @Linda Liberatore, Thanks for the links and very useful information. Much appreciated!

    0Reply
  • Linda Liberatore
    Real Estate Investor · Schaumburg, IL · Member since 2014 · 76 posts · 30 votes
    10y

    Hi Dan, I would think some of the issues in the Chicago lease would not really be appropriate - for example they have very specific issues addressing the porches (Example below).

    In our Lake County group we have an attorney on the board and of attorneys that are members as well.  I'm sure they would be happy to give you ideas. There are other sources for leases in Illinois and you may want to address issues specific to your home/association/municipality.  Feel free to send an email if you need more personal information.  Thank you, Linda

    “The porch or deck of this building should be designed for a live load of up to 100 pounds per square foot and is safe only for its intended use. Protect your safety. Do not overload the porch or deck. If you have questions about porch or deck safety, call the City of Chicago non-emergency number, 3-1-1.”

    0Reply
  • Account Closed
    Chicago, IL · Member since 2016 · 11 posts · 3 votes
    10y

    As an attorney (and a Chicago landlord), I agree with the above members who advised you to be cautious of the RLTO.  There are certain exemptions, but you should consult with an attorney before moving forward.  

    If you have any specific questions, you are welcome to send me a private message.  

    Good luck. 

    0Reply
  • Rob Hayes
    Real Estate Broker · Downers Grove, IL · Member since 2012 · 93 posts · 57 votes
    10y

    @Sam G. To the best of my knowledge Chicago tenant law is COMPLETELY different than it is out here in the suburbs.  I don't know of any suburbs in DuPage Co or Will Co that use Chicago landlord ordinances. Did i hear someone say that the Chicago Lease is TWENTY SIX pages long?!?!? The suburban lease that we use (provided by a suburban board of realtors) is 6 pages long.  Chicago is a completely different animal.  

    In my opinion if you're in Chicago, you would be making an enormous mistake to use a suburban lease...  and if you're in the burbs you would be absolutely crazy to use the Chicago lease. You have to use the right tool for the right job.

    1Reply
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