Illinois Appellate Court Issues Rule 23 Order In Evanston Security Deposit Case

In Foster v. Tucker, 2012 Ill. App. 111048-U, a recent Rule 23 order, the Illinois Appellate Court affirmed a Cook County trial court’s determination that an Evanston, Illinois landlord violated the Evanston Residential Landlord Tenant Ordinance’s (ERLTO) security deposit provisions.

The tenant filed a lawsuit claiming that the landlord failed to return her $2,500.00 security deposit within 21 days of her moving out of the apartment nor did the landlord provide an itemized statement of deductions.  Section 5-3-5-1(c) of the ERLTO states: 

"Upon termination of the tenancy, property or money held by the landlord as security or prepaid rent may be applied to the payment of accrued rent and the amount of damages which the landlord has suffered by reason of the tenant's noncompliance with Section 5-3-4-1 of this chapter, all as itemized by the landlord in a written notice delivered to the tenant together with the amount due twenty one (21) days after tenant has vacated his unit. Any security or prepaid rent not so applied, and any interest on such security due to tenant shall be paid to the tenant within twenty one (21) days after tenant has vacated his unit."

Section 5-3-5-1(F) states that

If the landlord fails to comply with subsection (c) hereof, the tenant may recover the property and money due him together with damages in an amount equal to twice the amount wrongfully withheld and reasonable attorney’s fees

The landlord raised three issues on appeal:  The first was that his actions were excusable because the tenant failed to provide an updated address; Second, the trial court failed to award him the alleged full amount of his apartment damages; Lastly, the failure of the tenant to return her keys until seven days after moving out created a holdover tenancy.

At trial, the landlord admitted that he failed to return the security deposit or provide an itemized statement of deductions within the ordinance’s 21-day timeframe.  The landlord inspected the apartment after the keys were returned and claimed that there was $6,600 in damages to the unit.  The tenant and her witness testified that upon cleaning the apartment, the only damage was to a closet mirror.

The trial court found that the evidence demonstrated that the landlord failed to follow Section 5-3-5-1(c) and awarded the tenant her original $2500 deposit, $5000 in damages (two times the amount wrongfully withheld), her court costs and $500 in attorneys fees.  The trial court also awarded the landlord $496.40 for the damage to the mirror.

As to the landlord’s argument that the tenant’s failure to supply him with a forwarding address, the appellate court found that fact to be irrelevant to the application of the Evanston ordinance.  Citing Nadhir v. Salomon, the court found that the evidence presented at trial showed that the strict provisions of 5-3-5-1 were not followed because the landlord did not “mail or deliver” the itemized deduction letter within the 21-day period.

The court went on to explain that

[a]lthough defendant asserted he lacked a forwarding address for plaintiff, defendant nevertheless could have mailed the letter to the address vacated by plaintiff, as plaintiff has suggested. The letter therefore, ideally, would have been forwarded by the postal service to any new address on file. Such steps by defendant would have provided documentation of his attempt to comply with the Ordinance. The trial court's determination that defendant failed to comply with the Ordinance was not contrary to the manifest weight of the evidence.

The tenant’s failure to provide a forwarding address did not excuse the landlord’s failure to deliver a statement of deductions to the tenant.

Next, the court addressed the apartment damage issue which could only be overturned if it was apparent that evidence was disregarded.  The defendant introduced his deduction letter into evidence but the court only awarded him damages for the mirror.   Because the issue of apartment damage was a question of fact, the trial court was given deference to evaluate it.   The trial judge, having this letter entered into evidence and testimony given, decided that, as a factual question, the landlord only incurred the damage for the mirror.

The appellate court also noted that it could not address the factual findings of the trial judge because the landlord failed to include the letter in the appellate record.   Citing Foutch v. O’Bryant, “doubts that arise from the incompleteness of the record [were] resolved against the [the appellant]." The trial court’s finding that the landlord was entitled to a small setoff was affirmed.

Finally, the court rejected the landlord’s contention that the late return of the apartment keys created a new holdover tenancy.  If a holdover tenancy had been found to exist, the landlord could have further offset any penalties imposed by the ERLTO.  Citing Hoffman v. Altamore, 352 Ill.App.3d 246 (2004), the court explained that when a lease ends and a tenant remains, they may be treated as a holdover tenant or as a trespasser.  However, the issue of whether a tenant is “holding over so as to trigger the landlord’s option for a holdover tenancy, a tenant’s continued possession of the premises upon the lease’s expiration must be voluntary and give the landlord reason to believe that the tenant intends to continue occupancy.”

The court here found that the tenant’s retention of the keys for a few days after the end of the lease did not constitute a holdover tenancy.  Not only was the period of time between the end of the lease and the key return short, the tenant testified that she told the landlord she had moved out on the day the lease expired.  The court looked to Hoopes v. Prudential Insurance Corp. of America, 47 Ill. App. 3d 146 (1977), for comparison.  In Hoopes, the tenant had retained keys, left a light on and left business decals on the building’s front door, but otherwise had left the premises.  The Hoopes court found that there was no intent by the tenant to stay based on the evidence entered at trial.

The result was that the tenant’s judgment for treble damages under the ERLTO, costs and attorney fees was affirmed by the appellate court.

The full opinion from the Appellate Court may be found at: 

http://www.state.il.us/court/R23_Orders/AppellateCourt/2012/1stDistrict/1111048_R23.pdf

Amendment Proposed To The Illinois Security Deposit Return Act

Illinois House Bill 5314 proposes to amend Section 5 of the Illinois Security Deposit Return Act (765 ILCS 710/1) by allowing a landlord to provide an invoice of security deposit deductions to a tenant by email as an alternative to regular mail or in-person delivery.  According to the website of the Illinois General Assembly, the proposed amendment has passed both the Illinois House and Senate and is awaiting further action.  The text with the proposed amendment is below:

(765 ILCS 710/1)  (from Ch. 80, par. 101)     Sec. 1. A lessor of residential real property, containing 5 or more units, who has received a security deposit from a lessee to secure the payment of rent or to compensate for damage to the leased property may not withhold any part of that deposit as compensation for property damage unless he has,within 30 days of the date that the lessee vacated the premises, furnished to the lessee, delivered in person, or by mail directed to his last known address, or by electronic mail to a verified electronic mail address provided by the lessee, an itemized statement of the damage allegedly caused to the premises and the estimated or actual cost for repairing or replacing each item on that statement, attaching the paid receipts, or copies thereof, for the repair or replacement. If the lessor utilizes his or her own labor to repair any damage caused by the lessee, the lessor may include the reasonable cost of his or her labor to repair such damage. If estimated cost is given, the lessor shall furnish the lessee with paid 1 receipts, or copies thereof, within 30 days from the date the 2 statement showing estimated cost was furnished to the lessee, 3 as required by this Section. If no such statement and receipts, 4 or copies thereof, are furnished to the lessee as required by 5 this Section, the lessor shall return the security deposit in 6 full within 45 days of the date that the lessee vacated the 7 premises....

Illinois Appellate Court Weighs In On Evanston Security Deposit Case

The Illinois Appellate Court has just added a new opinion to its small body of security deposit case law.  Nadhir v. Salomon deals with important interpretations of the security deposit section (§ 5-3-5-1) of the Evanston Residential Landlord Tenant Ordinance. (“ERLTO”)

In Nadhir, the tenants had split their $2,625.00 security deposit three ways.  After several years, they moved out when their lease expired.  The accrued interest on the deposit was $38.77.

The tenants moved out of the apartment on or before June 30, 2010.

On July 9, 2010, the landlords hired a contractor to repair the apartment after the tenants moved out.  A bill was issued on July 15, 2010.  The landlords paid the contractor for the work later in the month.  However, the contractor noted that additional repairs were required but these were not completed until a later date.

On July 20, 2010, the landlord emailed the former tenants containing a list of damages to be deducted from the security deposit.  However, the landlord listed the cost of all but one item as “TBD” (to be determined).  The landlord charged $150.00 for the removal of smoke detectors, and $3,200.00 for the breach of a lease clause that required the tenant to register the gas meter with the local utility.  The contractor bill was not listed in this invoice.

On July 22, 2010, the tenants emailed the landlords demanding the return of the deposit and reminding her that the ERLTO’s time period for returning the security deposit had passed.  On July 31, 2010, the defendant re-emailed the invoice to the plaintiff but inserted specific costs for most of the “TBD” items.  The total of the invoice was more than the deposit and no money was returned to the tenants.  A small claims lawsuit alleging violations of §5-3-5-1(c) of the ERLTO was filed.  The landlords pled an affirmative defense that its damages were more than the deposit.

The condition of the apartment was in dispute.  The tenants testified at trial that the apartment was in the same condition at move-out as it had been at move-in and that the landlords had not noted any problems.  The landlords testified that the tenants had caused substantial damage and that the apartment was in very poor condition.  Photographs of the apartment were admitted into evidence showing the apartment’s interior before a walkthrough.  The landlords also testified that she had to give new tenants a rent reduction because of delays in re-conditioning the apartment.*

The trial court felt that the TBD designation on the invoice was “reasonable” since the landlords couldn’t have known what the costs were at that point in time since they had not received a bill from the contractor.  The email invoice was found to be timely under the ERLTO.  Lastly, the trial judge found that the landlords had “proven that plaintiffs had caused damage to the property.”  The judge also found “that the amount of damages to the property was "more than enough offset for the amount of the security deposit.”  As a result, the court entered judgments against the tenants even though they had proven that the landlords failed to return the security deposit.

On appeal, the First District reversed and remanded the trial judge’s decision.  The ERLTO requires that

 [u]pon termination of the tenancy, property or money held by the landlord as security or prepaid rent may be applied to the payment of accrued rent and the amount of damages which the landlord has suffered by reason of the tenant's noncompliance with Section 5-3-4-1 of this chapter, all as itemized by the landlord in a written notice delivered to the tenant together with the amount due twenty-one (21) days after tenant has vacated his unit. Any security or prepaid rent not so applied, and any interest on such security due to tenant shall be paid to the tenant within twenty-one (21) days after tenant has vacated his unit. (2008)

The landlord argued that under §5-3-5-1(c) of the ERLTO, she was not required to give a dollar amount.  The Appellate Court did not agree; feeling instead that the plain language of §5-3-5-1(c) required that the invoice state exactly what the amount deducted was to be.  The court determined that the landlord’s argument was a logical fallacy that would allow the landlord to “evade the 21-day return requirement merely by giving a tenant notice of some unspecified damages, rendering that deadline meaningless.”

The Court concluded that the itemized statement of deductions under the ELTO must be sent to the tenant within the 21 day period and that the dollar amounts for the damages must be provided.  Simply stating “TBD” or other designation does NOT satisfy the ordinance and cannot be used as a “placeholder.”  At the same time, any deposit money not applied to deductions must also be returned to the tenant within 21 days of move-out.

Of note is that the Appellate Court found that the trial court had committed a form of judicial activism or legislating from the bench.  The appellate justices found that there wass no “reasonableness” exception to the ordinance’s strict rules.  To do so would result in the trial court’s inserting its own opinions and re-writing the law.   Therefore, the landlord’s inability to ascertain the amount of the repairs within the 21 day period due to factors beyond its control was irrelevant.

Next, the Appellate Court found that the award to the landlord for the contractor’s repairs and the tenants' failure to comply with the gas meter clause in the lease was against the manifest weight of the evidence. 

First, the court said that “section 5-3-5-1(C) only authorizes the landlord to deduct damages from the security deposit that are listed in the 21-day notice, defendants had no authority to deduct any expenses that were not itemized in the July 20 e-mail.”  Simply put, items not invoiced within the ERLTO’s 21 day time period cannot be used to deduct from a deposit.  As a result, the landlords could not deduct the contractor’s bill from the deposit.

Addressing the gas meter issue, under §5-3-5-1(c), deductions from the security deposit could only be for certain types of tenants' obligations listed in ERLTO §5-3-4-1.  However, compliance with a lease provision is not one of the listed obligations.  Therefore, the deduction was unlawful.

The Appellate Court concluded that the $150 deduction for the smoke detector damage listed in the timely invoice was appropriate.  However, the amount of the deposit owed to the tenant plus interest was not returned within the ERLTO’s 21 day period and as a result the landlords were liable for the statutory penalty of two times the amount owed (wrongfully withheld) plus costs and attorney’s fees. 

The case is:  Nadhir et al v. Salomon et al., No. 1-11-0851 (1st Dist. 2011) 

*The Court also went on to hold that the affirmative defense of "setoff" was not actually an affirmative defense but a counterclaim that should have been pled at the beginning of the lawsuit.  Therefore the landlords were not entitled to be awarded a setoff at trial.

Chicago City Council Amends CRLTO

Over the past couple months, the Chicago City Council has made critical amendments to the city's landlord tenant ordinance. The amended law affords landlords a cure period if they timely return interest on a security deposit to the tenant but where the landlord has miscalculated the amount. A security deposit or the remainder of one must still be returned to the tenant within 45 days of the date the tenant vacates the unit.

The new ordinance also requires that landlords provide certain information about the financial institution where a tenant's security deposit will be placed and imposes a penalty in the amount of two times the deposit amount for non-compliance.

Perhaps most importantly, the amended ordinance places liability for a security deposit upon lien holders who become successor landlords, i.e. where a bank takes over a rental property in foreclosure. Prior to this amendment, banks and other lienholders who foreclosed on a landlord were not responsible for the security deposit. Under the new language of the ordinance, this is no longer the case. It is to be expected that banks and lienholders will challenge the validity of this amendment in the courts.

This blog as well as http://www.chicagorltolaw.com will be updated over the coming months as the CRLTO amendments are litigated and their effects on the landlord-tenant landscape in Chicago become more clear.

Illinois Appellate Court Rules RLTO's "Owner Occupied" Exclusion Covers Landlord's Coach House

The law defining the "owner occupied" exclusion found in section 5-12-020(a) of the Chicago Residential Landlord Tenant Ordinance has been expanded to cover coach houses with the First District Appellate Court's ruling in Berven v. Marquette National Bank and Trust, and Toy.

In Berven, the plaintiff signed a lease with Toy to rent one of two apartment spaces inside a coach house located on a parcel of land that included a main house. After it appeared that the landlord did not clean the apartment, Berven broke the lease based on Toy's failure to supply him with a copy of the ordinance as required by section 5-12-170 of the RLTO. Berven also requested that Toy return his security deposit which was not done.

At trial, Toy asked the court for a directed verdict that the RLTO's "owner occupied" exclusion was triggered because (1) Toy lived in the main house, (2) that the total number of units on the property was 6 or less (4 in the main house and 2 in the coach house) and (3) that the coach house should be included because it was an "appurtenant building" to the property. The trial court agreed with the Toy and noted that additional evidence in the form of the property's PIN number indicated that the Cook County Assessor treated both structures as one property. Berven argued that the exclusion shouldn't have applied because the coach house was physically separated from the main house in which Toy lived.

The Appellate Court agreed with the trial court and held that "it is without doubt that the coach house is appurtenant to Landlord's residence...this fact alone brings the coach house under the definition of a dwelling unit in section 5-12-030(a)." This section provides a definition of the term "dwelling unit." The court also indicated that because Toy used part of the coach house for personal storage and other uses "associated with occupancy" also "render the coach house part of Landlord's 'dwelling unit...'"

Tenants renting coach houses in the City of Chicago may be afforded little protection under the Chicago RLTO. Tenants should strive to make sure they are comfortable with their prospective landlord and that the rental property is in good condition before signing any lease.

The appellate court's full opinion, (docket number 1-08-3296), may be found on the Illinois Court's home page at: http://www.state.il.us/court/Opinions/AppellateCourt/2009/1stDistrict/August/1083296.pdf

Chicago Landlord Sues Tenant For Libel Over Twitter Comment

This morning, the Chicago Tribune published a story about a recent libel lawsuit filed by a Chicago property management company against a tenant who posted a comment on her Twitter account about alleged mold in her apartment. The landlord is claiming that it suffered at least $50,000 in damages as a result of the tenant's online "Tweet."

While the merits and outcome of this lawsuit are speculative at this point in time, (along with issues over what sort of online comments can be deemed unlawful), tenants should always make every effort to notify their landlord of problems, including mold, and to do so in writing. Saving copies of your letters can help defend yourself against aggressive action by a landlord. If you think there may be mold in your apartment, it is also a good idea to contact the City of Chicago building inspectors or contact a private inspector to investigate. Tenants should obtain copies of any inspection reports as well. Mold can be a serious health problem and should not be taken lightly. Tenants should not allow themselves to be intimidated by their landlords over serious apartment problems.

To read the full story from the Tribune, click herehttp://www.chicagobreakingnews.com/2009/07/uptown-resident-sued-for-twitter-post.html

Illinois Supreme Court Rules in Security Deposit Case

On May 21, 2009, The Illinois Supreme Court, in Landis v. Marc Realty, L.L.C., held that the tenant's lawsuit under Sections 5-12-080(c) and (d) for the failure to pay interest and late/non-return of their security deposit was barred under the statute of limitations which deal with statutory penalties. Important to tenants and landlords, the Court set the statute of limitations for this type of case at TWO YEARS from the time the violation occurred.

The tenants in Landis moved out of their apartment in November of 2001 yet did not file a Section 5-12-080 lawsuit for the failure to return interest and return their original security deposit until 2006, almost 5 years after the violation under the RLTO occurred. They argued that the statute of limitations was 10 years and tried to classify the RLTO as a non-statutory penalty to which a 2-year statute of limitations did not apply. The Court held that the RLTO security deposit violations were a statutory penalty because the ordinance sets a formula of two times the amount of the deposit for damages and, (2) in a far reaching interpretation, the Court classified municipal ordinances as a type of statute.

Another important note is that the Court said that RLTO violations concerning security deposit penalties are not classified as breach of contract actions.

In a dissenting opinion, Justice Kilbride and Justice Karmeier thought that the 10 year statute of limitations was appropriate and cited several older Illinois cases that held that municipal ordinances were not statutes. Taking an originalist approach to the issue, the dissenters felt that the term "statute" should be defined according to the meaning it had in the 1870's when the forerunner limitations period statute was first created. The dissenters looked to legal texts and dictionaries from that time period to support their position.

This extremely important case sets the statute of limitations on security deposit interest and late/no return cases under the RLTO at 2 years from the date the violation occurred.

The case is Landis v. Marc Realty Co. L.L.C., Docket No.: 105569, filed May 21, 2009. The case may be found here: http://www.state.il.us/court/OPINIONS/SupremeCourt/2009/May/105568.pdf or on the Illinois Courts website: http://www.state.il.us/court/OPINIONS/recent_supreme.asp