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Illinois Tenants Entitled to Interest on Security Deposit, Fifth District Rules

 

As Chicago class action attorneys, our firm has been able to help many Illinois tenants protect their rights under a special state law that not every renter knows about. The Illinois Security Deposit Interest Act requires many Illinois landlords to pay their renters the interest on security deposits. The law applies to landlords of buildings with 25 or more rental units, and to deposits held six months or more. Under those circumstances, the law requires landlords to pay interest on security deposits once a year, after the end of the yearly rental agreement, except when the renter owed unpaid rent. Landlords who willfully fail to do this can be sued for the amount of the withheld interest, as well as attorney fees and court costs.

That was the case in Wang v. Williams and Royal Rentals, 343 Ill.App.3d 495, 797 N.E.2d 179, 277 Ill.Dec. 832 (Sept. 10, 2003). Zhiyuan Wang of Carbondale sued his landlord, Royal Rentals, for failing to return his security deposit, failing to pay interest during the two years he rented from Royal, consumer fraud and breach of contract. The trial court dismissed his interest claim and his breach of contract claim, both of which were based on the Security Deposit Interest Act, because Wang’s lease included a provision stating “TENANTS agree to waive right to interest on security deposit.” Wang appealed to the Fifth District Court of Appeal.

On appeal, Royal Rentals argued that legal rights, including Wang’s rights under the Security Deposit Interest Act, can be waived when the right in question is conferred only for the benefit of individuals rather than the public. The court found this unconvincing. It pointed out that the Security Deposit Interest Act protects the rights of renters, a class of people. In support, it cited several cases, including Gittleman v. Create, Inc., 189 Ill. App. 3d 199, 545 N.E.2d 237, 240 (1989), a similar case in which tenants sued their landlord for a security deposit refund and interest. That lease had a provision reading “It is understood that the security deposit is net of security deposit interest, if any.” That court found for the tenants, saying the provision was intentionally vague about how interest should be paid and suggesting that the landlord used that vagueness to try to circumvent the Security Deposit Interest Act.

On the Wang case’s breach of contract matter, the plaintiff pointed out that Illinois contracts incorporate relevant parts of Illinois law unless otherwise specified. Royal Rentals argued that Wang’s lease didn’t implicitly incorporate the Security Deposit Interest Act because it included explicit provisions to the contrary. However, the appeals court said, language in a lease may not supersede state law. Indeed, the Royal Rentals provision, which the court called “an apparent attempt to circumvent the Act,” showed that interest on a security deposit is an essential element of a lease, it wrote. Thus, it reversed the trial court on both counts and remanded the case for trial.

This case is important because it establishes that renters cannot waive their rights under the Security Deposit Interest Act, and that renters are a protected class of people, rather than protected individuals. As Illinois tenants’ rights lawyers, we believe those are important legal tools for renters seeking to protect their legal rights. At DiTommaso Lubin Austermuehle, we handle tenants’ rights cases as both individual cases and as class actions involving renters with complaints against the same landlord. If you think you may have a case under the Security Deposit Interest Act or another landlord-tenant law, you can contact our Chicago class action lawyers for a free consultation on your case and your rights.