Rlto Case Law

Residential Landlord and Tenant Ordinance Municipal Code Title 5, Chapter 12 Case Law

Prepared by: The Legal Assistance Foundation of Metropolitan Chicago November 20, 2006

Table Of Contents1 § 05-12-010 Title, Purpose Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 § 05-12-020 Exclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 § 05-12-030 Definitions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 § 05-12-080 Security Deposits.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 § 05-12-100 Notice of Conditions Affecting Habitability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 § 05-12-110 Tenant Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 § 05-12-140 Rental Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 § 05-12-150 Prohibition on Retaliatory Conduct by Landlord. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 § 05-12-170 Summary of Ordinance Attached to Rental Agreement. . . . . . . . . . . . . . . . . . . . . . . 8 § 05-12-180 Attorney’s Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 RLTO Generally.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

1

This case law summary is intended to provide a general overview for tenants and landlords on how the courts have interpreted various provisions of the RLTO; however, it is not a substitute for advice from a lawyer. If you have any questions regarding how the law applies to the particular facts of your case, you should consult an attorney.

§ 05-12-010, Title, Purpose, and Scope Liberal Construction As the purpose of the RLTO is to protect and promote the public health, safety, and welfare of its citizens and to establish the rights and obligations of landlords and tenants, it shall be liberally construed. Friedman v. Krupp, 282 Ill. App. 3d 436, 443; 668 N.E.2d 142, 147 (1st Dist. 1996); Accord, Allen v. Lin, 356 Ill.App.3d 405,412; 826 N.E.2d 1064, 1069 (1st Dist. 2005) (stated purpose of RLTO is primary guide in statutory construction).

§ 05-12-020, Exclusions Six Dwelling Unit Limit of Sub-Section (a) Determined by Total Number of Dwelling Units Not Rented Units To fall within the exemption of this section, a building must have six or fewer total dwelling units. If a building has seven units, but only six or fewer are occupied at the time of rental, the RLTO still applies. A “dwelling unit” is defined § 05-12-030(a). Meyer v. Cohen, 260 Ill. App. 2d 351, 632 N.E.2d 22 (1st Dist. 1993). Six Dwelling Unit Limit of Sub-Section (a) Exemption Must be in Separate Buildings. A “building” “means a structure, or part thereof, enclosing any occupancy including residential . . . [w]hen separated by a firewall, each unit so separated shall be deemed a building.” Allen v. Lin, 356 Ill.App.3d 405, 412; 826 N.E.2d 1064, 1069 (1st Dist. 2005) (citing to Chic. Muni Code, 13-4-010). Thus, a tenant in townhouse, located on a row of 6 townhouses, only two doors removed from the landlord’s townhouse, is still covered by the RLTO since each townhouse is a separate building. “Life Care Facilities” Licensed Under the Life Care Facilities Act Qualify as “Extended Care Facilities” Under Sub-Section (c). “Life Care Facilities” licensed under the Life Care Facilities Act, 210 ILCS 40-2(d) (West 1998), qualify as “Extended Care Facilities” under § 05-12-020(c). Antler v. Classic Residence, 315 Ill. App. 3d 259, 267; 733 N.E.2d 393, 399 (1st Dist. 2000). “Landlord” status is not removed simply by transferring title if there is a notice obligation. A landlord who sells his property is not relieved of his statutory obligations (e.g. Security Deposit issues) since a transferor can remain jointly and severably liable until the selling landlord satisfies any notice requirements under the RLTO (e.g. 5-12-080(e)). Starr v. Gay, 354 Ill.App.3d 610, 616; 822 N.E.2d 89, 94 (1st Dist. 2004). 1

§ 05-12-030, Definitions A Condominium Owner’s Association is Not a “Landlord” as Defined by the RLTO The RLTO, § 5-12-030(b) defines “landlord” as “the owner, agent, lessor or sub-lessor, or the successor in interest of any of them.” A condominium association becomes neither a “successor in interest” nor a “landlord” under the RLTO where it exercises its powers under the Condominium Property Act (735 ILCS 5/9-102) to bring an action against the tenant of a condominium owner through the Forcible Entry and Detainer Act. Spiegel v. Hollywood Towers Condominium Association, 283 Ill. App. 3d 992, 998-9; 671 N.E.2d 350 (1st Dist. 1996). The Holder of a Tax Deed Does Not Enter Into a Landlord-Tenant Relationship With Any Current Tenants The Illinois Revenue Act, 35 ILCS 205/266 (West 1996), provides that the holder of a tax deed takes merchantable title, free and clear of any prior liens. Therefore, the holder, though a successor in interest, does not become a “landlord” such that he enters into a landlord-tenant relationship with any pre-existing tenants of the building, and the RLTO does not apply. Neither does tenancy at sufferance apply, because there is no prior relationship between the parties and no oral or written agreement between them. Selvy v. Keyway Investments, Inc., 283 Ill. App. 3d 532, 537; 670 N.E.2d 784, 787 (1st Dist. 1996). § 05-12-080, Security Deposits When is a Unit “Vacated” under Sub-Section (d)? A tenant vacates when she actually surrenders possession of the leasehold, and the 45-day window for return of the security deposit accrues at that time. Meyer v. Cohen, 260 Ill. App. 2d 351, 361; 632 N.E.2d 22, 28 (1st Dist. 1993). Damage Awards Under Sub-Section (f) are Not Abated For Portions of Security Deposits Actually Returned The actual security deposit is not included in the statutory damages available under subsection (f). The RLTO provides for the return of the deposit and statutory damages when the landlord fails to issue a proper receipt to a tenant or prospective tenant. Solomon v. American National Bank and Trust Co., 243 Ill. App. 132, 136-137; 612 N.E.2d 3, 10 (1st Dist. 1993).

2

The ‘Credit Method’ of transferring security deposits at closing between the owner and a thirdparty purchaser does not violate Section 080(a) in that it does not commingle the funds such that the tenant’s security deposit is at risk. The ‘credit method,’ which is a transferring of a security deposit as a credit given at the close of sale of a building, between the current owner and a third-party purchaser does not result in the commingling of the tenant’s security deposit with the landlord’s assets since it does not “render the deposit attachable landlord property” or otherwise violate the trust that a tenant’s security deposit is held in by a landlord. Starr v. Gay, 354 Ill.App.3d 610, 615; 822 N.E.2d 89, 93-94 (1st Dist. 2004). However, there must be a real estate closing that includes a credit in the amount of the tenant’s security deposit to fall under this defense. Id. at 615-16, 822 N.E.2d at 94. No Requirement of “Willful” or “Knowing” Violation by Landlord, Generally, under SubSection (f) Nothing in section 5-12-080(f) requires proof that the landlord’s actions were knowing or willful. A landlord’s duty to comply with the statute is absolute. If a landlord requires a security deposit, the landlord is required to pay the tenant interest on that deposit. If he fails to do so, he is liable to the tenant for the damages specified in the statue. Lawrence v. Regent Realty Group, Inc., 197 Ill. 2d 1, 9-10; 754 N.E.2d 334, 339 (2001). Note that in an earlier unrelated case from the Appellate Court, First District, a court held the opposite, stating that in order to be subject to the penalty provisions of § 5-12-080(f), a landlord’s conduct must have been willful. Szpila v. Burke, 279 Ill. App. 3d 964, 972; 665 N.E.2d 357, 363 (1st Dist. 1996). The Lawrence court relied on the appeals court (expressly affirming that part of the case) ruling to overrule Szpila in part, and distinguish it in part. The appellate court in Lawrence held that where Szpila could be read to require a proof of willfulness on a single count under § 05-12-080(f), it was overruled. The court went on to distinguish and limit the proper holding of Szpila: that where there are a series of violations of the section related to a series of related transactions (the renting of one apartment and the renewal of a lease over a period of years), and the defendant-landlord has the equitable defense of laches, courts will impose a requirement that the plaintiff-tenant show willful action on the part of the defendantlandlord. Lawrence v. Regent Realty Group, Inc., 307 Ill. App. 3d 155, 159; 717 N.E.2d 443, 445-6 (1st Dist. 1999). Singular award proper for multiple violations of § 05-12-080 Trial court did not err when it merged damages for breach of contract with multiple violations of Section 5-12-080 of the RLTO. However, tenant was entitled to separate damage award for violation of Section 5-12-100. Krawczyk v. Livaditis, 366 Ill. App. 3d 375; 851 N.E.2d 862 (1st Dist. 2006)

3

Sub-Section (f) Imposes “Statutory Penalties” and as Such Claims Brought Under it Subject to Two-Year Statue of Limitations Under the Illinois Code of Civil Procedure, “actions for damages for a statutory penalty” have a two-year statute of limitations, 735 ILCS 5/13-202 (West 1996). Section 5-12-080(f) imposes a “statutory penalty,” and is therefore subject to that two-year statute of limitations. Namur v. The Habitat Company, 294 Ill. App. 3d 1007, 1013; 691 N.E.2d 782, 786 (1st Dist. 1998). Where Plaintiff’s cause of action is based upon commingling of assets, it accrues when the landlord deposits the security deposit. Id. [See also discussion of § 05-12-170, infra.] But see Sternic v. Hunter Properties, Inc., 344 Ill.App.3d 915, 918-19; 801 N.E.2d 974, 976 (1st Dist. 2003), holding that under 5-12-150 and 5-12-110(e) the statute of limitations is 5 years, as allowed by 735 ILCS 5/13-205 (recovery of personal property or damages for the conversion thereof), because these damages are not statutory penalties because they do not specify an amount to be awarded for any violations or impose a formula for calculating an award without regard to the actual damages. There are no “de minimus” or “no harm” exceptions to this section. All relevant authority rejects excuses for commingling and the “no harm” argument where the security deposit is returned. Plambeck v. Greystone Management, 281 Ill. App. 3d 260, 272; 666 N.E2d 670, 676-7 (1st Dist. 1996). Security Deposits are held “in trust” by the landlord, and thus are not part of the Bankruptcy Estate of any Landlord in a Bankruptcy Filing and the Landlord’s Use of the tenant’s Security Deposit is a “defalcation while acting in a fiduciary capacity” and is not a dischargeable debt. A landlord holds the tenant’s security deposit in trust, pursuant to the standards under 5-12-080(e), and thus the landlord is a fiduciary of that trust. Thus, if a landlord spends the money they have committed and act of “defalcation” and the debt (i.e. the security deposit and any damages) are not dischargeable in bankruptcy (see 11 U.S.C. § 523 (a)(4)). In Re McGee, 353 F.3d 537, 540-41 (7th Cir. 2003); see also, Starr v. Gay, 354 Ill.App.3d 610, 613; 822 N.E.2d 89, 92 (1st Dist. 2004), holding that Section 080(a) is “designed to keep tenant monies out of the reach of creditors . . . [and to prevent] a landlord’s intentional or inadvertent personal use of tenant funds.”

4

§ 05-12-100, Notice of Conditions Affecting Habitability No “de minimus” or “materiality” exceptions to sub-section (a) Unlike other sections of the RLTO, which expressly include materiality language, this sub-section contains no qualifying language and is aimed at disclosure of all violations without regard for the degree to which they affect habitability. There is no de minimus exception. Plambeck v. Greystone Management, 281 Ill. App. 3d 260, 271; 666 N.E2d 670, 676 (1st Dist. 1996).

§ 05-12-110, Tenant Remedies Any Matter “Arising Under” the RLTO is “Germane” Any matter “arising under” the RLTO is germane, and thus may be introduced by joinder, counterclaim, affirmative defense, or otherwise. American National Bank v. Powell, 293 Ill. App. 3d 1033, 1044-5; 691 N.E.2d 1162, 1169-70 (1st Dist. 1997). Time To Cure Under Sub-Section (a) Terminating the lease is a distinct act from vacating the premises. Just because a tenant vacates the premises, it does not mean that tenant failed to give full 14 days to cure. Plambeck v. Greystone Management, 281 Ill. App. 3d 260, 271; 666 N.E2d 670, 675 (1st Dist. 1996). The Tenant Remedies Provided in Subsections (a) and (g) are Not Cumulative Where there are two statutory provisions, one of which is general and designed to apply generally, and the other is specific and relates to only one subject, the specific provision must prevail and must be treated as exception to the general provision. By making separate provision for material noncompliance that results from a fire or other casualty, the City Council apparently meant to distinguish such instances from other sources of material noncompliance. If the City Council meant to provide subsection (g) as an additional mode of recourse to subsection (a) for those struck by fire, the Council could have expressly stated so. Farnham v. Windle, 918 F.2d 47, 49-50 (7th Cir. 1990). [Note: This case actually discussed the pre-amendment RLTO. I have included it because the sections it discusses are for these purposes identical to the current RLTO sub-sections on the topic. My research did not uncover any cases examining these provisions post-amendment.]

5

When Does a Tenant Withhold or Deduct Rent Under Sub-Section (d)? When Can a Tenant Withhold or Deduct Rent Under Sub-Section (d)? A tenant withholds or deducts rent under the RLTO when the landlord receives partial payment, not when the tenant mails, posts, or sends partial payment. But a tenant cannot deduct rent under the RLTO until the landlord has received written notice of the tenant’s intent to deduct rent, and has had a full 14 day opportunity during which to make requested repairs. American National Bank v. Powell, 293 Ill. App. 3d 1033, 1038-40; 691 N.E.2d 1162, 1165-6 (1st Dist. 1997). Singular award proper for multiple violations of the same RLTO provision Trial court did not err when it merged damages for breach of contract with multiple violations of Section 5-12-080 of the RLTO. However, tenant was entitled to separate damage award for violation of Section 5-12-100. Krawczyk v. Livaditis, 366 Ill. App. 3d 375; 851 N.E.2d 862 (1st Dist. 2006) There is No Private Right of Action for Lead-Based Poisoning Injuries Under Sub-Section (e) A cause of action should not be implied under the City Code because it is not necessary to provide an adequate remedy for violations of the Code. A plaintiff’s remedy lies in common law negligence. Abbasi v. Paraskevoulakos, 187 Ill. 2d 386, 396-7; 718 N.E.2d 181, 187 (1999). As the dissent correctly points out, however, the RLTO provides an express private right of action for material noncompliance with municipal ordinances prohibiting the use of lead-bearing substances in dwelling units, and therefore it does not matter that an available remedy also exists in negligence. Id. 187 Ill. 2d at 403, 718 N.E.2d at 190. The Statute of Limitations for 110(e) Cause of Action is 5 years. The Statute of Limitations for an action under 5-12-110(e) is 5 years, as allowed by 735 ILCS 5/13-205 (recovery of personal property or damages for the conversion thereof), as these damages are not statutory penalties because they do not specify an amount to be awarded for any violations or impose a formula for calculating an award without regard to the actual damages. Sternic v. Hunter Properties, Inc., 344 Ill.App.3d 915, 918-19; 801 N.E.2d 974, 976 (1st Dist. 2003). 5 years statute of limitations for violation of sub-section (e) (Damages and Injunctive Relief) See Sternic v. Hunter Properties, Inc., 344 Ill.App.3d 915; 801 N.E.2d 974 (1st Dist.2003).

6

§ 05-12-140, Rental Agreement An Attorneys’ Fees Clause is Permissible To The Extent It Does Not Conflict With the RLTO A fees clause that provides for a tenant to pay landlord’s attorneys’ fees “to the extent permissible by courts, statutes, or ordinances” is compatible with this section of the RLTO. Plambeck v. Greystone Management, 281 Ill. App. 3d 260, 267; 666 N.E2d 670, 674 (1st Dist. 1996). No Liability Limitation Clauses Allowed Under the RLTO The RLTO prohibits “the limitation of any liability.” The command to delete any and all exculpatory clauses is complete and unambiguous, and it does not allow for any qualification. A lease may not even contain a conditional liability limitation clause containing language analogous to, “to the extent permissible by courts, statutes, or ordinances.” Plambeck v. Greystone Management, 281 Ill. App. 3d 260, 268; 666 N.E2d 670, 674 (1st Dist. 1996). No Waiver of Notice Allowed Under the RLTO The RLTO prohibits lease clauses requiring tenants agreement “to waive any written termination of tenancy notice or manner of service.” The command to delete waiver of notice clauses is clear and absolute. Such clauses will not be saved for language analogous to “subject to the provision of the Chicago Landlord and Tenant Ordinance.” Plambeck v. Greystone Management, 281 Ill. App. 3d 260, 269; 666 N.E2d 670, 675 (1st Dist. 1996). Upheld Sub-Section (g) See Plambeck v. Greystone Management, 281 Ill. App. 3d 260, 269; 666 N.E2d 670, 675 (1st Dist. 1996).

§ 05-12-150, Prohibition On Retaliatory Conduct By Landlord Retaliatory Conduct is “Germane” and May Be Introduced as an Affirmative Defense to a Forcible Entry and Detainer Action See American National Bank v. Powell, 293 Ill. App. 3d 1033, 1044-5; 691 N.E.2d 1162, 1169-70 (1st Dist. 1997), and supra under § 05-12-110.

7

Statute of limitations for 150 Cause of Actions is 5 years. The Statute of Limitations for an action under 5-12-150 is 5 years, as allowed by 735 ILCS 5/13-205 (recovery of personal property or damages for the conversion thereof), as these damages are not statutory penalties because they do not specify an amount to be awarded for any violations or impose a formula for calculating an award without regard to the actual damages. “Even the two-months’ rent liability under 5-12-150 is related to the actual damages because it can be imposed only if it is greater than twice the actual damages.” Sternic v. Hunter Properties, Inc., 344 Ill.App.3d 915, 918-19; 801 N.E.2d 974 (1st Dist. 2003).

§ 05-12-170, Summary of Ordinance Attached to Rental Agreement Tenant’s Motive is Irrelevant A tenant’s motive for invoking the right of termination provided under this section is simply not relevant to the determination whether the termination is valid. There is no “clean hands” doctrine overlaid on the text of this section, and imposing one would counter-act the inherent purpose of the RLTO to correct the historical disparity between bargaining powers of landlord and tenant. Plambeck v. Greystone Management, 281 Ill. App. 3d 260, 266-7; 666 N.E2d 670, 673-4 (1st Dist. 1996).

§ 05-12-180, Attorney’s Fees A Party is Entitled to an Appropriate Hearing on Attorneys’ Fees This section provides for reasonable attorneys’ fees to the prevailing plaintiff. That plaintiff is entitled to an appropriate hearing to determine reasonable attorneys’ fees. Plambeck v. Greystone Management, 281 Ill. App. 3d 260, 273; 666 N.E2d 670, 677 (1st Dist. 1996). Burden of the Party Pleading for Attorneys’ Fees It is incumbent upon the petition for fees to specify the services performed, by whom they were performed, the time expended and an hourly rate charged therefore. Petitioner must present records maintained during the litigation containing facts and computations upon which the charges are predicated. Plambeck v. Greystone Management, 281 Ill. App. 3d 260, 273-4; 666 N.E2d 670, 677-8 (1st Dist. 1996).

8

Factors for Court to Consider in Awarding Attorney’s Fees In assessing the reasonableness of attorneys’ fees, the trial court should consider a variety of factors, including the skill and standing of the attorney employed, the nature of the case, the novelty and difficulty of the issues involved, the degree of responsibility required, the usual and customary charge for the same of similar services in the community, and whether there is a reasonable connection between the fees charged and the litigation. The trial court is permitted to use its own knowledge and experience to assess the time required to complete particular activities, and a reviewing court may not reverse an award of attorneys’ fees merely because it may have reached a different conclusion. Plambeck v. Greystone Management, 281 Ill. App. 3d 260, 273; 666 N.E2d 670, 677-8 (1st Dist. 1996). A Court May Not Discount an Award of Attorney’s Fees To a Party Represented by Not-ForProfit Legal Service Providers Discounting the legal fees awarded to legal aid attorneys would serve only to chill the impulse of attorneys to pursue and continue careers in legal service work, because the receipt of such fees promotes the health and continued existence of their employing organizations. Pitts v. Holt, 304 Ill. App. 3d 871, 874; 710 N.E.2d 155, 157 (1st Dist. 1999). Policy Behind Provision See Pitts v. Holt, 304 Ill. App. 3d 871; 710 N.E.2d 155 (1st Dist. 1999).

RLTO Generally The RLTO Does Not Violate the United States Constitution See Chicago Bd. Of Realtors, Inc. v. Chicago, 819 F.2d 732 (7th Cir. 1987). Analyzes RLTO with respect to the Contract Clause, Procedural Due Process, Substantive Due Process, Equal Protection, Void-For-Vagueness Doctrine, and Pre-Emption. The RLTO Supercedes § 9-207 of the Illinois Code of Civil Procedure The Illinois Supreme Court has repeatedly held that an ordinance that is within a municipality’s home-rule powers supercedes, within the home-rule unit’s territory, a conflicting statute passed before the 1970 Illinois Constitution took effect on July 1, 1971. Because § 9-207 of the Illinois Code of Civil Procedure, 735 ILCS 5/9-207 (West 1996) was passed prior to July 1, 1971; the municipality of Chicago is a home-rule unit; and the ordinance addresses the well being of its citizens, we conclude that the ordinance supercedes the statute in this instance. Reed v. Burns, 238 Ill. App. 3d 148, 152-4; 606 N.E.2d 152, 154-5 (1st Dist. 1992).

9