In many instances, upon the termination of a tenancy, the law or the lease may impose a set period of time on the landlord to return the tenant's security deposit or provide a reasonable explanation of set-offs from the security deposit. In these situations, a landlord's failure to return a security deposit or to provide an explanation as to the application of the funds may result in the landlord's exposure to severe penalties.  Among the laws relating to security deposits, there are two main laws regulating security deposits on landlords: the Illinois Security Deposit Return Act and the Chicago Residential Landlord - Tenant Ordinance. (there are other ordinances in other municipalities in Illinois - you should check if your local municipality is governed by one).

The legislature of the State of Illinois and the governing bodies of many municipalities (Chicago, Evanston for example) have recognized that security deposit abuse exists and have instituted laws to provide a remedy to tenants. The penalties imposed by these laws for failure to comply are severe and serious in many cases.

The Illinois Security Deposit Return Act

The Illinois law (found at 765 ILCS 710) applies to all landlords throughout the State of Illinois for residential property containing five units or more in an apartment complex or in a single building. Under the Illinois statute, a landlord may not keep any part of a security deposit unless he or she has, within 30 days from the date the tenant vacates a property, delivered an itemized statement of damages containing estimated or actual costs, including receipts (for estimated costs, the landlord must send a receipt within 30 days of the date of the letter) to the tenant. If such a letter is not delivered within 30 days, the landlord must return the enitre security deposit to the tenant within 45 days from the date the tenant vacates a property.  (This does not defeat the landlord's ability to recover from the tenant for damage later.  Instead, it limits the landlord's ability to deduct for damage from the deposit.) If the landlord refuses to return the deposit, supplies a statement in bad faith or refused to supply a statement, the tenant has an action in Court for a return of the deposit plus a penalty of double the amount of the deposit being held plus court costs and attorney fees.  According to the case law relating to the statute, the law does not apply in cases where a landlord holds a security deposit for a good reason or where the landlord was not wanton and willful in disregard of the tenant's rights.  

The Chicago Residential Landlord - Tenant Ordinance

The City of Chicago has enacted its own law specific to residential properties located within the city limits of Chicago.  The Chicago ordinance is more biased in favor of tenants than the State law. The ordinance applies to all tenants renting within the City of Chicago except for those units specifically excluded in Section 5-12-20. The most common exception to the Chicago ordinance is owner occupied properties containing six or fewer units.  The Chicago Ordinance places a number of duties upon a landlord related to the deposit. The landlord must hold a security deposit, separate and apart from the landlord's own funds, in a federally insured interest-bearing account and must provide the tenant with a receipt for the security deposit.  Upon the transfer of a property to a new owner, the landlord must provide the tenant with certain information about the successor landlord.  The landlord must also pay interest on the security deposit.  (See Section 5-12-080)  In addition to these duties, within 45 days from the date the tenant vacates the premises, the landlord must return the security deposit to the tenant. However, the landlord may deduct any unpaid rent or any amounts needed to repair any damage to the premises. Like the Illinois statute, a landlord intending to withhold security deposit funds must, within 30 days from the date the tenant vacates a property, deliver an itemized statement of damages containing estimated or actual costs, including receipts (for estimated costs, the landlord must send the actual receipt within 30 days of the date of the letter) to the tenant. In the event that the landlord fails to comply with any provision of Section 5-12-080 , a tenant may be entitled to a return of the deposit plus a penalty of two times the security deposit plus costs and attorneys fees. It should be noted that a willful violation on the part of the landlord is the key to recovering the penalty available at law under the Illinois statute, however, there is no such requirement under the Chicago Ordinance. The Illinois appellate courts have strictly construed a violation under the Chicago Ordinance as resulting in a penalty.