Under Illinois landlord-tenant laws, property owners have a right to charge their renters a security deposit. A security deposit helps protect a landlord against potential liabilities that can emanate from renting out their property. It can help with things like covering unpaid utilities and damage exceeding normal wear and tear after a tenant vacates their rented premises.

As an Illinois landlord, you’re bound by certain rules when it comes to the collection and handling of tenants’ security deposits. Knowing these rules will help you understand both your and your tenant’s rights. Here’s a guide to help landlords understand the state’s security deposit law:

Illinois Security Deposit Limit 

Unlike in other states, Illinois landlords are not currently limited by how much they can charge as a security deposit. That said, the charges you levy a tenant must be at least reasonable. 

Generally speaking, most landlords charge tenants a security deposit that’s equivalent to anywhere between 1 and 2 months’ rent. So, suppose you’re charging tenants a monthly rent of $1,500. It’d be reasonable to charge your Illinois tenants a security deposit ranging between $1,500 and $3,000. 

Nonrefundable Fees 

A security deposit is intended to be returned at the end of the tenancy unless deductions are necessary. That said, you may be able to charge your Illinois tenants nonrefundable fees as well. This fee doesn’t form part of the security deposit. Examples of nonrefundable fees can include screening and pet fees. These once again, however, must be reasonable. 

person in a grey sweater counting American cash

Additional Pet Deposits 

As already mentioned, Illinois landlords may be able to charge nonrefundable fees, such as a pet fee. However, there is a caveat when it comes to service or support animals. Both the Americans with Disabilities Act (ADA) and the Federal Fair Housing Act (FHA) protect disabled tenants from additional pet charges. 

Storing a Tenant’s Deposit in Illinois 

The Illinois security deposit laws dictate the manner in which landlords must store their tenants’ security deposits. You must store your tenant’s deposit in an interest-bearing account. 

Also, the financial institution must be federally insured and located in the state of Illinois. Various cities have different rules regarding interest on security deposits. Currently, though, the interest rate in Illinois is 0.01%. 

As per Illinois law, you must only pay interest if you lease out at least 25 units and have held the deposit for at least 6 months. And once it’s due, you must credit it to the tenant directly within the 30 days following a 12-month rental period. 

Reasons to Withhold a Tenant’s Security Deposit in Illinois 

You may be able to withhold your tenant’s security deposit for the following reasons in Illinois:

  • Unpaid rent or utilities
  • Charges outlined in the lease 
  • Costs incurred due to a breach of the lease agreement
  • Costs of damage exceeding normal wear and tear 

Home maintenance worker using a paint roller to paint a wall white

Normal Wear and Tear

Normal wear and tear is the gradual deterioration of a property after normal use. Examples of normal wear and tear on a property include: 

  • Stained bathroom fixtures
  • Faded carpet from normal use
  • Faded curtains from sunlight exposure
  • Faded paint
  • Lightly dirtied grout
  • Lightly scratched glass
  • Lightly torn wallpaper
  • Loose door handles

Excessive Damage

Damage, on the other hand, occurs as a result of abuse, misuse, negligence, or carelessness by a tenant. The following are a few examples of damage exceeding normal wear and tear:

  • Missing fixtures
  • Holes in the wall
  • Broken tiles or windows
  • Heavily burned, stained, or torn carpets
  • Missing tiles
  • Graffiti on walls
  • A missing door
  • A missing lock
  • A smashed bathroom mirror

Please note that you can only hold your renter accountable for property damage that exceeds normal wear and tear. 

Security Deposit as Last Month’s Rent 

Illinois state law forbids tenants from using their security deposit as last month’s rent. You may even want to include a provision in your lease stating that they can’t do so until they have vacated the unit. 

Security Deposit Refund in Illinois 

Once a tenant vacates their unit, you must return their deposit within 45 days if you’ve made no deductions. If you make deductions, return the deposit within 30 days.  

person using a calculator with a stack of coins and house figurine in front of them

If leasing out at least 5 units, you must deliver a written notice either in person or by mail to the tenant’s last known address. You must send the notice alongside the remaining portion of the security deposit and provide the tenant with an itemized list of deductions. 

Landlords must also specify the costs in the itemized statement as follows:

  • The damage was repaired and the actual costs paid 
  • A written estimate of the cost of repairs or restoration done by the landlord or their employees
  • Reasonable estimates of the costs within 30 days of providing the tenant with an itemized statement 
  • A sworn statement where the landlord is unable to produce receipts as evidence of work done 

Penalty for Not Returning a Tenant’s Security Deposit 

Failing to return your tenant’s security deposit or provide an itemized list of deductions can make a landlord or property owner liable for paying the tenant certain damages. 

Also, acting in bad faith or unintentionally violating any of these rules will result in tangible financial consequences. Specifically, you may be liable for paying up to 2X the wrongly withheld amount, plus court and attorney fees. 

Bottom Line

When renting out a property in Illinois, landlords must abide by certain laws, including the state’s security deposit rules, the eviction process and lease termination clauses. Knowing these rules is key to running a successful investment business. 

If you need expert help to manage your Illinois rental property, turn to Keyrenter Northwest Chicago. We provide full-service property management to property owners in Northwest Chicago. Get in touch today to learn more about us and get started right away! 

Disclaimer: This blog isn’t intended to be a substitute for professional legal advice. Laws change and this information may become obsolete at the time you read it. For further help, please get in touch with a qualified attorney or an experienced property management company.