Security Deposit Transferee Liability

Q: After I moved into my apartment, the original landlord sold the property to a new owner. I paid my security deposit to the original landlord, and continued to pay rent to the new owner. My lease is up soon, and the new owner says he never got any deposits from the old landlord, so he can’t refund anything to me. Is there any way I can get my deposit back?

A: There should be, assuming your rent is paid in full and there are no damages. Whether or not the old landlord gave the new landlord any security deposits, the new landlord is responsible to you for your deposit. It’s the law.

That law is the Illinois Security Deposit Return Act, which provides a rare direct solution to your problem. It makes it clear that the new landlord steps into the shoes of the old landlord, and is liable for the deposit.

The law says: “In the event of a sale . . . of residential real property . . . by a lessor [landlord] who has received a security deposit or prepaid rent from a lessee [tenant], the transferee [new landlord] of such property shall be liable to that lessee for any security deposit, including statutory interest, or prepaid rent which the lessee has paid to the transferror [old landlord].

All those words (74 in all, counting those left out) boil down to saying the new landlord owes for the deposit you paid to the old landlord.

Old and new landlords should explicitly deal with security deposits whenever rental property is sold. One way is for the old landlord to actually hand over a pot of money, representing the deposits, to the new landlord as part of the sale. Or, the new owner can get a credit for the deposits the old landlord would pay, and simply reduce the amount paid to the old landlord for the property.

But sometimes, especially with Mom-and-Pop rental properties, neither side thinks about deposits when a house or apartment is sold. That’s where the Act comes in.

So, the new landlord is liable, even if he got nothing from the old landlord for deposits. To protect against the new landlord claiming that you wouldn’t get your deposit back anyway, because of damages or clean up charges, carefully document the condition of your apartment when you move out (e.g., photos, videos, witnesses). If the new landlord then doesn’t voluntarily return your deposit, you can sue in small claims court for a refund. That’s where you can use those photos, videos, and witnesses.

If there are 5 units where you live, your landlord has either 30 days from when you move out to explain in writing any deductions from your deposit, or 45 days to return the deposit without deductions. And if there are 25 or more units, you get interest–but only at a current rate of about 1% a year.