Being a landlord in Chicago can be a profitable venture but not without hurdles. The city’s specific legal framework, tenant protections, and somewhat dynamic rental market present numerous opportunities for one miscalculation to become a legal problem or cause financial loss. This blog runs through the top 10 most common landlord mistakes in Chicago and exactly how to avoid them, whether a new investor or experienced landlord.
1. Ignoring the Chicago Residential Landlord and Tenant Ordinance (RLTO)
Mistake: Many landlords in Chicago inadvertently violate the city’s Residential Landlord and Tenant Ordinance (RLTO) due to a lack of knowledge or misinterpretation of the regulations.
Impact: Such oversights can result in serious consequences, including tenant lawsuits, financial penalties, and the potential for triple damage awards.
Prevention Strategies:
- Educate Yourself: Obtain and thoroughly review the official RLTO summary
- Inform Tenants: Always provide every tenant with a copy of the RLTO summary when a lease agreement is signed.
- Stay Current: Keep informed about annual updates and modifications to Chicago’s housing policies.
2. Mishandling Security Deposits
Mistake: Mixing tenant security deposits with personal funds or neglecting to pay legally required interest.
Impact: Potential court order to repay double the deposit amount, plus cover the tenant’s legal expenses.
Prevention Strategies:
- Maintain security deposits in a distinct, interest-bearing account.
- Furnish tenants with a receipt and details regarding interest.
- In Chicago, explore the option of a legally more secure, non-refundable move-in fee.
3. Illegal Eviction Practices
Mistake: Taking action to remove a tenant without a legal court order. Examples include changing locks or shutting off essential utilities.
Impact: Such actions are illegal and considered a criminal offense. Consequences can include lawsuits and financial penalties.
Prevention:
- Adhere strictly to the legal eviction process, which requires serving proper notice to the tenant and obtaining a court order.
- Seek guidance from a legal professional or a property management company who specializes in Chicago eviction procedures.
4. Repair Requests and Property Maintenance
Mistake: Neglecting tenant repair requests or implementing inadequate, temporary solutions.
Impact: Ignoring maintenance issues can lead to:
- Property damage
- Tenant dissatisfaction
- Potential code violations
How to Avoid:
- Establish a clear process for documenting and addressing maintenance requests.
- Promptly address critical repairs, particularly those affecting heating, water, and plumbing systems.
- Conduct routine property inspections to proactively identify and resolve potential problems before they worsen.
5. Tenant Screening Mistakes
Mistake: One of the most common Chicago landlord mistakes is rushing the tenant screening process—failing to thoroughly verify income, rental history, or conduct proper background checks.
Impact: Inadequate screening can result in negative consequences such as late rent payments, property damage, and costly evictions.
How to Avoid: Implement a comprehensive and standardized tenant application process that includes the following steps:
- Utilize a consistent application form for all applicants.
- Conduct thorough credit checks to assess financial responsibility.
- Perform background checks to identify potential risks.
- Verify employment and income through reliable sources.
- Contact previous landlords to obtain valuable references regarding the applicant’s tenancy history.
6. Using Generic or Incomplete Lease Agreements
Mistake: Using generic or online lease templates that don’t comply with Chicago’s specific regulations.
Impact: This can lead to the omission of crucial terms or the inclusion of clauses that are not legally enforceable in Chicago.
How to Avoid:
- Have your lease agreement reviewed by a real estate attorney or property manager who is knowledgeable about Chicago law.
- Verify that the lease explicitly addresses essential aspects such as utilities, maintenance responsibilities, late payment penalties, pest control measures, and adherence to the Residential Landlord and Tenant Ordinance (RLTO).
7. Fair Housing Violation
Mistake: Discriminating against potential or current tenants based on race, religion, national origin, gender, or familial status, whether intentional or unintentional.
Impact: Such violations can trigger investigations by the Department of Housing and Urban Development (HUD), potentially resulting in legal battles and significant fines.
How to Avoid:
- Implement uniform criteria and application procedures for all prospective tenants.
- Refrain from using discriminatory language in property listings. Examples include phrases like “ideal for singles” or “no children allowed.”
- Ensure that all staff and owners are thoroughly trained on fair housing regulations and laws.
8. Pricing Your Rental Property Correctly
Mistake: Incorrect pricing, either too high (leading to vacancies) or too low (reducing cash flow).
Impact: Negatively affects revenue and tenant retention.
How to Avoid:
- Utilize rental analysis tools or consult a property manager to assess comparable properties in your area.
- Fine-tune pricing based on the property’s condition, available amenities, and current local market demand.
9. Poor Record-Keeping
Mistake: Poor record-keeping of payments, maintenance, lease changes, and tenant communication.
Impact: Difficulty enforcing lease terms and substantiating claims in disputes.
How to Avoid:
- Implement property management software or spreadsheets for comprehensive tracking.
- Maintain both digital and physical records of signed leases, invoices, and official notices.
10. Underinsuring the Property
Mistake: Using a standard homeowner’s insurance policy instead of dedicated landlord insurance is one of the costly Chicago landlord mistakes that can leave property owners vulnerable to financial loss.
Impact: This type of policy typically does not cover risks associated with renting, potentially leaving you financially responsible for:
- Tenant-caused property damage
- Liability claims
- Loss of rental income
How to Avoid:
- Obtain landlord insurance. This specialized coverage includes protection for property damage, liability specific to rental situations, and rental income loss.
- Require tenants to purchase renter’s insurance.
Conclusion
Protect your Chicago real estate investment, ensure legal compliance, and foster positive tenant relationships by sidestepping common landlord errors. A proactive and well-informed strategy is key to minimizing risks and maximizing returns in Chicago’s competitive rental market.
Kettle & Oak offers specialized property management services to help landlords like you avoid these pitfalls. From lease agreements to tenant disputes and pricing strategies, we provide comprehensive support for your success.
