Security Deposit Interest Act
How the Illinois Security Deposit Interest Act Can Cost Landlords More Than Just One Tenant’s Security Deposit!
The Illinois Security Deposit Interest Act provides that landlords of residential rental property, containing 25 or more units in either a single building or a complex of buildings located on contiguous parcels of real property, who receive a security deposit from a tenant must pay interest to the tenant computed from the date of the deposit at a rate equal to the interest paid by the largest commercial bank, as measured by total assets, having its main banking premises in this State on minimum deposit passbook savings accounts as of December 31 of the calendar year immediately preceding the inception of the rental agreement on any deposit held by the landlord for more than 6 months. 765 ILCS 715/1.
Furthermore, the Act requires landlords to pay their tenants the interest within 30 days after the end of each 12 month rental period either by cash or by credit to be applied to rent due (except for those tenants who are in default of their lease). One of the most important aspects of this Act is that any landlord who willfully fails or refuses to pay the interest required by the Act will be liable for an amount equal to the amount of the security deposit , together with court costs and reasonable attorney’s fees. 765 ILCS 715/2.
Landlords may find themselves asking, “But how many tenants would actually go through the trouble of going to court to receive the interest from their security deposit?” Unfortunately for landlords, the incentives for bringing suit against the landlords under the Security Deposit Interest Act outweigh the potential detriments.
First, the statute allows for the tenant to recover the ENTIRE security deposit, not just the interest received from that deposit.
Secondly, there is the issue of attorneys’ fees. Generally speaking, in Illinois the only way a party to a lawsuit may recover its attorneys’ fees is if the law provides for recovery either by contract or statute. In this case, the Illinois Security Deposit Act allows successful tenants to recover their costs and attorney’s fees; meaning the Act makes it possible for tenants to sue landlords and then have the landlords pay their legal bill, as well as their security deposit. On the other hand, the statute is silent as to the recovery for a successful landlord’s attorney’s fees; meaning that even if a landlord successfully defends against a suit brought against him a tenant under the Security Deposit Act, that landlord is still stuck paying for his attorneys’ fees to defend the case.
Another obstacle landlords face with the Illinois Security Deposit Act is the possibility of having to defend against a class action lawsuit. A class action lawsuit is a suit filed on behalf of multiple plaintiffs against a single defendant. A new trend has developed in Central Illinois in which larger Chicago based law firms have began filing class action lawsuits on behalf of a multiple tenants against local landlords. The Illinois Security Deposit Act has become a highly tempting and lucrative tool for these types of lawsuits.
It may be one thing for a landlord to defend against a case filed under the Illinois Security Deposit Act by an individual tenant, but it is an entirely different creature to defend a suit brought upon by multiple tenants. The costs alone of defending such a suit could bring about devastating consequences for any landlord and even jeopardize the landlord’s entire business.
Tenants have very little incentive not to bring a lawsuit against a landlord under the Illinois Security Deposit Act. Not only can they get their deposit back but they can do so on the landlord’s dime. To avoid potential liability under the Illinois Security Deposit Act, a landlord’s best defense is to set up the proper procedures necessary to ensure that no violation of the Act will occur. For advice on this and other landlord tenant issues, contact the attorneys at Benckendorf & Benckendorf, P.C.