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 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.
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