Protect Your Tenant Revenue
With the risk for tenant rent default harder to predict in today’s economy, I am pleased to inform you about Aon Rent Protect.
This new insurance plan is designed especially for residential investment property landlords to recoup lost incomes in the event of tenant rent defaults.
Aon Rent Protect: Cash flow protection beyond the security deposit.
Aon Rent Protect offers replacement rental income so your cash flow is not interrupted while a new tenant is being secured.
The plan also provides assistance with legal expenses, such as attorney fees to help you through the eviction process.
With the release of this new product, there’s no reason to worry about a financial nightmare from tenant rent defaults anymore.
Chicago Landlord Guide
Whether you’re a big management company, a part time real estate investor, or a first – time landlord, you’ ll face the same challenges and (with limited exceptions) be forced to comply with the same laws when renting out your apartment. The key to success is retaining tenants, avoiding vacancies, and staying on the right side of the law, particularly in Chicago, where the penalties for non – compliance with the local landlord – tenant ordinance are draconian and expensive.
In this guide, Mike Kravitz hopes you’ll find the advice you need to succeed. You’ll get useful tips on, landing creditworthy and responsible tenants, and making all the disclosures required by state, federal, and local law. We’ve even included a series of sample forms, plus links to other sources of valuable information.
Rent The Apartment Quickly
- Price the unit competitively. (Consulting with Mike Kravitz for comparable apartments is a great way to learn the market.)
- Structure leases to expire during the early summer when the Chicago rental season is hottest.
- Prepare the property to show well. Touch up paint, remove clutter, clean the unit, and be cognizant of landscaping.
- Use the Internet to market the property. In this rapidly changing technological world, tenants turn to the Internet first. Please take a look at the marketing page in this packet.
- Take appealing photographs, primarily of the building exterior, the kitchen, the living area, and the bathrooms. Renters are reluctant to schedule appointments if they can’t preview the apartment interior online.
- If necessary, offer concessions, such as one month’s free rent.
- Mike responds promptly to e-mail and telephone inquiries.
- Mike posts a “for – rent” sign: On office window, in building and other widely seen places.
Screen Your Tenants
- Personally interview all potential tenants before renting the apartment. Require all tenants to complete and sign an application form at the tenant’s own expense. The application should request the tenant’s consent to a credit check and the disclosure of all information necessary to enable that credit check, as well as a criminal background check, an eviction report, and a sex offender search. Please See Attachment.
- Consult one of the many trusted screening sites, including Tenant Verification Service or E – Renter or Rental Research Inc.
- Obtain references from prior landlords. Some landlords will only answer written questions, in which case Mile Kravitz sends them the landlord verification form.
- Questions asked include:
- Did the tenant timely pay rent?
- Was the tenant considerate of neighbors?
- Did the tenant give proper notice before vacating?
- Did the tenant leave the premises in good condition?
- Would you rent to this tenant again?
- Satisfy yourself that the tenant can afford the monthly rent. Mike Kravitz provides a rent calculator for precisely this purpose.
- Remember that the City of Chicago prohibits discrimination on the basis of race, color, sex, age, religion, disability, national origin, ancestry, sexual orientation, marital status, parental status, military discharge status, or source of income.
Properly Document The Tenancy
- In this highly -regulated city of ours, every rental agreement – and particularly those governed by the Chicago Residential Landlord and Tenant Ordinance (otherwise known as the CRLTO) – requires a hefty stack of documents and disclosures. Samples of some of these documents and disclosures are included at the end of this guide. Mike Kravitz conducts an online search for the latest versions of these materials, as they are often updated. Failure to comply in all respects with the CRLTO can result in severe financial penalties. Do not fail to provide any paperwork required by the ordinance!
- First, read the definition section of the CRLTO to determine whether the apartment you are renting is governed by the ordinance. Most do, but if yours does not (owner – occupied buildings of six units are the most typical exception), then much of the work will be simplified.
- Lead Based Paint Disclosure. This disclosure is required by federal law for all properties built before 1978. The Chicago Association of Realtors produces the most popular disclosure form.
- This disclosure is required if the tenant is responsible for paying the utility provider directly for heat supplied primarily by natural gas or electricity. Chapter 5 – 16 of the Chicago Municipal Code requires the landlord to provide the tenant, as part of the lease agreement, the projected annual and average monthly cost of utility service based on energy consumption during the most recent twelve months of continuous occupancy. Landlords who do not have this information handy may either send the utility company a copy of the form attached to this guide (allowing several weeks for processing) or call the utility company directly and obtain the information by telephone.
- Security Deposit Receipt. Section 5 – 12 – 080(b) of the CRLTO requires the landlord to provide a security deposit receipt, and a failure to do so can have severe consequences. A form that complies with the ordinance is made available at the end of this guide.
- Security Deposit Interest Rate Summary. Section 5 – 12 – 170 of the CRLTO requires the landlord to provide a copy of this document to any renter. The City of Chicago updates this form annually through a link on its “Rents Right” page.
- Summary of the CRLTO. Section 5 – 12 – 170 of the CRLTO requires that a summary of the ordinance itself be provided to any renter. The City of Chicago has produces its own form, available through a link on its “Rents Right” page.
- Disclosure of Segregated Account. Landlords are required to hold all security deposits in segregated account and to disclose in the lease the name and address of the financial institution where the funds are kept. The specifics can be found in Section 5 – 12 – 080(a) (3) of the CRLTO.
Disclosure of Conditions Affecting Habitability
Section 5 – 12 – 100 of the CRLTO requires the landlord to disclose all code violations cited by the City of Chicago during the preceding twelve months for the dwelling unit or common areas, as well as information concerning the pendency of any code enforcement or compliance board proceeding. The landlord is also required to provide certain information regarding any notice of intent by the City of Chicago or any utility provider to terminate water, gas, electrical or other utility service to the dwelling unit or common areas.
Disclosure of Managing Agent
Section 5 – 12 – 090 of the CRLTO requires the landlord to disclose the name, address, and telephone number of (i) any person authorized to manage the premises and (ii) a person authorized to accept service of legal process and formal notices or demands under the lease.
Rules and Regulations
- Incorporate these into the rental agreement if the apartment is included within a condominium or homeowners’ association.
- If a prospective tenant poses any kind of credit risk, require that the lease be guaranteed by a creditworthy third party. Typically, residential leases contain a form guaranty provision. In addition, all persons who will be living in the apartment should be required to co – sign the lease.
Conduct A Walk Through
- If possible, at or prior to the move – in, conduct a walk – through of the apartment to document the condition of the unit and its various appliances. For your convenience, Mike Kravitz has produced a premises inspection form for this purpose.
- Ask the tenant to review and sign a checklist.
- During the inspection, demonstrate how the security, heating, and air conditioning systems operate.
Properly Handle Security Deposits
The easiest way to get sued in Chicago is to violate the CRLTO rules regarding security deposits. Our “Chicago Landlord’s Guide to Handling Security Deposits” is the most definitive source of information on this topic. All landlords should read this guide thoroughly in order to avoid unpleasant surprises in this notoriously tenant – friendly town.
In the meantime, here’s a general list of the landlord’s obligations with respect to security deposits:
- Provide a receipt. Include the owner’s name, the date the security deposit was received, and a
description of the dwelling unit. The receipt must be signed by the person accepting the security deposit. If the security deposit is paid by means of an electronic funds transfer, the landlord may provide an electronic receipt containing a description of the dwelling unit, the amount and date of the deposit, and an electronic or digital signature.
- Disclose the location. The written rental agreement must specify the financial institution where the
security deposit will be deposited.
- Avoid commingling. A landlord must hold all security deposits in a federally insured, interest – bearing account in a financial institution located in Illinois. Security deposits and interest thereon may not be commingled with the assets of the landlord.
- Pay annual interest. A landlord must pay annual interest on security deposits and prepaid rent held more than six months. The interest rate is set by the city.
- Timely refund security deposits and properly document repair costs. Before any amounts may be deducted from the security deposit, the landlord must supply the tenant with an itemized statement of the damages. This statement must be delivered within 30 days of the termination of the tenancy. A landlord must return the security deposit, plus interest, if any, minus unpaid rent and expenses for damages, within 45 days from the date the tenant vacates the unit. A landlord who fails to comply with the security deposit obligations imposed by the CRLTO may be liable to the tenant in an amount equal to two times the security deposit, plus court costs and attorney fees. Do not let this happen to you. Know your obligations regarding the handling of security deposits.
As more and more landlords have gotten socked with costly lawsuits alleging technical violations of the CRLTO, there has been a gradual, but steady movement away from security deposits. Many landlords now require a non-refundable “move in fee” as security for any unpaid rent or damages. For more information, please consult with Mike Kravitz and “Chicago Landlord Guide to Security Deposits”
Consider Hiring A Management Company
Gold Coast Property Management is capable of handling all the day to day issues that arise in connection with the ownership of an apartment unit. A single middle of the night telephone call from the tenant with a flooding toilet is all it takes to appreciate the service of a property manager. In addition, a property manager will create a buffer that protects a landlord against consequences of becoming too personal with the tenant. Landlords do not like to be approached personally and asked for relief with rent payments or to be told “sob stories” by tenants seeking concessions. A management company eases the difficulty associated with making emotionally difficult decisions.
Among other things, a property manager will:
- Collect and account for rent.
- Create an annual budget.
- Contract for repairs, maintenance and landscaping
- Bind property and liability insurance.
- Show property, conduct tenant screenings, and prepare the documentation.
The fees charged by property manager will vary with the number of units being managed. Landlords should be aware, however, that there are property management firms willing to accept the responsibility of managing a single unit. The cost may be as high as ten percent of the monthly rent, but the peace of mind is typically worth the expense.