Security Deposit for long term tenants 15+ years

[Sara Wnek]

Hi, 

I have a question regarding refunding the security deposit on long term tenants in Chicago. My husband and I have a property we just bought this year and next year in 2019 we are not re-newing one of the leases so that we can get into that unit and do some rehab. My question is do we have any grounds when their lease is up next year to take any of the security deposit for the 15 years worth of wear and tear? Wondering what others do since we technically never saw the initial condition of the unit 15 years ago.....

Thanks!

[Marcia Maynard]

Best Practice: Create a Property Condition Report periodically during the duration of a tenancy. Charge for damages as they occur or as you discover them. If you wait until the end of tenancy, the security deposit is rarely enough.

If the previous owner didn't give you a Move-In Condition Report, not all is lost. Sometimes the tenants will give you a copy of what they have on file. Worth asking. At least you know the condition of the unit at the time when you purchased it. Document what you know of the condition as of that date. There are also some things you will know from other items mentioned in the tenant's original rental agreement, if you have a copy of that.

Keep in mind that some items may have been placed in service 15 years ago and may be at the end of their useful life. Other items might have been replaced as new at different times during the tenancy. See if you can create a record of that. It's easy to find the age of appliances from the model and serial numbers.

Surprisingly, some tenants will volunteer honest information about the condition of the unit when they first moved in. Why not strike up a conversation with them about that?  One strategy is to create a Move-In Condition Report, with all items listed as "Clean and Functional, No Damages" as of the date of their move-in. Ask the tenant to verify that and to sign the document. Let the tenant know you'll be running this by the previous owner too (whether or not you can) to verify the move-in condition as well. This helps keep a tenant honest. The tenant may bring to your attention something they believe was damaged before they moved there. And they may be absolutely right about that. Make a note of it.

Question: Are you planning a major rehab of the unit, or are you planning on minor updating? By choosing to not renew the lease, you will be displacing a family. Good long-term tenants are worth keeping. Unless there are other valid reasons for ending their tenancy, you might consider letting them stay.

Our longest term tenant has been in the same apartment for 30 years, another for 26 years. When we need to upgrade something in the home, we arrange to do so with the tenant in place. Once we even did a complete overhaul of an apartment in a week and simply moved the family to a hotel during that time and their belongings into a storage pod. The apartment got all new floor coverings, all new paint, new electrical switch/outlet covers, new curtain rods, new blinds, some new lighting fixtures, some new plumbing fixtures, furnace and air duct cleaning, and chimney cleaning. We would have lost a lot more money on a vacancy. We were able to raise the rent too. Most important, we're able to continue to rent to a good tenant for many more years to come.