If you are like many of the landlords I've worked with in the past 12 months, you're pretty new to this whole rental thing. You found yourself unable to sell your home for a price that was worth the effort, so instead you are offering it to tenants for the time being. Meanwhile, if you're a regular reader you've seen what's happened to Chicago
rent rates over the past year and are wondering what to do to maximize your return on investment.
As you approach the end of your first lease term with your first tenants, here's a timeline you can use to handle the renewal offer, and if necessary, the re-renting of the property. It will give you plenty of time to make plans if your tenants decide to leave, while staying within the bounds of the
Chicago Residential Landlord Tenant Ordinance.
This guide assumes that you are a private landlord, not living in the same building with your tenants, that your tenants have been on a lease for over 6 months, and you want to keep them on a lease rather than going month-to-month.
Preparing the Renewal
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Date
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Action |
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120 days before expiration
(4 months)
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- Start researching rent rates in your area for comparable market rates. Think about whether you want to increase your tenants’ rent.
- A basic guideline should be to keep the rent lower than what it would cost them to move into a comparable place. Don’t forget to calculate in costs of utilities and parking.
- If you need help in determining a rate, contact me – I’m happy to help research prices for you!
- Draft your renewal letter and have it reviewed by an attorney if necessary. I have sample documents you can use.
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90 days before
(3 months)
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- Earliest date you can ask your tenants to renew, according to the CRLTO. Tenants will think you're nuts if you ask them this early, but you theoretically could do so and be within the law.
- Finalize your renewal letter.
- Call your tenants and get a verbal commitment regarding their plans. They can always change their mind, but it’s a good starting point.
- Set up a time to meet at the apartment to sign the renewal.
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55-75 days before
(2-2.5 months)
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- This is an ideal time to get the renewal signed.
- Meeting in person at the property to sign the renewal will allow you to assess the condition of the property.
- Make sure that you get a signed agreement regardless of if your tenants are staying or going.
- You will also want to provide a fresh copy of the CRLTO summary, lead disclosure pamphlet, radon disclosure, and a list of any building violations from the past 12 months. I can help you prepare these.
- You're not the only one who can ask for new terms like increased rent at renewal time. Be ready for tenants to ask for new changes as well. This can be anything from touchups and tweaks to adding new people or pets.
- Have both sides sign renewal agreements. Keep a copy and give them one.
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Note: If you do not obtain a signed renewal before the lease expires, the lease will default to a month-to-month verbal agreement. You and your tenants will be able to alter and/or end the lease with just one month’s notice. However, you will lose the protection of the written lease, its rules and regulations, which is not a recommended situation. You may also wind up in violation of your Condo Association's Bylaws. You will still be covered by the CRLTO, and the Illinois Condo Act if this is a condo.
If your tenants decide to stay...
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Date
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Action |
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First day of new term
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- Make sure your tenants pay their new rent rate, if you raised their rent.
- If you choose, obtain a separate check to increase their deposit to match their new rent rate. Provide them with a receipt stating that you have done so, including the name and address of the bank where you are escrowing the deposit. I can provide you with a receipt to complete if needed.
- If you promised them anything in exchange for their renewal, do what you promised.
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30 days after
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- Provide written notification to your tenants of the interest accrued on their deposit.
- Unless you cut a brand new lease every year, the interest rate remains the same as it was in the year they moved in for the duration of their stay.
- To calculate interest, add up all of the following items:
- Security deposit
- Pet deposit
- Key deposit
- Anything else referred to in your lease as a deposit or refundable.
- Rent paid more than six months in advance
- You may either cut them a check for the amount accrued or apply it as a credit to their rent. Either way, make sure you send them written notice and keep a copy for proof.
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Under no circumstances should you ever agree to use your tenants’ security deposit as the last month’s rent! This is against the law!
If your tenants are leaving...
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Date
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Action |
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55-60 days before
(2 months)
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- Determine how quickly you will be able to have the apartment ready for a new tenant after the old ones leave. Remember to plan for the following:
- Fresh paint
- Cleaning
- Changing the locks (required by law)
- Changing the furnace filters & smoke detector batteries
- Patching any obvious holes in the walls
- Determine the rent rate you want to ask for a new lease. (Remember, I can help!)
- Communicate with your tenants about showings. Get their contact info, and make sure they know to get the place cleaned up. Clean apartments rent much faster, so it’s in everyone’s best interest that these things occur.
- Remind tenants that strangers may be coming in and out of the apartment, so they should keep valuables and unmentionables out of plain sight. (I can recall one embarrassed tenant who left out his water pipe on a day that I was showing it to a prospective renter... who happened to be a cop. It was not a good day for anyone.)
- If your tenants give you a hard time about showings, remind them that they are required to permit you access with 2 days advance notice. Don’t be too harsh with them, though. Hostile tenants can hurt your chances with new tenants.
- If you plan to work with an exclusive listing agent, contact your agent to get started.
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60 days before
(2 months)
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- Earliest date you can show the apartment, according to the CRLTO.
- Show it and rent it. You’ve done this part before.
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15 days before
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- Confirm your tenants’ move out plans.
- Schedule a time to do a final walk through with the tenant after they’re finished moving out.
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Moving Day
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- Do the walk through with your tenants. Make a list of any damages. Take photos. Make sure that you and the tenant both get copies of the list and that you both sign it.
- Get the forwarding addresses for all tenants. If they are going to separate locations, determine (in writing) which one of them should receive the security deposit.
- If your tenants leave any large items behind, check with an experienced landlord-tenant attorney as to the proper current policy for storage and disposal of such items. Anything they attached to the walls, ceiling or floor becomes your property by default, but everything else is subject to property law and you could become liable for theft if you dump the items without following the right steps.
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30 days after
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- If you will be deducting anything from the deposit, you must deliver an itemized ledger to your tenants by this time indicating the amount to be deducted.
- Acceptable deductions:
- Outside labor & materials for repairing major damages
- Ditto for damage caused by obvious negligence or misuse
- Unpaid rent
- If your lease states that fees are to be applied as additional rent, you may deduct any accrued late fees, lockout fees, NSF fees, etc.
- Not allowed:
- Cost of repairing standard wear and tear
- Hourly cost for your own time
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45 days after
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- Security deposit plus interest must be in the hands of the tenants, less any deductions. See above for how to calculate security deposit interest.
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A downloadable PDF version of this guide can be found
here.
Was this guide helpful for you? Do you have suggestions on how I can improve it? Let me know in the comments!
