If you rent out your condo, you likely collect a security deposit from your tenants to protect yourself in case of damage to your property or a broken lease agreement. And, while some people treat these arrangements with a certain degree of informality, you should know that as far as the City of Chicago is concerned, you are formally a “landlord” and there are strict rules for keeping the tenants’ security deposit.
For example, many owners don’t know that they are obligated to pay yearly interest to their tenants for the security deposits they keep. The interest rate itself isn’t very high—in 2015 you are required to pay the tenants only .01% of the deposit, which is equal to 10 cents for every $1000 you’ve collected.
But, failure to pay this amount on a yearly basis, should the tenants pursue legal action, could result a court-mandated return of the security deposit, a penalty of two times the deposit plus interest, and payment of all legal fees associated with the case.
So, as you can see, this is one case where it makes sense to closely follow the formalities. Don’t forget to attach a Security Deposit Summary document to each new or renewed lease, and pay the interest on time to your tenants in order to avoid any problems. Of course, if you utilize a property management company to deal with your tenants, all this is taken care of for you already.
To keep track of future rates and other formalities for landlords, visit the City of Chicago Security Deposit Interest Rates page.