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.

Tenants by the Entirety for Co-ops?

The United States Federal Court for the 7th Circuit may have provided a bit of clarity with regard to whether or not the common stock interest of a married couple in a co-op who reside in their co-op unit pursuant to a proprietary lease may be held as "tenants by the entirety".

In the case Maher v. Harris Trust and Savings Bank, the Court of Appeals identified the issue as a case of first impression in Illinois. It has always been clear that real estate or an interest in a land trust held as a tenancy by the entirety was insulated against the claims of non-joint creditors. With regard to real property, it is quite clear that co-owners who qualify can hold title as a tenancy by the entirety. However, unlike an interest in a land trust (which interest is considered personal property), the Illinois Joint Tenancy Act did not expressly identify an interest in a co-op as property that can be held as tenants by the entirety.

The court first looked to the Illinois law relating to homestead property and found that an interest in a co-op was subject to homestead rights. Next, the court looked to the Illinois Joint Tenancy Act and determined that "The Illinois Tenancy Act specifically provides that property maintained as a homestead may be held as a tenancy by the entirety, and it does not differentiate between real or personal property."

In a footnote, the court indicated that it considered the fact that land trusts were specifically included in the Illinois Joint Tenancy Act whereas co-ops were not. The court indicated that it recognized co-op ownership as being akin to a land trust in that the manner of holding title in those forms is "merely a matter of convenience of the parties". I would go further and suggest that a beneficial interest in a land trust is personal property as is an interest in the common stock of a co-op.

While this may not be the end of the discussion, as no Illinois State courts have passed on the issue, it provides good guidance and certainly a reasonable argument to an innocent spouse to avoid a judgment creditor on co-op property held as tenant by the entirety.

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.

Changes at the Chicago Water Department affect home sales in Chicago

The City of Chicago Water Department


On November 12, 2007, the Chicago City Council passed a number of amendments to the Municipal Code of Chicago that affect the City of Chicago Water Department and real estate transactions in the City of Chicago.


It is expected that, beginning December 17, 2007, the City of Chicago will increase double price charged to obtain a "Full Payment Certificate" also known as a "Water Certification" from $25 to $50. (See changes to 11-12-530)


In addition to the fee increase, the City has reinstated the requirement that a "Full Payment Certificate" be obtained for condominium property. In addition to the normal requirements for obtaining an FPC, a condominium request must also include a paid assessment letter current for the month of closing that includes the condominium unit number, the condominium assoication water account number, the name of the condominium unit owner, a statement from the association that the condominium association pays the water bill, and a statement from the association that the to be conveyed unit's monthly assessments are paid in full and up to date. (See changes to 11-12-531)

The alleged policy behind the FPC is that the City is given a final chance to make a seller pay their water account in full before being allowed to sell property and flee the city. Is this really necessary for condominiums where the association is responsible for payment of the water bill?

So what does this mean to sellers of property in the City? Increased fees and more hassles. Condominium Sellers who will be selling early in any given month will need to pre-pay their assessments so that they can timely obtain a paid assessment letter that conforms to the City's requirements. The new law will also likely cause a major disruption in obtaining FPCs.


If the City needed more money, they should have just imposed a new tax on the sale of real property. Instead, they increased the bureacratic workload by forcing hundreds more people to stand in line to obtain FPCs for condominium units where the association already pays the water bill.

Merger of damages - does the landlord owe you 10 times damages?

Section 5-12-080 of the Chicago Residential Landlord Tenant Ordinance sets forth the requirements a that Chicago landlords covered by the ordinance must follow. Among these are the requirement to provide a receipt for a deposit; to keep the deposit in a segregated account; to pay interest on the deposit; to return the deposit within a prescribed time period or to properly deduct from that deposit; and to properly transfer the deposit upon a change of ownership of the property.

Section 5-12-080(f) provides:

"If the landlord or landlord's agent fails to comply with any provision of Section 5-12-080 (a) - (e), the tenant shall be awarded damages in an amount equal to two times the security deposit plus interest at a rate determined in accordance with Section 5-12-081. This subsection does not preclude the tenant from recovering other damages to which he may be entitled under this chapter."

Thus, in addition to the regular damages a tenant can recover for a landlord's violation of the ordinance, a tenant can also recover a penalty of two times the deposit as a penalty. (As an aside, the ordinance also provides elsewhere that a prevailing tenant can recover attorney's fees and court costs from the landlord)

I have found that when a landlord violates the ordinance, he or she usually does it in a big way. That is, if the landlord fails to return a deposit, it is also likely that the landlord did not provide a receipt for the deposit, that the landlord probably commingled the deposit and that the landlord likely violated many of the other requirements of the CRLTO.

Accordingly, many tenant's attorneys will bring a multiple count complaint against a landlord for various violations of the CRLTO. Until recently, these attorneys would plead for (and sometimes get) a penalty for each and every violation of Section 080 of the ordinance.

In the middle of 2006, a case was decided by the Illinois Appellate Court, KRAWCZYK v LIVADITIS, that clarified the situation. In that case, the Court followed two prior appellate decisions and determined that "the payment of a security deposit is a singular event and the RLTO does not specify double damages for "each" violation of 5-12-080".

Thus, a landlord can only be penalized once for violating Section 080 of the ordinance, regardless of the number of counts against the landlord. Following the KRAWCZYK ruling, a landlord who commingles a security deposit, does not provide a receipt for a deposit and fails to pay interest on the deposit will only be charged with a single penalty of two times the deposit (in addition to any other legal damages).

I am not sure I agree with the court's reasoning in this case. Frankly, the application of a single penalty actually encourages a landlord to violate the ordinance. Because ordinance violations cannot be cured, the penalty has a chilling effect on landlords becoming compliant.

For example, a landlord who commingles (and thus, has violated the ordinance and now owes two times as a penalty if sued) has no incentive to later segregate the account (except to segregate it and hope the statute of limitations passes) and even less incentive to pay interest or follow any of the other requirements of Section 080 because no matter what the landlord does, the landlord is on the hook for a penalty capped at two times the deposit.

Regardless of my belief that the decision has a chilling effect on landlord compliance, I am amazed at the number of tenant's attorneys who try to bull landlords with multiple claim counts and wild assertions that they are due the penalty for each violation. I recently spoke with another attorney dealing with a four count complaint. The tenant's attorney offered the landlord's attorney to settle the case, based on a security deposit approximately $1000, for about $10,000 claiming that he was entitled to eight times the deposit if he prevailed on all of the counts. Either this tenant's attorney is not very smart or he is smart like a fox. Landlords need to be careful of traps like this one.

If the landlord's attorney merely stipulated to the violation, he likely would pay no more than $3000 plus some interest and some minimal attorneys fees. Some deal!