There is a new twist on security deposit interest this year. The Section 5-12-080 of the CRLTO requires Chicago landlords with rentals covered by the ordinance to pay interest on security deposits at the rate set by the City (the same applies to Evanston). That rate, for 2009, is 0.12%.
In addition, the State of Illinois also has a law that applies to interest. The Illinois Security Deposit Interest Act is applicable to all landlords of residential real property containing twenty five (25) or more units in a single building or a complex of contiguous parcels. That interest rate, for 2009, is 0.25%.
As a result, a Chicago (or Evanston) landlord, covered by the Illinois Security Deposit Interest Act (ie. one with 25 or more units) must actually pay the State of Illinois rate rather than the Chicago rate! The penalty for violation of the ISDIA is a bit different from the Chicago ordinance, but it is a penalty nonetheless. Don't get caught with this mistake in 2009!
Friday, February 13, 2009
Thursday, February 12, 2009
Be careful how you sign that!
Oftentimes, clients or potential clients bring me a contract or other document after they have signed it. Sometimes, by then, it is too late for me to help the client get out of a jam. I was recently shown a document where a client signed a contract, believing his signature to be on behalf of his corporation, that was signed individually by the client. That is, the client thought he was obligating his company under a contract, but did not sign the document properly and thus, obligated himself personally. As a result, all of the benefits of the typical corporate liability shield are now gone.
How should someone go about signing a contract on behalf of their corporation? Like this:
ABC Widgets, Inc.
(signature)
by: (typed or printed name of person signing above)
its: (officer position of person signing)
Now, the world is on notice that a corporation is on the hook and not the person, individually, who signed the contract. This is part of the "corporate formalities" that are required to take advantage of the corporate liability shield. By signing as suggested, it is clear to the other party and outside third parties that a corporation is on the hook - not the signer. Anytime that all of the elements of a corporate signature are missing (ie. corporation name, signed by officer, position of officer), it is possible that an opposing party could go after the personal assets of the signer - not good!
Similarly, if you wish to obligate another party, make sure you are clear who the other party is. Is it a corporation? an individual? a partnership? The type of entity will make a major difference when it comes time to seek a remedy for breach, but that's another story.
How should someone go about signing a contract on behalf of their corporation? Like this:
ABC Widgets, Inc.
(
by: (typed or printed name of person signing above)
its: (officer position of person signing)
Now, the world is on notice that a corporation is on the hook and not the person, individually, who signed the contract. This is part of the "corporate formalities" that are required to take advantage of the corporate liability shield. By signing as suggested, it is clear to the other party and outside third parties that a corporation is on the hook - not the signer. Anytime that all of the elements of a corporate signature are missing (ie. corporation name, signed by officer, position of officer), it is possible that an opposing party could go after the personal assets of the signer - not good!
Similarly, if you wish to obligate another party, make sure you are clear who the other party is. Is it a corporation? an individual? a partnership? The type of entity will make a major difference when it comes time to seek a remedy for breach, but that's another story.
Wednesday, February 11, 2009
Phonecall of the day!
I just fielded a phonecall from someone who found me on the web wondering "is it okay to take the hinges off of my tenant's door so that they just leave"? Apparently, the caller had already served the tenant with a five day notice and was now ready to engage in self help.
After I gathered my senses at such a question, I quickly remembered that this is exactly the reason why the landlord tenant laws have been slanted so far in favor of tenants. Just to be clear, because it seems to not be obvious to some landlords, there are only two people who can return a rental property to the landlord: (1) the tenant... voluntarily and (2) the sheriff after the landlord has obtained an order for possession from a judge. Other than those two scenarios, changing the locks, removing the door, cutting the electricity, moving someone else in, and any other nonsense that the landlord can think up is a wrongful eviction.
Landlords need to treat their rental business like what it is: a business. That means learning the rules and understanding how to move within the system. That means having a lease that complies with the CRLTO or other applicable laws (depending upon the location of the property).
Evictions cost lots of time and money. Lawsuits from tenants cost money. In these tougher economic times, landlord's can't afford to not do it by the book. They also need to build into their business plan the potential cost of an eviction and the cost of being in compliance with the law.
The Illinois forcible entry and detainer act provides that a tenant who is wrongfully or constructively evicted is entitled to an abatement of rent for the eviction period and also entitled to compensatory damages for any losses that were a result of the wrongful act. It is worse in Chicago. Under 5-12-160 of the CRLTO, a landlord is subject to a daily fine of between $200-$500 plus the tenant has a civil remedy to recover the greater of two months rent or twice the tenants actual damages plus court costs and attorney's fees. Landlords: don't lock out your tenants.
After I gathered my senses at such a question, I quickly remembered that this is exactly the reason why the landlord tenant laws have been slanted so far in favor of tenants. Just to be clear, because it seems to not be obvious to some landlords, there are only two people who can return a rental property to the landlord: (1) the tenant... voluntarily and (2) the sheriff after the landlord has obtained an order for possession from a judge. Other than those two scenarios, changing the locks, removing the door, cutting the electricity, moving someone else in, and any other nonsense that the landlord can think up is a wrongful eviction.
Landlords need to treat their rental business like what it is: a business. That means learning the rules and understanding how to move within the system. That means having a lease that complies with the CRLTO or other applicable laws (depending upon the location of the property).
Evictions cost lots of time and money. Lawsuits from tenants cost money. In these tougher economic times, landlord's can't afford to not do it by the book. They also need to build into their business plan the potential cost of an eviction and the cost of being in compliance with the law.
The Illinois forcible entry and detainer act provides that a tenant who is wrongfully or constructively evicted is entitled to an abatement of rent for the eviction period and also entitled to compensatory damages for any losses that were a result of the wrongful act. It is worse in Chicago. Under 5-12-160 of the CRLTO, a landlord is subject to a daily fine of between $200-$500 plus the tenant has a civil remedy to recover the greater of two months rent or twice the tenants actual damages plus court costs and attorney's fees. Landlords: don't lock out your tenants.
Friday, January 25, 2008
Exclusions from CRLTO
The City of Chicago Residential Landlord Tenant Ordinance strictly governs the conduct of most landlords within the City of Chicago. Nearly all rental property within the City limits is regulated by the CRLTO. Some rental units, however, are not covered by the strictures of the Ordinance.
In fact, Section 5-12-010 provides in part that the CRLTO "...applies to, regulates and determines rights. obligations and remedies under every rental agreement entered into or to be performed after the effective date of is chapter for a dwelling unit located within the City of Chicago, regardless of where the unit is made, subject only to the limitations contained in Section 5-12-020".
Section 5-12-020 of the Chicago Residential Landlord Tenant Ordinance sets forth the various exclusions from coverage of the ordinance. The most common exclusion from coverage arises under 5-12-020(a) of the CRLTO in situations where a building both (1) contains six or fewer units and (2) the landlord resides in the building. Even when the ordinance does not apply in the case of owner occupied buildings of six units or less, the provisions of Section 5-12-160 continue to apply.
Unfortunately for many condominium owners throughout the City of Chicago, the test for exclusion under 5-12-020(a) is a two part test. As a result, if a condominium owner owns a single unit in a four unit condominium building but does not also reside in the building, that condominium is governed by the CRLTO. Similarly, a single family home in the City of Chicago that is leased out is also governed by the CRLTO. Many landlords are surprised to find that their tenancies are governed by the ordinance. Usually, when they find out, it is too late.
The remainder of the exclusions in 5-12-020(b)-(f) provide for exemptions for various hotels, hospitals, purchasers of real estate who allow a seller to retain temporary possession, employee housing, and co-op property occupied by the co-op shareholder under the proprietary lease. The exclusions are quite limited and specific, with many being defined elsewhere in the City of Chicago code.
In fact, Section 5-12-010 provides in part that the CRLTO "...applies to, regulates and determines rights. obligations and remedies under every rental agreement entered into or to be performed after the effective date of is chapter for a dwelling unit located within the City of Chicago, regardless of where the unit is made, subject only to the limitations contained in Section 5-12-020".
Section 5-12-020 of the Chicago Residential Landlord Tenant Ordinance sets forth the various exclusions from coverage of the ordinance. The most common exclusion from coverage arises under 5-12-020(a) of the CRLTO in situations where a building both (1) contains six or fewer units and (2) the landlord resides in the building. Even when the ordinance does not apply in the case of owner occupied buildings of six units or less, the provisions of Section 5-12-160 continue to apply.
Unfortunately for many condominium owners throughout the City of Chicago, the test for exclusion under 5-12-020(a) is a two part test. As a result, if a condominium owner owns a single unit in a four unit condominium building but does not also reside in the building, that condominium is governed by the CRLTO. Similarly, a single family home in the City of Chicago that is leased out is also governed by the CRLTO. Many landlords are surprised to find that their tenancies are governed by the ordinance. Usually, when they find out, it is too late.
The remainder of the exclusions in 5-12-020(b)-(f) provide for exemptions for various hotels, hospitals, purchasers of real estate who allow a seller to retain temporary possession, employee housing, and co-op property occupied by the co-op shareholder under the proprietary lease. The exclusions are quite limited and specific, with many being defined elsewhere in the City of Chicago code.
Wednesday, January 9, 2008
Relief for Tenants when Landlord is Being Foreclosed
Effective January 1, 2008, the State of Illinois has enacted Public Act 095-0262 amending 735 ILCS 5/15-1701 of the Code of Civil Procedure to allow tenants a right of possession during a foreclosure. Under the old law, tenants could be evicted shortly after the entry of an order for possession in the foreclosure action.
Under the new law, in the case of a foreclosure where a tenant is current on his or her rent, an order for possession entered in a supplemental petition for possession in the foreclosure must allow the tenant to retain possession of the property covered by the tenant's rental agreement for the shorter of: (1) 120 days following the notice of the hearing that has been properly served upon the tenant or (2) through the duration of the tenant's lease.
As a result, tenants will have at least the balance of their lease if less than 4 months remain or up to 4 months after they receive notice that their landlord is in foreclosure. Tenants will still have to pay their rent. The law provides the additional right to possession only if the tenant continues to pay rent in full during the 120 day period. In addition, the right only extends to a case of "foreclosure where the tenant is current on his or her rent". This can lead to a few questions.
Who is entitled to rent during the pendancy of the foreclosure action? Is it the landlord, the mortgage holder foreclosing the loan, or the court appointed receiver? Generally, payment should be made to the landlord. However, many landlords in arrears refuse to accept rental payments. In such a case, the tenant should be careful to tender the rent payment to the landlord. If the payment is denied, the tenant should tender the rent payment to the court appointed receiver and/or mortgage holder. In either case, the tenant should get a receipt for payment! If neither the court appointed receiver/mortgage holder or the landlord will accept the rent, the tenant should appear in court and attmept to have the court order one of the parties to the suit to accept the rent.
Under the new law, in the case of a foreclosure where a tenant is current on his or her rent, an order for possession entered in a supplemental petition for possession in the foreclosure must allow the tenant to retain possession of the property covered by the tenant's rental agreement for the shorter of: (1) 120 days following the notice of the hearing that has been properly served upon the tenant or (2) through the duration of the tenant's lease.
As a result, tenants will have at least the balance of their lease if less than 4 months remain or up to 4 months after they receive notice that their landlord is in foreclosure. Tenants will still have to pay their rent. The law provides the additional right to possession only if the tenant continues to pay rent in full during the 120 day period. In addition, the right only extends to a case of "foreclosure where the tenant is current on his or her rent". This can lead to a few questions.
Who is entitled to rent during the pendancy of the foreclosure action? Is it the landlord, the mortgage holder foreclosing the loan, or the court appointed receiver? Generally, payment should be made to the landlord. However, many landlords in arrears refuse to accept rental payments. In such a case, the tenant should be careful to tender the rent payment to the landlord. If the payment is denied, the tenant should tender the rent payment to the court appointed receiver and/or mortgage holder. In either case, the tenant should get a receipt for payment! If neither the court appointed receiver/mortgage holder or the landlord will accept the rent, the tenant should appear in court and attmept to have the court order one of the parties to the suit to accept the rent.
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