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Security deposit or move in fee - which is better?

Posted: 10-09-2015 4:21 pm by:

In January of 2014 the Chicago Association of Realtors introduced a new lease. The lease includes a cover page that warns landlords about the risks of taking a security deposit. That article can be read in its entirety below. When considering whether to take a security deposit vs move in fee - please see this link to read the article on security deposit or move in fee.

It has been nearly two years that the recommendation for not taking security deposits was put out by C.A.R. Carolyn Anavi, the owner and Managing Broker of Live Here Chicago, speaks to hundreds of landlords yearly seeking to list their property with her firm.  She has found that some landlords are completely behind taking a move in fee instead of a security deposit while others still prefer taking a security deposit - typically equal to one month rent. Carolyn states that “Some landlords feel that a move in fee may not cover the damage should expensive items like wood floors be damaged. Others don’t want the hassle of worrying about the Chicago Residential Landlord and Tenant Ordinance (RLTO) and the ramifications should it not be followed perfectly.”

Is it best to take a security deposit or move in fee?  Here’s what Live Here Chicago is seeing in the marketplace. Most management companies in Chicago are now taking a move in fee instead of security deposit. The trend started about seven to eight years ago. Some management companies take a move in fee amount per tenant while others take a flat move in fee for the unit. A flat move in fee is more typical. Unlike the security deposit, the move in fee is non-refundable. Most landlords are still taking a security deposit but many are wary and each year the number of landlords grow - switching from a security deposit to a move in fee. Many times the landlord who makes the decision to change has either incurred a legal issue themselves or knew of someone who had.

How much should a landlord take for move in fee? That amount is entirely up to the landlord. Typically Live Here Chicago is seeing landlords ask for somewhere between 25 and 30 percent of the monthly rent. Some management companies in Chicago take a move in fee based on the number of bedrooms, while others take it on the number of tenants to occupy the unit.

What sparked new interest in this topic is that Carolyn Anavi saw one of her customers, a small management company in Lakeview, revert back to taking security deposits. The management company had been taking move in fees for over seven years.  A month ago they decided to start taking security deposits again. According to one of their property managers, too many tenants were leaving the apartment in bad condition at the end of their lease. They felt that the move in fee essentially left the tenants unmotivated to make sure their apartments were left in good condition because essentially, they had nothing to lose. Without the consequence of not getting ones security deposit returned the condition that the apartments were left in had changed substantially.

What do you think?  Are your taking a move in fee or a security deposit? If you are a landlord we would like to hear about experiences that you can share with us and other landlords  

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Posted 12-28-2015 4:12 am by anonymous
As a tenant, I hate the non-refundable move-in fee. On more than one occasion, I have paid a move-in fee, only to find that the landlord did not bother to clean the apartment before I moved in, or did not bother to fix things that needed fixing. What am I paying a fee for if the landlord can\'t be bothered to spend money on basic maintenance? A move-in fee is essentially a way to lie about the monthly rent. If you charge me a $480 move-in fee and $1000/mo rent, you are really charging me $1040/mo rent. I have no sympathy for price gouging landlords, who ransom off living spaces for ridiculous monthly fees.

Posted 10-30-2015 10:09 am by Alex
I own a condo in the South Loop. Three years ago I paid out over $6200K (plus paying my lawyer) to a tenant who almost destroyed my condo and the one below mine after letting the kitchen sink overflow. He also ruined our carpet with cigarette holes and destroyed the blinds in the master bedroom. I think it should be mentioned that this tenant was screened and had no red flags. Good credit. Good income. Owned a home prior to renting with us.\nI\'ve rented this condo for several years and never had any issues. My wife and I went to court with our attorney and lost. We lost to a man who seemed like a great guy when we rented to him and turned into a complete jerk when he realized he could capitalized on the Chicago tenant laws. Despite all the damages that this tenant caused I was responsible for paying this tenant $4200 (twice the security deposit) plus his legal fees because we did not have the name of our bank on the lease. \nYes, I messed up on this. It is my fault for not being aware of this. But twice the security deposit as a penalty?? The point is there are many ways that you can easily mess up if you take a security deposit. \nI only take a move in fee now. I think what I am asking is lower than most. My rent is $2200 and I only take a $500 as a move in fee. \nI have done this now for two years. Yes the place is not as clean when they leave but for $120 I have it cleaned by a service and I don\'t have to worry about this happening again. I would like to make mention that many tenants are happy not having to pay a full month in addition to their first months rent. I actually think it has made it easier for me to rent.

Posted 10-28-2015 3:36 am by Charles S. Chicago
Move in fees protect a landord far better than security deposits. Took a deposit for 16 yrs and then I got burned by the ordinance/tenant/lawyers. Do your research and at the least fully understand what you need to do to be compliant if you\'re landlord renting in Chicago and still are taking security deposits.

Posted 10-21-2015 4:48 am by A. STEVE WARNELIS, Property Manager; XL Properties, LLC
As long as the Chicago Residential Landlord and Tenant Ordinance exists in its current, antiquated, inequitable form, security deposits will continue to be fraught with legal peril for all concerned. We did away with using deposits OR pre-paid last month of rent held six months or more in 2009 and have never looked back! There are better ways to assure good tenancies. HOWEVER, we aren\'t too fond of the move-in fee either, even if the courts, currently, seem not to have a major problem with those. INSTEAD, we replaced it all with better, deeper, more discerning up-front due diligence as part of our background screening process. It\'s been good for us--less paperwork, less time-consuming, and doing the research up-front has given us significantly fewer problems using a fact-based approach when qualifying applicants rather than money-based.

Posted 10-21-2015 4:45 am by Jon
At our properties we take a security deposit. We do so because as mentioned in the article tenants upon move out have zero motivation to return the unit in the condition it was delivered, less normal wear and tear. There is also less incentive to pay late fees because at the end of the lease there is no S/D to deduct unpaid rent or unpaid late fees. It\'s definitely more challenging to manage S/D funds but with a strict system in place for move out inspections and processing of refunds we\'ve never had a negative experience.

Posted 10-21-2015 4:07 am by Ann
As a small landlord owning a building with only 7 apartments, I absolutely still take a security deposit -- exactly for the reason the Lakeview firm began to do so again. Tenants have to to have something in the game--especially young ones.

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