Security Deposit (Chicago, Bridgeport: apartments, leases, lawyer)

[eberrocal]

I'm in the process of buying a building with tenants currently living there. During a conversation with the current owner, he said he was going to give the tenants back their security deposits. It told him that should be coming to me and I will give it back to the tenants when they move.

What's the correct way to handle this? Should the deposit be paid to the tenants or to me (the new landlord)?

Is there a website that list rules that would cover this scenario? Thanks!

[soulful]

Typically, the current landlord passes the security deposits to the new owner of the building at the closing. The new owner then refunds the tenants after they move out (since their leases remain intact regardless of ownership in most all cases).

Most folks buying an apartment building specify in the purchase contract that security deposits, leases, and keys to all apartments and common areas are to be handed over at the closing

[JoeyPants]

I'd never heard of the landlord giving back the security deposit to the tenants before they move out. I've been involved in several transactions and have always received the security deposit. Insist that he forward it to you. What's to stop him from keeping the security and telling you likewise? What if the tenants do receive it but tell you they never received it? Trust me, you are opening yourself up for a long list of potential problems if you don't receive the deposits.

[eberrocal]

Thanks so much for your replies, Soulful and JoeyPants. What I need now is to find this information in written form. There's got to be a website that shows this information. I'm sure there's a law or regulation for this sort of thing. Any clues? Thanks!!!

[Manigault]

Originally Posted by eberrocal

Thanks so much for your replies, Soulful and JoeyPants. What I need now is to find this information in written form. There's got to be a website that shows this information. I'm sure there's a law or regulation for this sort of thing. Any clues? Thanks!!!

No, the law is imbeded in IL contract law precedent which is based on common law. A new owner puts on the shoes of the previous owner and assumes the leases which are in force on the property. Thus, it would behoove a purchaser to get the security deposit funds from the current owner (plus interest!) because the building purchaser is what is called a successor in interest.

Since you intend to become a Chicago landlord, it would be wise to familiarize yourself with the RLTO. You may also want to confer with the lawyer doing your closing.

Chicago RLTO - Chicago Residential Landlord Tenant Ordinance

[WhaThe]

Just to throw in my 2 cents. I got the security deposits of my tenants at closing. I will always have a security deposit on tenants, as much as many would prefer not to have to pay one. That leverage is essential.

[Talltimbers3350]

Thanks, your advice is simply what I needed and again it will help me make the appropriate choice.

[lucki13]

You aren't thinking of buying in Bridgeport, are you? Because this sounds like my current landlord. Yeah, those deposits should be yours until your tenants move out. Good luck!