Thursday, January 26, 2012

The Unintended Consequences of the Chicago Residential Landlord And Tenant Ordinance

Pictured Above: The Author Of The RLTO

Like many unduly heavy handed government regulation, the Residential Landlord And Tenant Ordinance of Chicago produces unintended consequences that harm the very group they were purportedly designed to help. This ever expanding set of codes is heavily biased against landlords and enables tenants and lawyers looking to gain a quick buck from frivolous lawsuits. As I will demonstrate, the end results are diminished housing opportunities, especially for families of modest means.

 The most egregious aspect of the ordinance are the heavy fines mandated for clerical errors such as not maintaining security deposits in separate, interest bearing, escrow account. I personally know an honest landlord who returned the full deposit plus interest in a timely fashion, but was fined twice the amount of the deposit plus the tenant's legal fees! In this case, a $1,000 deposit generated a $3,000 fine, much of which went to the tenant's parasitic attorney! It gets worse; there are lawyers who contact tenants engaged in eviction proceedings and offer them "free" legal assistance, but only if they provided the landlord a security deposit. The unscrupulous attorney then attempts to turn the tables by counter-suing the landlord for any failure to comply with the regulatory minutia governing the deposit. Thus the said landlord can potentially face thousands of dollars in lost rent, fines and legal fees from his own attorney as well as the derelict tenant's attorney! Even if he is not subject to a counter-suit, if a tenant is well versed in the law, it can potentially take 3 or 4 months to evict him. Given that very few landlords immediately begin the eviction process, most spend a month or more hanging onto the broken promises of deceitful tenants, they can potentially face 5 or 6 months of lost revenue. And if the judge rules in the landlord's favor, the chances of collecting the lost revenue is slim at best. Does this sound like equal protection under the law?

Understandably, a growing number of landlords have decided to waive the requirement for a security deposit. Even landlords who have not decided to take this course of action have gotten much stricter on their credit requirements for prospective tenants. Most landlords would be willing to "lend a hand" and "give working families a chance," but given the increasingly costly and time consuming nature of evictions, most would rather maintain their apartments empty than run the said risks. What this means is that a lot of good, hard working families are having even more trouble finding quality, affordable housing in decent neighborhoods. To make matters worse, the growing risks and regulatory burdens that landlords face in Chicago are causing fewer individuals to purchase  property, especially in the blighted neighborhoods that are most in need of investment. And the landlords who remain will direct more of their resources towards regulatory compliance and keeping up with surging property taxes, than the upkeep and improvement of their property.

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