Genevieve M. Daniels, Genevieve M. Daniels, P.C.
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The Chicago RLTO Strikes Again: Landlord Incurs Substantial Judgment for Improperly Attempting To Recover Attorneys’ Fees from Tenants
Practitioners see this on a regular (sometimes even monthly) basis in First District cases: Chicago’s Residential Landlord Tenant Ordinance (RLTO) requires landlords’ hypervigilance in complying with its technical, often counterintuitive provisions, lest they incur substantial penalties for noncompliance. A common trap for unsuspecting landlords is the improper handling of security deposits, which can result in a penalty equaling double the security deposit held. Surprisingly, the landlord’s acknowledged mishandling of the security deposit and ensuing penalty was not disputed by the parties in the recent First District case Republic Ontario LLC v. Organ, 2025 IL App (1st) 231405. Rather, it was the manner in which the landlord attempted to recover its attorneys’ fees that caused it trouble, again highlighting the need for hypervigilance in pursuing claims when the RLTO is involved.
Facts
In May 2020, Lawrence and Susan Organ entered into a luxury residential lease with Republic Ontario LLC, with monthly rent at $18,750, a required $37,500 security deposit, and a lease term ending on June 30, 2022. 2025 IL App (1st) 231405 at ¶¶4 – 5. It is undisputed that Republic Ontario did not provide a security deposit receipt to the Organs. Id. The lease also contained a common fee-shifting provision requiring the Organs to pay Republic Ontario’s legal fees and costs “to the extent permitted by court rules, statute, or local ordinance.” 2025 IL App (1st) 231405 at ¶6.
Approximately six months into their lease, the Organs entered into a side agreement with a third-party, Thomas Merkel, to sublease the unit with the intention that Merkel be added to the lease. 2025 IL App (1st) 231405 at ¶¶7 – 8. It is unclear whether Republic Ontario ever agreed to add Merkel to the lease. Id. Due to various alleged issues with the apartment, including the HVAC system causing the master bedroom to vibrate and make noise, the Organs, via their attorney, notified Republic Ontario that they would be terminating their lease as of May 31, 2021. 2025 IL App (1st) 231405 at ¶¶10 – 12. On the advice of their attorney, the Organs paid rent to Republic Ontario up to May 31, 2021, on which date it was undisputed that the Organs and Merkel had vacated the apartment. 2025 IL App (1st) 231405 at ¶¶12 – 14.
In response, Republic Ontario contended that the Organs had abandoned the lease and were obligated to make the payments through the lease end date of June 30, 2022, ultimately prompting it to file a complaint against them for unpaid rent and damages and alleging that it was “taking all commercially reasonable steps to mitigate damages, including relisting the premises for rent.” 2025 IL App (1st) 231405 at ¶¶12, 15 – 16.
Although initially defaulted by the trial court for failing to appear, the Organs, through counsel, filed a timely motion to vacate the default judgment and shortly thereafter answered the complaint and filed their counterclaim. 2025 IL App (1st) 231405 at ¶¶18 – 23. The tenants alleged that Republic Ontario failed to mitigate its damages by failing to list the subject property to rent for months after they had moved out and when it was eventually listed, the monthly rent sought was “in excess of the rental value.” 2025 IL App (1st) 231405 at ¶21. In their counterclaim, the Organs alleged various violations of RLTO regarding the handling of their security deposit and because Republic Ontario had sought attorneys’ fees against them in express violation of the ordinance. 2025 IL App (1st) 231405 at ¶¶22, 23.
During discovery, Republic Ontario admitted that it “failed to list the address where the security deposit was held on the lease” and failed to deposit the security deposit “into a bank in Illinois” — both express violations of the RLTO. 2025 IL App (1st) 231405 at ¶27. Republic Ontario also admitted that after the Organs and Merkel had vacated the apartment, it undertook necessary and significant repairs of the unit, including repairs to the roof and wood flooring, and could not market the property to new prospective tenants until the work was completed approximately nine months later. 2025 IL App (1st) 231405 at ¶28. Ultimately, Republic Ontario entered into a new lease starting in July 2022, the month following the expiration of the Organs’ original lease term. Id.
The Organs moved for summary judgment on various counts and obtained partial summary judgment with respect to their security deposit counterclaims, which Republic Ontario admitted it had violated, and on Republic Ontario’s request for attorneys’ fees in violation of the RLTO. 2025 IL App (1st) 231405 at ¶¶30 – 40. The trial court order found Republic Ontario liable on the Organ’s counterclaim for “a combined sum of $112,500 — that is, $75,000 (twice the security deposit) for violation of [RLTO] section 5-12-080 [and] and $37,500 (two months’ rent) for violation of [RLTO] section 5-12-040.” 2025 IL App (1st) 231405 at ¶40. Whether Republic Ontario had reasonably mitigated its damages was continued for bench trial.
Ultimately, the trial court found that the Organs were liable to Republic Ontario for rent from the date their landlord relisted the unit until the end of their lease term (about five months of rent). 2025 IL App (1st) 231405 at ¶43. In rendering its decision, the trial court essentially found that Republic Ontario could not seek damages for lost rent for the nine months immediately following the Organs’ vacation of the unit because material issues to the condition of the unit (not caused by the tenants) precluded renting it to someone else — conditions supported by the evidence presented by Republic Ontario itself. 2025 IL App (1st) 231405 at ¶48. Ultimately, after crediting the Organs for the amount of their security deposit, the trial court entered judgment in favor of Republic Ontario for $54,910.71, which it offset against the previously entered $112,500 judgment relating to the Organs’ counterclaims 2025 IL App (1st) 231405 at ¶50.
In the end, Republic Ontario was liable to the Organs for nearly $58,000, prompting it to timely file an appeal. 2025 IL App (1st) 231405 at ¶51. Notably, Republic Ontario did not challenge the award with respect to the security deposit violations but, rather, challenged the trial court’s ruling with respect to (1) the request for its attorneys’ fees in its default motion (two times the rent or $37,500) and (2) on the lower court’s failure to award lost rent damages for the period of June 1, 2021, to February 2022. 2025 IL App (1st) 231405 at ¶¶53, 56.
Appellate Court
The appellate court, noting that “[t]he construction and legal effect of the lease agreement and the provisions of the [Ordinance] are questions of law” that are subject to de novo review, upheld the lower court’s ruling. 2025 IL App (1st) 231405 at ¶¶60, 61.
RLTO §5-12-140 expressly prohibits any rental agreement obligating a tenant to cover a landlord’s attorneys’ fees “except as provided for by court rules, statute, or ordinance.” 2025 IL App (1st) 231405 at ¶71. Section 5-12-140 further provides that “[i]f the landlord attempts to enforce a provision in a rental agreement prohibited by this section the tenant may recover two months’ rent.” Id. Even though the default order awarding Republic Ontario its fees was almost immediately vacated and no attorneys’ fees award was ever entered in favor of Republic Ontario, the fact that it had attempted to recover its the fees in the first place, along with failure to give proper notice to the Organs of its intent to seek a fee award in its complaint or in its motion practice, was deemed sufficient to constitute a violation of the RLTO. 2025 IL App (1st) 231405 at ¶¶72 – 76. (citing notice requirements of 735 ILCS 5/2-604.2 and Illinois Supreme Court Rule 105).
In rendering its decision, the appellate court, like the trial court, recognized that Illinois courts repeatedly have held similar lease provisions are not violative of the RLTO and, therefore, declined to hold that Republic Ontario’s fee shifting provision was, on its face, impermissible under the RLTO. 2025 IL App (1st) 231405 at ¶¶78 – 82. Rather, the appellate court agreed with the lower court’s decision, which “was based on landlord’s improper attempt to seek its fees as part of a default judgment, outside the rules of pleading and beyond the scope of the [RLTO].” 2025 IL App (1st) 231405 at ¶81. In other words, just because attorneys’ fees potentially may be recoverable under the RLTO did not absolve Republic Ontario from complying with separate procedural rules when it sought attorney fees in conjunction with a default judgment. Accordingly, Republic Ontario’s actions “amounted to an attempt to enforce a prohibited provision, justifying an award of two months’ rent under section 5-12-140.” 2025 IL App (1st) 231405 at ¶82.
With respect to the second issue on appeal, Republic Ontario made its own technical (albeit losing) argument under the RLTO that the trial court improperly denied its request for lost rental income for the unit from June 1, 2021 (after the Organs had declared the lease terminated), to February 2022 (when it was able to actively relist the unit after substantial repairs had been made). Republic Ontario claimed that the Organs had acted improperly by summarily declaring the lease terminated instead of giving it official notice of any defects in the unit and an opportunity to correct them, as required under RLTO §5-12-110. 2025 IL App (1st) 231405 at ¶89. As a result, Republic Ontario argued that the “tenants’ obligation to pay rent ‘was not terminated’ by the roof leaks and that they remained obligated to pay rent for the next several months.” Id. The appellate court rejected this argument, mainly because it lacked a sufficient record of the evidence and/or arguments presented to the lower court on which to base its review. 2025 IL App (1st) 231405 at ¶92.
Interestingly, the trial and appellate courts held the Organs to their lease obligations for the last five months of their lease term. If it was undisputed that the unit could not be rented for a substantial and prolonged period while the necessary repairs were being made, it is unclear why there wasn’t a basis to simply declare the lease terminated at that juncture rather than hold the Organs to their lease. Conceivably, Republic Ontario could have been liable for the Organs moving and alternate housing costs while the repairs were ongoing until the tenants could be relocated back to the unit for the last few months of their lease. Of course, these are just musings on the potential issues and arguments on hand and until the next RLTO case appears for review and analysis.
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