Move-In Fees vs. Security Deposits in Chicago: Which Is Better for Landlords?

If you're preparing to rent out a property in Chicago, one of the first decisions you'll need to make is whether to collect a security deposit or a move-in fee from your tenants. For many landlords, a security deposit seems like the obvious choice. However, Chicago's landlord-tenant regulations are among the most tenant-protective in the country, and security deposits come with significant responsibilities and compliance requirements. Owners who fail to properly handle, document, or return a security deposit may expose themselves to disputes, penalties, and unnecessary liability.

Additionally, Illinois and local housing regulations are constantly evolving. New legislation

affecting landlords is proposed regularly, and existing requirements frequently change. Before collecting a security deposit, landlords should ensure they understand all applicable state and local laws and stay informed about future changes that may impact their obligations.

For these reasons, many Chicago landlords have moved away from traditional security deposits and instead utilize non-refundable move-in fees. At City Roots Properties, we typically recommend move-in fees for most residential rental properties because they are simpler to administer, help offset turnover costs, and often reduce the likelihood of disputes.

What Is a Security Deposit?

A security deposit is money collected from a tenant at the beginning of a lease to protect the landlord against:

• Unpaid rent

• Damage beyond normal wear and tear

• Certain lease violations

• Other obligations outlined in the lease agreement

At the end of the tenancy, the deposit must generally be returned to the tenant, less any allowable deductions. While security deposits can provide protection, many landlords are surprised to learn that they cannot simply use the deposit to restore a unit to "like-new" condition after a tenant moves out.

Chicago Security Deposit Considerations

Security deposits often create challenges at the end of a tenancy because landlords and tenants may disagree about:

• Cleaning charges

• Repair costs

• Damage versus normal wear and tear

• Documentation supporting deductions

• Refund timing

Additionally, many landlords underestimate the administrative burden associated with security deposits. Proper documentation, recordkeeping, and compliance are critical.

Given the ongoing changes to landlord-tenant regulations throughout Illinois and Chicago, landlords should regularly review current laws and consult qualified professionals when necessary.

What Is a Move-In Fee?

A move-in fee is a one-time, non-refundable fee paid by a tenant before taking possession of the property.

Unlike a security deposit, a move-in fee is not intended to be returned at the end of the tenancy. Instead, it helps offset the costs associated with:

• Preparing the unit for occupancy

• Administrative processing

• Tenant onboarding

• Future turnover expenses

• Cleaning and maintenance between residents

Move-in fees have become increasingly common throughout Chicago and are widely used by landlords, condominium associations, and professional property managers.

How Much Should a Move-In Fee Be?

One of the most common questions landlords ask is how much they should charge.

While every property is different, we generally recommend charging:

$500 or approximately 20% of one month's rent, whichever is greater.

For example:

Monthly Rent	Suggested Move-In Fee
$2,000	$500
$2,500	$500
$3,000	$600
$4,000	$800

The goal is to collect an amount that reasonably helps offset the costs associated with preparing and turning over the property without creating an unnecessary barrier for prospective tenants.

As always, landlords should ensure any move-in fee structure complies with applicable laws and regulations.

Why We Typically Recommend Move-In Fees

1. Every Tenant Creates Turnover Costs

Even excellent tenants create expenses when they move out.

Common turnover costs include:

• Professional cleaning

• Paint touch-ups

• Minor repairs

• Lock changes

• Maintenance inspections

• Unit preparation for future residents

These costs are an unavoidable part of owning rental property.

2. Security Deposits Cannot Typically Cover Ordinary Wear and Tear

One of the biggest misconceptions among landlords is that a security deposit can be used to cover normal aging and use of a property.

Examples of ordinary wear and tear may include:

• Minor wall scuffs

• Small nail holes

• Worn flooring from normal use

• Faded paint

• General aging of fixtures and finishes

These are generally considered normal operating expenses and not tenant-caused damage.

As a result, landlords often find themselves returning most or all of a security deposit while still paying out-of-pocket for turnover costs.

3. Fewer End-of-Lease Disputes

Security deposits are one of the most common sources of landlord-tenant disagreements.

Move-out discussions frequently involve:

• Cleaning expectations

• Damage assessments

• Repair invoices

• Deposit deductions

Because move-in fees are non-refundable, there is generally less opportunity for disagreement at the end of a tenancy.

4. Simpler Administration

Move-in fees are often easier to administer than security deposits.

Owners avoid:

• Tracking refundable funds

• Processing deposit refunds

• Preparing deduction statements

• Defending disputed charges

This reduces administrative work and helps create a smoother leasing experience.

When Might a Security Deposit Make Sense?

While we generally prefer move-in fees, there are situations where a security deposit may still be appropriate.

Examples include:

• Luxury rentals

• Furnished properties

• Homes with high-end finishes

• Higher-risk tenancy situations

Every property is different, and landlords should evaluate their specific circumstances before making a decision.

Our Recommendation

For most Chicago residential rentals, we believe a reasonable move-in fee offers the best balance of simplicity, predictability, and protection. A properly structured move-in fee helps offset the real costs associated with tenant turnover while reducing administrative burdens and minimizing the potential for disputes.

Most importantly, landlords should remain aware that Illinois and Chicago landlord-tenant laws continue to evolve. What works today may be subject to new requirements tomorrow, making it essential to stay informed and review policies regularly. Check out our most recent guide to the changes coming into effect regarding Illinois House Bill 3564 here.

Need Help Renting Your Chicago Property?

Whether you're renting out your first condo, managing a small multifamily building, or growing a larger investment portfolio, City Roots Properties can help. From tenant screening and lease preparation to rent collection and maintenance coordination, we provide full-service property management designed to protect your investment and simplify ownership.

Curioius about our pricing? Click here for more detials. Or check out our Chicago management fee guide here!