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Security deposit or move in fee - which is better?

Posted: 10-09-2015 4:21 pm by:

In January of 2014 the Chicago Association of Realtors introduced a new lease. The lease includes a cover page that warns landlords about the risks of taking a security deposit. That article can be read in its entirety below. When considering whether to take a security deposit vs move in fee - please see this link to read the article on security deposit or move in fee.

It has been nearly two years that the recommendation for not taking security deposits was put out by C.A.R.Carolyn Anavi, the owner and Managing Broker of Live Here Chicago, speaks to hundreds of landlords yearly seeking to list their property with her firm.  She has found that some landlords are completely behind taking a move in fee instead of a security deposit while others still prefer taking a security deposit - typically equal to one month rent. Carolyn states that “Some landlords feel that a move in fee may not cover the damage should expensive items like wood floors be damaged. Others don’t want the hassle of worrying about the Chicago Residential Landlord and Tenant Ordinance (RLTO) and the ramifications should it not be followed perfectly.”

Is it best to take a security deposit or move in fee?  Here’s what Live Here Chicago is seeing in the marketplace. Most management companies in Chicago are now taking a move in fee instead of security deposit. The trend started about seven to eight years ago. Some management companies take a move in fee amount per tenant while others take a flat move in fee for the unit. A flat move in fee is more typical. Unlike the security deposit, the move in fee is non-refundable. Most landlords are still taking a security deposit but many are wary and each year the number of landlords grow - switching from a security deposit to a move in fee. Many times the landlord who makes the decision to change has either incurred a legal issue themselves or knew of someone who had.

How much should a landlord take for move in fee? That amount is entirely up to the landlord. Typically Live Here Chicago is seeing landlords ask for somewhere between 25 and 30 percent of the monthly rent. Some management companies in Chicago take a move in fee based on the number of bedrooms, while others take it on the number of tenants to occupy the unit.

What sparked new interest in this topic is that Carolyn Anavi saw one of her customers, a small management company in Lakeview, revert back to taking security deposits. The management company had been taking move in fees for over seven years.  A month ago they decided to start taking security deposits again. According to one of their property managers, too many tenants were leaving the apartment in bad condition at the end of their lease. They felt that the move in fee essentially left the tenants unmotivated to make sure their apartments were left in good condition because essentially, they had nothing to lose. Without the consequence of not getting ones security deposit returned the condition that the apartments were left in had changed substantially.

What do you think?  Are your taking a move in fee or a security deposit? If you are a landlord we would like to hear about experiences that you can share with us and other landlords