Can I keep tenant security deposit for insurance deductible?

[Woralak Bryant]

So my renter of 7 months called me up and said that her son and her nephew was playing with a lighter and fire started in the bedroom. She called the fire department and it's all under control. Everyone was fine except for my house. I told her she can move out because I don't know how long it will take to fix it. She prepaid until January. I will give her back the rent she prepaid. I would not charge her rent for Aug since that is the day of the fire. I also told her that I would keep $500 of the deposit if she moves.  She seems to think that she is entitled to the full refund. She keeps saying that it was God doing.  I am stressing out over this.  The law to my understanding said that they are entitled to a full refund unless they are responsible for the fire. This rental is in Illinois, if anyone is familiar with Illinois law please help me. 

[Jon A.]

The fire dept will say the house in uninhabitable until the smoke damage can be remediated anyway. That is what happened to me. It wasn't up to me whether or not they could live in the home. My tenants did not have renters insurance as it happened on the day they moved in. So they were basically out of luck. I was trying to be nice and offered to help them with a hotel room until the guy helping them move in demanded that I had to pay for his hotel room also. I went home and called my insurance rep and figured out where I stood as a landlord trying to help out my tenants. I learned a lot. 

This is exactly what renters insurance is for and I tell the story to all my tenants that question the need for it. By the way, the Red Cross usually has hotel rooms blocked out specifically for this reason. The tenants can call them to find out. I think your tenant is using the "act of god" terminology like an insurance company would use it for something like a flood or hurricane. 

It took about 3 months for all the work to be done on the home and I ended up letting my tenants out of their lease and had them sign a termination of lease agreement and gave them their money back. I had to listen to this very large man verbally attack me with his crazy "old lady" egging him on the whole time while I was standing there with a pen and a piece of paper and a wad of cash. I went alone because it was during business hours and no friends could go with me and I wasn't going to bring my wife. 

In the end I gave them their deposit back because they did not start the fire so I am not sure what to say about your deposit but thought I would just give you some insight into my experience. I ended up with a much nicer house almost completely remodeled but had to suffer through a 3 month vacancy period that ate up all my reserves at the time. I would talk to a lawyer and your insurance rep if I were you to get piece of mind on where you stand. Let this tenant go because all they will do is cause problems waiting to move back in and no one can really tell you how long it will take. My tenant wanted to sleep in the house while the work was being done but smoke damage can cause a lot of health problems as you can imagine.  My tenants drug the process out much longer than it needed to be by calling the county and harassing the restoration crew almost daily. It was ridiculous and in hindsight I realize I dodged a bullet with these crazy people. I even told them they could park a camper in the driveway because I felt responsible for the fire, but it was just one of those things that happened. It was no ones fault and it taught me to be a better landlord. 

Oh, and the tenant didn't even call the fire dept. He called me and said "your house is on fire". I responded "did you call the fire dept?" When he said no, I immediately hung up the phone and had to call them myself.