Do Deposit Return Rules Apply If I Live in My Own Chicago 2-Flat or 3-Flat?

You live on one floor of your 2-flat. The tenant upstairs hands back the keys. Now there is a security deposit sitting in your account, and a question that sounds simple: which deposit rules govern what happens next?

For owner-occupied small buildings in Chicago, the answer has two layers. The city ordinance mostly steps aside. A state statute, after a 2024 change, does not.

Layer One: The RLTO's Owner-Occupied Exemption

The Chicago Residential Landlord and Tenant Ordinance carves out owner-occupied buildings with six or fewer units from most of its requirements. That exemption sits in section 5-12-020, and it reaches the RLTO's security deposit section, 5-12-080. So the city's deposit rules, with their separate-account, receipt and interest requirements, would generally not govern a deposit held by an owner who lives in a 2-flat or 3-flat.

The exemption is not total. The ordinance expressly keeps two provisions in force for these buildings:

• The lockout ban (5-12-160). Changing locks, shutting off utilities or removing a tenant's belongings to force them out remains prohibited, owner-occupied or not.
• The Fair Notice rule (5-12-130(j)). This RLTO notice provision continues to apply as well.

Whether a given building qualifies for the exemption at all is its own question, covered in Does the Chicago RLTO Apply to My Property?

Layer Two: The State Law That Now Reaches Small Buildings

Stepping outside the RLTO does not mean stepping outside deposit law. Illinois has its own Security Deposit Return Act, 765 ILCS 710. That Act used to have a unit minimum, which left smaller buildings outside it. Public Act 103-224, effective January 1, 2024, removed the minimum. The Act now covers any residential lessor, regardless of building size.

For an owner-occupied 2-flat or 3-flat, that is the practical shift. The building may be exempt from the city's deposit rules, and still be squarely inside the state's.

What 765 ILCS 710/1 Requires

The 30-day itemized statement. Under 765 ILCS 710/1, a landlord who wants to keep any part of a deposit for property damage would need to provide the tenant with an itemized statement of the damage and the estimated or actual cost of repairing or replacing each item. The clock is 30 days, measured from the later of two dates: the date the tenant vacated, or the date the tenant's right of possession ended.

Receipts. Paid receipts, or copies of them, are attached to the statement. If the statement uses estimates instead, the paid receipts would follow within 30 days of the date the statement was provided.

Delivery. The Act recognizes three ways to get the statement to the tenant: in person, by postmarked mail to the tenant's last known address, or by email to a verified email address the tenant provided.

The landlord's own labor. If the owner does the repair work personally, the Act allows the reasonable cost of that labor to be included.

Costs set in the lease. If the written lease specifies a cost for cleaning, repairing or replacing a particular component, that amount may be withheld, provided the damage is beyond normal wear and tear and the amount is reasonable. In that case, the relevant excerpt of the lease is attached to the statement.

The 45-day fallback. If no itemized statement and receipts are furnished as the Act requires, the landlord would have to return the full deposit within 45 days of the date the tenant vacated.

The penalty. If a court finds that the landlord refused to supply the itemized statement, or supplied it in bad faith, and failed to return the amount due on time, the landlord owes the tenant twice the amount of the deposit due, plus court costs and reasonable attorney's fees.

"The building can be exempt from the city's deposit rules and still sit squarely inside the state's."

What About Deposit Interest?

Illinois has a separate statute on deposit interest, the Security Deposit Interest Act, 765 ILCS 715. It applies only where the property has 25 or more units, in one building or in a complex of buildings on contiguous parcels, and only to deposits held more than six months. A small owner-occupied building, outside the RLTO's deposit rules and below that threshold, would generally owe no statutory interest on a deposit. The interest rules for buildings the RLTO does cover are explained in Chicago Security Deposit Interest Requirements.

The One Rule That Follows You Home

Deposit disputes can sour quickly, and living a floor away from the tenant makes it personal. That is exactly where the RLTO's lockout ban still matters. Because 5-12-160 applies to owner-occupied buildings, the exemption that relaxes the deposit rules does not open the door to self-help. The details are in Self-Help Eviction in Chicago.

For a specific move-out in a specific building, DwellerIQ can walk through which framework applies and what the 30-day statement would need to include.

Key Takeaways

• Under RLTO 5-12-020, owner-occupied Chicago buildings of six units or fewer are exempt from most of the ordinance, including its deposit rules in 5-12-080
• The lockout ban (5-12-160) and the Fair Notice rule (5-12-130(j)) still apply to those buildings
• P.A. 103-224, effective January 1, 2024, removed the unit minimum from the Security Deposit Return Act (765 ILCS 710), so it covers any residential lessor
• Under 765 ILCS 710/1, keeping any part of a deposit for damage would require an itemized statement, with paid receipts or estimates (receipts to follow within 30 days), within 30 days of the later of move-out or the end of the right of possession
• Without that statement and receipts, the full deposit would be due within 45 days of move-out
• A bad-faith or refused statement, plus a late return, can mean twice the deposit due, court costs and reasonable attorney's fees
• Statutory deposit interest under 765 ILCS 715 applies only to properties with 25 or more units (one building or a complex on contiguous parcels)