Series: Getting started with Chicago Investment Property. Part 3

Taking an application and lease

Personally, when I take a lease application, I require all the paperwork, and all the money, paid up front.

There are several musts when someone rents your apartment:

1. They fill out a credit application – completely (no blanks).

2. They pay a credit check fee. Check with your credit reporting bureau to see what this fee is. Have the tenant pay the credit check fee in a separate check either to you or to your credit bureau depending on your arrangement. No, you will not take a credit report from someplace else. These are too easily faked.

3. They fill out the lease.

4. They pay the first month’s rent. This must be a separate check.

5. They pay the security deposit. This must be a separate check. In Chicago, the law requires it be a separate check.

6. You must give a receipt for every check you receive. Some receipt books have check boxes so one page serves as a receipt for all three. Some receipt books do not and you’ll have to write three separate receipts. In Chicago, the law requires that the security deposit receipt contains: 1) description of the dwelling unit (property address), 2) the amount received, 3) the date received, 4) the name of the person who received the deposit and, 5) the signature of the person who received the deposit. Big troubles to those who don’t follow this simple rule.

Some possible exceptions:

You might let the tenant pay their rent on the day they move in. Personally, I would not. I want their checks to have plenty of time to clear. If a tenant is scheduled to move into my apartment sooner than one week from application, then I require certified funds.

This should go without saying: do NOT fall for a Cragslist style scam whereby you receive a certified check in the mail, and the tenant tells you he made a mistake and that you should cash his check and return the overage by mail. You can kiss your bank account goodbye if this happens.

Other things to consider:

If your rental is a condo, does the building have move-in/move-out fees or deposits? Find out and make sure that the renter knows it is their cost to absorb. Get this info and inform them upfront at the application stage or it could cause some bad animosity later.

Lease Terms
Get the appropriate lease for your unit type. You will want to look for one of these:
@ Standard Chicago Apartment Lease
@ Chicago Apartment Lease – Furnished
@ Condominium Lease – or a standard lease that contains language appropriate to condominiums

You can get the Standard Chicago Apartment Lease at Tanenbaum Hardware on Belmont. The others, we may have.

The Standard Chicago Apartment Lease is the easiest to use (but not appropriate for condominiums) because it covers all the legal stuff required in Chicago.

If you don’t use the Standard Chicago Apartment Lease, you must add a rider that contains the following information:
@ The Chicago Landlord Tenant Ordinance applies to the lease. Tenant acknowledges receiving a copy of the summary of the ordinance.
@ Tenant acknowledges receiving a copy of the rules and regulations of your building, or of the condominium building the unit is located within.
@ The interest rate paid on the security deposit.
@ Rent is due on the First of the month. It shall be considered late if not received on the first. Even though late fees cannot be collected until after the 5th.
@ The late fee: The monthly rent shall be automatically increased $10, plus 5% of the amount by which the monthly rent exceeds $500, as additional rent, if received by Lessor after the 5th of the month for which it is due.
@ Tenant acknowledges receiving a Lead Disclosure statement and the pamphlet “Protect your Family from Lead in your Home.”
@ Tenant acknowledges receiving a Heating Cost Disclosure – or a statement that the heat is included in the rent and therefore a Heating Cost Disclosure is not provided.

Additional Resources:
Lead paint disclosure: www.epa.gov/lead
Chicago Landlord Tenant Ordinance: http://www.egov.cityofchicago.org/

Guide to articles

Part 1: Identifying potential property
Part 2: Marketing
Part 3: Taking an application and lease
Part 4: Move in day