Landlords know how important security deposits are in residential leases. The threat of losing their security deposit can keep tenants honest. Good landlords don't want to hold back the security deposit after the tenant leaves; they would much rather have their home or apartment back in good shape. Tenants, too, look forward to the return of their security deposit when they move out. Illinois has two laws governing security deposits, and it is easy to run afoul of them:
1. The Security Deposit Interest Act: This law requires all landlords who have 25 or more units in one building or complex to pay interest on security deposits to their tenants, so long as the landlord hold the security deposit for more than 6 months. The interest rate is calculated based on the savings account interest rate payable by the state's largest bank at the end of the year preceding the year in which the tenancy commences. For leases that started in 2007, that interest rate is .5%; for leases that started or will start in 2008, that interest rate is .35%. For leases that will start in 2009, the security deposit interest rate will be calculated on December 31, 2008.
But be careful! Chicago and certain other municipalities have different rules regarding security deposits and calculate the security deposit interest in a different manner. For example, in Chicago, the interest rate on security deposits for leases entered in 2007 is 1.68%; for 2008 leases, it's 1.26%. If you are a landlord, before paying any interest, you should check with the municipality in which your units are located to determine the correct interest rate. Fortunately, most municipalities do follow the Security Deposit Interest Act and will not have their own interest rate on security deposits.
2. The Security Deposit Return Act: Landlords who have 5 or more units may withhold all or a portion of a tenant's security deposit if the following conditions are met:
a) Within 30 days after the tenant leaves, the landlord must give the tenant an itemized list of the damage the tenant caused, along with the cost (either actual or estimated) of repairing the same.
b) If the actual cost is provided in the notice, the landlord should include a copy of the paid bills and receipts for the repairs. If an estimated cost is provided in the notice, then the landlord must provide paid bills and receipts for the repairs within 30 days after the notice in (a) above is provided.
c) The notices to the tenant shall either be hand-delivered or mailed to the tenant's last known address.
If the landlord follows the rules above, and if the cost of the repairs is reasonable, the landlord may withhold the portion of the security deposit necessary to complete the repairs, or, if the cost of repair meets or exceeds the security deposit, the landlord may withhold the entire security deposit. If the landlord fails to comply with the requirements of (a), (b) and (c) above, the landlord must return the entire security deposit to the tenant within 45 days after the tenant leaves.
Landlords beware: If you hold back all or part of the security deposit and a court finds that you acted in bad faith or did not follow the provisions of the Security Deposit Return Act, you could be liable to your tenant for twice the amount of the security deposit, in addition to the tenant's court courts and attorneys' fees.
Please note: The rules for security deposits for City of Chicago landlords are different! City of Chicago landlords are subject to the Chicago Residential Landlord Tenant Ordinance. It is important for Chicago landlords to comply with the provisions of that ordinance. For more information on the City of Chicago's rules pertaining to security deposits, click here.
Thursday, September 25, 2008
Friday, September 19, 2008
Cook County Real Estate Taxes -- More Bad News for Homeowners
As if the real estate market hasn't had it bad enough this year, Cook County's real estate tax bills will be coming out soon and will be due on November 3, 2008, and unfortunately, the taxes are going up.
While home prices are plummeting, real estate taxes are not. In fact, Cook County's north and northwest suburban homes were reassessed last year. The second installment tax bill that homeowners will soon receive will include these increased assessments. Unfortunately, the increased assessments are valued as of January 1, 2007, before the housing market crashed. Therefore homeowners will be paying taxes based on home values inflated beyond where they are today.
The City of Chicago will not be reassessed until 2009. In the meantime, their property taxes are still based on home values as on January 1, 2006, when the housing market was peaking. Some Chicago homeowners will thus see large increases in their tax bills this fall.
Southern Cook County suburbs are being reassessed this year; therefore tax increases in that area based on assessed value increases should be negligible, if any. Additionally, when the new assessed values for southern Cook County are complete, homes should be valued as of January 1, 2008. It remains to be seen what sort of tax increase southern Cook County homeowners will face in coming years.
If your taxes have gone up, you still have options! You can appeal the property taxes and attempt to get a reduction. If the time for filing an appeal has passed, the property can still be appealed through the Board of Review. Filing deadlines are strict and must be stringently adhered to. You can also contact an attorney specializing in real estate tax reductions to assist you.
While home prices are plummeting, real estate taxes are not. In fact, Cook County's north and northwest suburban homes were reassessed last year. The second installment tax bill that homeowners will soon receive will include these increased assessments. Unfortunately, the increased assessments are valued as of January 1, 2007, before the housing market crashed. Therefore homeowners will be paying taxes based on home values inflated beyond where they are today.
The City of Chicago will not be reassessed until 2009. In the meantime, their property taxes are still based on home values as on January 1, 2006, when the housing market was peaking. Some Chicago homeowners will thus see large increases in their tax bills this fall.
Southern Cook County suburbs are being reassessed this year; therefore tax increases in that area based on assessed value increases should be negligible, if any. Additionally, when the new assessed values for southern Cook County are complete, homes should be valued as of January 1, 2008. It remains to be seen what sort of tax increase southern Cook County homeowners will face in coming years.
If your taxes have gone up, you still have options! You can appeal the property taxes and attempt to get a reduction. If the time for filing an appeal has passed, the property can still be appealed through the Board of Review. Filing deadlines are strict and must be stringently adhered to. You can also contact an attorney specializing in real estate tax reductions to assist you.
Thursday, September 11, 2008
Joint Tenants and the Deceased Joint Tenant Affidavit
What happens if you own real estate jointly with someone (i.e as joint tenants with right of survivorship or as tenants by the entirety) and the other property owner dies? Who gets his or her half of the property? Did they want you to have it? How do you get it?
Don't worry, if the joint tenant dies, the property is yours. That is the purpose of joint tenancy -- if one owner dies the other owner(s) automatically get the ptoperty. But when it comes time to sell the real estate, the title company will be looking for proof that the joint owner has passed on, and a death certificate is not enough.
Fortunately, the process of removing a deceased joint tenant from title is simple. A form called a Deceased Joint Tenant Affidavit needs to be prepared by someone with knowledge of the facts (typically the surviving joint tenant), signed, notarized, and filed with the county recorder along with a death certificate.
If you fail to have this procedure completed after the death of the deceased joint tenant, you can do it at the time of the sale of the real estate. However, it is best to handle this immediately after the joint tenant's death to avoid complications in case you die before you sell the real estate, or in case you want to add another joint tenant to the real estate or modify title in any other way. Preparing a Deceased Joint Tenant Affidavit is simple and inexpensive, and can clear the way for a simple transition to your buyers or heirs.
Don't worry, if the joint tenant dies, the property is yours. That is the purpose of joint tenancy -- if one owner dies the other owner(s) automatically get the ptoperty. But when it comes time to sell the real estate, the title company will be looking for proof that the joint owner has passed on, and a death certificate is not enough.
Fortunately, the process of removing a deceased joint tenant from title is simple. A form called a Deceased Joint Tenant Affidavit needs to be prepared by someone with knowledge of the facts (typically the surviving joint tenant), signed, notarized, and filed with the county recorder along with a death certificate.
If you fail to have this procedure completed after the death of the deceased joint tenant, you can do it at the time of the sale of the real estate. However, it is best to handle this immediately after the joint tenant's death to avoid complications in case you die before you sell the real estate, or in case you want to add another joint tenant to the real estate or modify title in any other way. Preparing a Deceased Joint Tenant Affidavit is simple and inexpensive, and can clear the way for a simple transition to your buyers or heirs.
Tuesday, September 2, 2008
Home Inspections for New Construction
Many buyers think that a professional inspection for a newly constructed home is unnecessary. After all, it's a new house -- everything is brand new and absolutely perfect, right? Wrong. I strongly urge all of my clients to obtain a professional inspection of any home they are purchasing, even it's just been built.
In the course of my work, I see inspection reports on homes that have been previously lived in, as well as new construction homes. The lists of defects, however, are pretty much the same in length regardless of the age of construction. In fact, new construction homes sometimes have a longer list of defects because there is no one living there to have found and fixed those defects yet. For example, a switch that is supposed to be wired to an outlet may not be working properly, or a shower diverter may leak. While the builder probably checked these items upon installation, he may well have missed them, especially if it is a large construction project with many units or homes. A professional home inspection, however, should uncover these issues and bring them to the seller's attention before it's too late.
Many builders do not include inspection contingencies in their contracts; however, these can be negotiated into the contract by your attorney. Larger builders, however, may not allow any inspection contingency in the contract at all. In such cases, the buyer should be wary. While most builders, large and small, encourage a pre-closing walkthrough to nail down any outstanding punchlist items, sometimes this is not enough. If a unit or home is ready for occupancy when you make your offer, I strongly recommend you schedule a home inspection immediately!
In the course of my work, I see inspection reports on homes that have been previously lived in, as well as new construction homes. The lists of defects, however, are pretty much the same in length regardless of the age of construction. In fact, new construction homes sometimes have a longer list of defects because there is no one living there to have found and fixed those defects yet. For example, a switch that is supposed to be wired to an outlet may not be working properly, or a shower diverter may leak. While the builder probably checked these items upon installation, he may well have missed them, especially if it is a large construction project with many units or homes. A professional home inspection, however, should uncover these issues and bring them to the seller's attention before it's too late.
Many builders do not include inspection contingencies in their contracts; however, these can be negotiated into the contract by your attorney. Larger builders, however, may not allow any inspection contingency in the contract at all. In such cases, the buyer should be wary. While most builders, large and small, encourage a pre-closing walkthrough to nail down any outstanding punchlist items, sometimes this is not enough. If a unit or home is ready for occupancy when you make your offer, I strongly recommend you schedule a home inspection immediately!
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