As a landlord of rental properties in the suburbs west of Chicago you more than likely spend more time interviewing potential tenants than focusing on the lease agreement that they sign prior to move in. The lease agreement is quietly doing something for you each and every day of a tenancy either protecting your investment or exposing you to great risk.
We have been managing single family homes, townhomes and condominiums in the suburbs west of Chicago, including DuPage County, Kane County, Cook County and Will County since 2004. By managing our own rental properties, we have first hand knowledge of the importance of a good lease. It can be your best friend while you have a good tenant or your worst enemy when you have a "nightmare" tenant. Here are some tips on what to look for in a good lease as a landlord of single family homes, townhomes and condominiums in the Naperville, IL area.
In This Guide
- Why the Lease Is the Most Important Document You Own
- Illinois Isn't Chicago, and That Actually Works in Your Favor
- Security Deposit Protection
- Additional Lease Language for Certain Types of Properties
- Pet Policy Problems
- The Disclosures That Can Cost You $19,000
- Is That Renter Signed Up for an Extended Lease Contract?
- Emergency Maintenance and Lease Language That Prevents Disputes
- Late Fees, Lease-Breaking, and the Clauses Tenants Will Test
Why the Lease Is the Most Important Document You Own
Not your deed. Not your insurance policy. Your lease.
Your lease is the controlling document when you have tenants. You need it to spell out who is responsible for lawn care on a property similar to this property in Geneva. On a property in Downers Grove, you need it to clearly state how sublets are processed. Ultimately, the terms of your lease are the only thing that matter. To that end, we can assure you that in DuPage County, where all evictions are processed through the 18th Judicial Circuit, the courts are not very sympathetic to leases that are not written out clearly. If for example a lease states that a tenant can have pets, but does not clearly outline the extent of damages that can be done to a rental property by said pets, then in the court's eyes, it is in the tenant's favor.
Litigating evictions and trying to collect on security deposits is costly. The last thing you want is to get into court over ambiguous language in your lease agreements. For this reason, it is best to make sure that every clause is as airtight as possible, to avoid any chance of it being read in a negative light.
Illinois Isn't Chicago, and That Actually Works in Your Favor
Note: A Lease Agreement is subject to the Illinois State Landlord-Tenant Laws as opposed to the Chicago Residential Landlord and Tenant Ordinance (RLTO) which is one of the most tenant-friendly local laws in the country. Also, Naperville, IL and the surrounding suburbs are not part of the city of Chicago. This would mean that a landlord would not be restricted by the just-cause eviction laws as found in the RLTO. However, a landlord is still required to comply with all of the terms and conditions as outlined in the Illinois State Landlord-Tenant Laws. For example, a landlord is required to give a tenant 30 days written notice to terminate a month-to-month lease agreement as found in Illinois law (as opposed to 10 days found in the RLTO). If a landlord fails to give proper notice, a court could potentially dismiss an eviction action and the landlord would be required to give the additional time and would also be responsible for any holding costs (i.e. rent and utilities) for the additional time.
With your lease, as with the majority of landlords, you may not be aware that just because you are given 30 days written notice to terminate a month-to-month lease, that within that 30 days that you cannot terminate the tenancy, or give notice of termination, that a court of law will interpret your actions and declare your eviction action a nullity and allow the tenant 30 to 60 additional days to which to arrange for alternate lodging and to which you will continue to pay all of the housing costs.
Security Deposit Protection
Illinois laws governing rental deposits stipulate that each landlord return the deposits within thirty days of the end of lease and include a complete, detailed list of any outstanding charges or damages he's collected from the former renter. If for any reason the return of said deposits and/or a written list is not fulfilled within that thirty days the landlord of said rental property may be fined two times the amount of the initial deposits collected plus the legal fees for the at-lege representation of the recently-departed renter(s).
Define what normal wear and tear is to a rental property, and what isn't, in your lease, to best protect yourself from having to absorb the cost of repairs and/or damage to your rental property when you have tenants leave.
Additional Lease Language for Certain Types of Properties
For HOA homes in residential rental property, there is a very important and critical piece of advice regarding HOA properties.
Your home is located in a HOA. While the HOA Rules and Regulations and By-Laws are between you and the HOA, when the tenant violates the rules, such as parking in a prohibited location, failure to comply with trash and recycling policies, and landscape violations, the HOA assessment will be to YOU. Without a provision in the Lease requiring the tenant to comply with all current and future HOA Rules and Regulations and stipulating that any and all future HOA assessments are the tenant's responsibility, there is no clear legal recourse for you to charge back the tenant for their infractions.
Parking fines, trash or other violations and even fines for not mowing your lawn or maintaining your patio can all be charged to you by the HOA even if the fault was the tenant's. By including an HOA compliance clause in your lease agreement, you can provide in writing that the tenant is required to comply with all current and future rules and regulations of the HOA. You can also specify in the lease that any fines incurred by the HOA as a result of the tenant's violation of the lease agreement (or of the HOA's rules and regulations) are the responsibility of the tenant.
Pet Policy Problems
A lot of landlords reflexively say no pets. We get it. But here's what that often costs in practice.
In the rental market in Naperville IL eliminating pets from consideration can extend your time on market by weeks. Our average time on market for properties that Yellow Key Property Management manages is around 8 days and that is by not filtering out a large portion of qualified applicants. A 30 day vacancy on a $1,800 unit will cost you $1,800 in lost rent and all the other carrying costs for that unit. These costs by far exceed any wear and tear that the pets can cause and should not disqualify tenants from consideration.
A common problem we have seen is when an owner's lease does not have a proper pet addendum (including breed and weight restrictions and deposit amount/term) and the tenant fails to disclose when bringing pets to the property. In the worst case, a tenant brought a large dog to the property mid lease without the owner's knowledge or consent. After the tenant moved out, there was significant damage to the carpet in excess of $1,200 and there was no way to recover for the damage as there were no provisions in the lease for the owner to do so. A standard pet addendum for managed properties requires a refundable deposit and spells out all terms and conditions for tenants with pets. We leave it to the owner whether or not to allow pets but if the owner does allow pets, we require the owner to complete a pet addendum as part of the lease signing process.
“We have been managing single family homes, townhomes and condominiums in the suburbs west of Chicago, including DuPage County, Kane County, Cook County and Will County since 2004.”
The Disclosures That Can Cost You $19,000
This is the one that catches people off guard.
You could also incur a huge fine for not disclosing known lead paint hazards to prospective rental property tenants. If your rental unit was built prior to 1978, this could apply to you. And the federal penalty for failing to disclose this information can be as much as $19,507 per violation. The leading cause of lead poisoning in children is from paint in older homes. While a large number of old homes have already been remediated for lead paint, many have not. As long as there is no documented proof that your home has been inspected for and remediated for lead paint, you could be putting your self at risk for a huge fine.
A long lease with lots of boilerplate doesn't guarantee that all required disclosures have been included. Get a lease current for the local market and not one that has been sitting in a file for years. Many owners rely on outdated lease templates thinking they are adequate. They are not. Illinois law requires certain disclosures to be made to residential tenants. There are many others that are optional but can be very important to landlords in certain situations.
Is That Renter Signed Up for an Extended Lease Contract?
Lease renewal terms matter! The owner of the following townhome could have avoided the subsequent weeks of legal negotiations by clearly outlining lease renewal terms in the lease. Apparently, the landlord informed the tenant of the increased rent due at renewal time by text and the tenant said okay. Although the increased rent terms were apparently communicated by the landlord to the tenant in time for renewal of the lease, there were never any new written lease terms created which governed the tenant's lease after renewal. Consequently, the tenant challenged the increased rent, and after weeks of negotiation and legal consultation the increased rent was finally agreed to by the landlord and the tenant. All this could have been avoided had the landlord, at the beginning of the lease, created and had the tenant sign a new written lease with terms governing the lease after renewal of the lease. As it was, the increased rent terms were apparently informally agreed to by landlord and tenant prior to the time when the terms were to take effect, but not until after it became apparent that increased rent terms would be challenged by the tenant.
We start renewal negotiations 60 to 90 days prior to lease expiration on all managed properties. We charge a one-time Lease Renewal fee of $200 to draft up new lease terms, confirm any rent increases, and collect new signed leases. With our online property management software, Rentvine, owners can login to their property at any time to view the status of their renewal, review new lease terms, and even view copies of signed lease agreements.
Emergency Maintenance and Lease Language That Prevents Disputes
In lease negotiations it is very important to include specifications about emergency maintenance issues such as damaged furnace in the middle of winter. The owner and tenant should come to an agreement in regards to response time for repairs such as these. The owner should clearly outline a policy for when and how emergency maintenance requests will be handled in order to avoid disputes with tenants. Coordinating with vendors prior to issues happening is also a wise step.
Late Fees, Lease-Breaking, and the Clauses Tenants Will Test
Throughout Downers Grove and Elmhurst we have experience dealing with all kinds of renters, including young families as well as corporate relocators. As such, we are familiar with the various issues that arise, especially with lease breaking and subletting. Late fees are also tested by tenants throughout the Chicago suburbs and in order to have late fees enforced, the late fees must be clearly outlined within the lease and be greater than $25 to $50 per occurrence for lower rental priced units. As such, it is typical for us to include late fees within the lease for all managed properties in order to protect owners from potential financial loss.
Also, make sure to explicitly state the amount to be paid as a penalty for early termination of the lease. This is often expressed as one to two months' rent to be paid to the landlord to extinguish the tenant's responsibility to continue with the terms and conditions of the lease. This type of language is far more specific and enforceable than simply stating that the landlord can charge the tenant for any damages incurred by the tenant as a result of his or her early termination of the lease.
FAQ
What is required in an Illinois residential lease agreement?
The minimum information to include in any lease are: 1) the parties' names and addresses for all parties; 2) the property address where the lessee will occupy; 3) the agreed upon monthly rent plus the day of the month it is due; 4) the term of the lease (e.g. 12 months or month-to-month); 5) the terms for security deposits including amount plus return requirements; and, 6) the statutory disclosures under Illinois law (as of 1/1/2018 and subject to change): Radon in Soil Disclosure; Carbon Monoxide Disclosure; and, Lead Paint Disclosure for Pre-1978 Residences. Any additional information regarding the lease (i.e. terms specific to a particular property and/or requirements of a Home Owners Association (HOA) need to be added to the lease as well). Omitting any required disclosure(s) as well as any other lease terms in the Illinois leasing laws (820 ILCS 605/3.5, et seq. and associated rules and rules amended subsequent to the most current edition of IL Rent Law—published by Aspen Publishers as of 12/7/2017)—can have the disclosed information render non-enforceable (i.e., subject the landlord to potential of substantial fines), for example, in regard to required disclosure(s).
How long does a landlord have to return a security deposit in Illinois?
Security deposits must be returned to the tenant(s) within 30 days of the end of the lease. A detailed, written explanation of any portion of the deposit returned in the form of repairs must also be provided to the tenant(s) at the same time. The failure to return the security deposit within the 30 day period or to provide an adequate explanation for return of only a portion of the deposit can result in a double penalty plus the tenant's attorney's fees.
Do Naperville landlords have to follow the Chicago Residential Landlord and Tenant Ordinance?
No. Naperville and most other suburbs fall under the jurisdiction of the Illinois landlord-tenant laws. There is no "Chicago Residential Landlord Tenant Ordinance" that applies to Naperville properties. Therefore, a Naperville landlord is not required to follow the just-cause for eviction requirements. A Naperville landlord must comply with the just-cause for eviction requirements of the local municipality in which the rental property is located. However, if the property is located within the City of Chicago, the Chicago Residential Landlord and Tenant Ordinance will apply and the landlord will be required to follow the requirements of that Ordinance. Under Illinois law a landlord must provide a specified amount of notice prior to commencement of eviction proceedings against a tenant. A Naperville landlord must also comply with the Illinois laws regarding security deposits, and the minimum requirements for habitability for a rental property.
Use of Online Lease Templates – GOOD or BAD idea for Illinois Landlords?
We are always surprised when someone is looking for generic lease templates online because when you download and complete a template for use in Illinois there are many things that are likely to be wrong. In many instances, these leases lack the Illinois specific disclosures required by statute. The jurisdiction for action under a lease managed in a suburb outside of the city of Chicago is the DuPage County or other appropriate circuit court for Cook County, not the Chicago city court. Most templates have not been updated since the late 1980s and do not comply with the current law as it pertains to repairs and maintenance among other things. It is not worth the risk of losing a security deposit dispute or an action to evict a tenant due to an unenforceable lease provision.
What should a lease include for properties managed by an HOA?
Leases for properties managed by an HOA must specifically require the lessee to abide by all rules of the HOA. If the lessee does not comply with the rules of the HOA, then any fines incurred by the lessee during his/her tenancy must be the lessee's responsibility to pay to the HOA and the responsibility of the landlord to collect from the lessee. The lease must clearly state that the responsibility for any fines levied against a condo unit or townhome during a lessee's tenancy rests with the lessee and that the landlord is merely responsible for collecting the fines from the lessee for the HOA.
Is it worth allowing pets in a Naperville rental property?
Pets – yes or no? Often we recommend not to rule out pets entirely. Such ruling out can prompt qualified applicants to search for rental properties which do allow pets. By including pets in lease agreements with qualified renters, owners can fill their apartments more quickly and avoid extended vacancies and resulting costly finance charges. Even with including pets in lease agreements, an owner can protect himself or herself by entering into a written, well-drafted pet addendum that lists and specifies the terms and conditions for a pet or pets for a particular rental property. Such a written agreement can include and specify, for example: 1) description of animal(s); 2) weight limits; 3) refundable, non-refundable pet deposit; 4) description of any damage(s) for which pet's owner shall be responsible.
