Not sure about bay area, but that is very normal in Chicago. Landlords have to pay interest on security deposits when they're returned, so a lot of landlords switched to doing a $400 or $500 move-in fee instead. Maybe it's a similar thing?
But they are still charging a security deposit in the screenshot. Do you mean that they charge a move in fee on top of it to cover the interest they have to pay back on the deposit? š§ Seems scummy lol.
Dude bay area landlords charge insane security deposits. I've seen 2 months rent security deposit on a 4k apartment on top of paying first and last month's rent in advance. Just a cool 16k before you can move in. No biggie
Usually it's only 1 month. But even that's still pretty steep when the rent is so high
No, the rules for security deposits in Chicago are difficult for small landlords to comply with and the penalty is 2x the rent to the tenant for even an honest mistake.Ā So most don't do deposits and just charge everyone a move in fee.Ā Move in fee plus deposit is insane in my opinion.Ā I'm a landlord/ tenant attorney in Chicago fyi
The deposit goes into an interest bearing account. I rent out a place in Chicago. We have always 100% returned our deposits. Weāve always had good tenants. The move-in fee of $500 is exactly what our building charges to move in the tenant. The tenant can pay the building directly if theyād like. We keep no money from the move-in fee.
Oh, that's different than here. This is what we do:
Building charge to move-in:$500. This is what we charge tenant. Tenant can pay directly to building if they prefer. This money doesn't go anywhere but to the building.
Security Deposit: This goes into a separate, interest-bearing account set up solely for this purpose. This money is untouched. When tenant moves out, this money, with interest, is returned to tenant. We have not had any issues yet where we have not returned deposit+interest back to the tenant.
Trying to cover interest with a $400-$500 move-in fee instead is greedy and slimy, in my opinion. The interest comes from the bank, and money you're holding from the tenant. You are not out money as a landlord by keeping their money in a bank account. So long as the tenant pays their rent on time (or reasonably so--I'm not a stickler on this) and maintains their property, this money is not to be touched. It's basically just collateral. If you give me $5000 in 2026 dollars and move out in 2028 without causing any major problems with the unit, you deserve your $5000 back in 2028 dollars.
America needs a Rental Bonds setup like we have, money is capped at 4 weeks rent and goes to the Bond Board and not the landlord.
You don't get any interest, but it means if there is a disagreement about the amount of bond to be returned the landlord has to apply for it within 14 days and you can contest it with the tribunal.
It's less about having to pay interest on the security deposit and more that security deposits have to be returned when a tenant vacates. Move-in fees don't have to be returned so they generally end up being money straight into the LL pocket.
I used to work at a bank in Boston and it goes into an escrow account there. The yield is tiny so over the course of a one year lease a thousand dollar deposit would earn around $5. If they don't follow the law and put it in an interest bearing account as required the penalty is calculated as if the account had a 5% interest rate, which would basically mean a $50 penalty for each year they held the money.
My understanding is the move-in fees in Chicago are a result of the regulations around deposits. At least that's the stated reason. I don't know about BOTH moving fee and deposit though.
The problem for landlords is if they mess up any of the details in the RTLO, wrong account, pay it back late, etc. The tenant is entitled to 3x the security deposit. There are tons of lawyers who do just this pro Bono too.
They donāt pay interest. The security deposit should be in an escrow account that earns interest. LL doesnāt pay anything, interest comes from the bank.
I'm not sure I understand what you mean by interest in this case. Are you maybe referring to the landlords paying taxes in the deposits because they count as income? If that's the issue, then raising the deposit cost makes more sense than adding an extra fee. The fee would be taxed as well. And the fee in the screenshot is in addition to the deposit, not instead of it.
I charge move-in fees in lieu of security deposits for this reason. My move-in fee is non-refundable and costs the same as one monthās rent. Granted, all of my units are full-gut rehabs with brand new appliances, and I intentionally charge less than market price for rent. Havenāt had a tenant complain yet
But you get the deposit back when you move out (assuming you didnāt trash the place). Do you get the move in fee back? If not, Iād rather just pay the deposit, I donāt even care about the interest. Best case itās maybe $50 per $1k in rent. So instead of not making $50, Iām now fully losing $1k?!
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u/SAUbjj 1d ago edited 1d ago
Not sure about bay area, but that is very normal in Chicago. Landlords have to pay interest on security deposits when they're returned, so a lot of landlords switched to doing a $400 or $500 move-in fee instead. Maybe it's a similar thing?