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Cook v. University Plaza
427 N.E.2d 405 (Ill. App. 1981)
Appellate Court of Illinois, Second District.
SEIDENFELD, Presiding Justice:
In this appeal we consider the applicability of the statute providing payment of
interest on security deposits to a tenant (Ill.Rev.Stat.1979, ch. 74, pars. 91-93), to
particular contracts. The parties to the agreements are the plaintiffs, the residents of
University Plaza as a class, who entered into residence hall contracts with University
Plaza and its general partners, defendants, a privately owned university dormitory
which serves students of Northern Illinois University in DeKalb. Plaintiffs appeal from
the dismissal of their class action suit. The defendants' motion was sustained on the
basis that the statute is inapplicable because no tenant-landlord relationship has been
created by the contracts and thus that no cause of action was stated.
The individual contracts with the students are entitled "Residence Hall Contract
Agreement". The introductory paragraph states that the agreement governs the use of
the University Plaza facilities and services by the resident. In Clause I the dormitory
agrees to furnish accommodations and services, including basic furniture, carpeting
and draperies, local telephone service, cleaning service, social and recreational
facilities, and parking facilities. Clause III requires a $50 security deposit and spells
out the rights that the resident has in that deposit. University Plaza reserves the right
to cancel the contract for default, although the resident has no right to cancel once it
has accepted the agreement. If the resident has not vacated the premises at the end
of seven days following a written notice of intent to cancel the contract, University
Plaza may take possession of the premises and remove the resident. University Plaza
provides meal service for the residents. It also reserves the right to make assignments
of space, to authorize or deny room and roommate changes and to require the
resident to move from one room to another. There is also a provision that the
dormitory is closed and meals are not served during Thanksgiving and spring recess as
well as during semester breaks; and that no one is allowed to remain in the residence
hall during these stated periods or beyond the established academic year closing date.
Clause IV states:
"Notwithstanding anything to the contrary which may herein be contained, expressly,
impliedly or otherwise, it is specifically understood and agreed by and between the
parties hereto, that it is not the intention of the parties hereto to create a landlord-tenant relationship, and that the intention hereof is strictly contractual in nature;
for bed and board, ancillary service, the use of certain recreational facilities, and
participation in student social programs promoted at University Plaza, all of which
are for the most part in concert with others. The resident may not assign any rights
hereunder and may not sublet the room assigned."
Whether a contract is a lease or a license is not to be determined from the language
that the parties choose to call it but from the legal effect of its provisions. Illinois
Cent. R. Co. v. Michigan Cent. R. Co., 18 Ill.App.2d 462, 473-74, 152 N.E.2d 627
(1958). See, also, Holladay v. Chicago Arc Light & Power Co., 55 Ill.App. 463, 466
(1894).
In Holladay, a contract, referred throughout as a lease of the right to run electric
wires under the sidewalks of certain buildings, was held not to be a lease but a mere
license. In reaching that conclusion, the court reasoned that an instrument which
merely gives to another the right to "use premises for a specific purpose; the owner of
the premises retaining the possession and control of the premises, confers no interest
in the land and is not a lease but a mere license." (55 Ill.App. at 466, 467). In Illinois
Cent. R. Co., the court held that an agreement between two railroads to share their
track and railroad station rights was a license, not a lease and concluded that where
the railroad shared the use of the tracks and terminal areas there was no transfer of
exclusive possession sufficient to create a lease. It noted that "a leasehold requires
that the lessee's possession be more than merely coextensive with the lessor; it must
be exclusive against the world and the lessor." (18 Ill.App.2d at 482, 152 N.E.2d 627).
However, "there may be a reservation of a right to possession by the landlord for
purposes not inconsistent with the privileges granted to the tenant." (18 Ill.App.2d at
477, 152 N.E.2d 627). See, also, Urban Investment & Dev. Co. v. Rothschild & Co., 25
Ill.App.3d 546, 550, 323 N.E.2d 588 (1975).
In In re Application of Rosewell, 69 Ill.App.3d 996, 26 Ill.Dec. 36, 387 N.E.2d 866
(1979), the court considered whether agreements between the City of Chicago and
certain individuals under which the individuals were permitted to operate city owned
parking garages or lots, constituted leases or licenses. The court held that the essence
of a lease was transfer of possession (at 1000- 1001, 26 Ill.Dec. 36, 387 N.E.2d 866)
while a license is "an agreement which merely entitles one party to use property
subject to the management and control of the other party." (1001, 26 Ill.Dec. 36, 387
N.E.2d 866). Thus, it concluded that since the City retained the right to control how
the parking lots were operated the agreement constituted a license, even though the
City surrendered exclusive possession of the lots to the parking lot operators. In
People v. Chicago Metro Car Rentals, Inc., 72 Ill.App.3d 626, 28 Ill.Dec. 843, 391
N.E.2d 42 (1979), the issue was whether an agreement between the City of Chicago
and a car rental agency, which permitted the agency to operate a rent-a-car business
at O'Hare airport, constituted a lease or a license. In finding that the agreement
constituted a lease the court noted that the document was written using traditional
terms; that it contained all of the essential requirements of a lease, including a
definite agreement as to the extent and bounds of the leased property; and that the
agreement granted Metro exclusive possession of a designated service area and
designated counter space amounting to a particular number of square feet, legally
described and diagramed in the agreement. 72 Ill.App.3d at 629, 28 Ill.Dec. 843, 391
N.E.2d 42.
While the agreement before us contains certain aspects normally associated with
leases, a definite and agreed term and a definite and agreed price of rental and
manner of payment, (see, Metro at 629, 28 Ill.Dec. 843, 391 N.E.2d 42), we conclude
that it lacks the essential requirement of being a definite agreement as to the extent
and bounds of the property to be used. The fact that the students may be moved
during the term from room to room at the will of the contracting party is the principal
feature of the agreement which we find persuasive in our determination that the
parties did not intend to enter into a landlord and tenant relationship since the
agreement failed to pass a possessory interest in specific property.
The question remains as to whether the legislature intended the statute on security
deposits to apply to dormitories which provide bed and board to students. Paragraph
93 of the statute excludes only public housing units from the application of the act.
(Ill.Rev.Stat.1979, ch. 74, par. 93). However, parties are only covered by the statute
if the agreement between the residents and the dormitory can be considered a lease.
We find nothing in either the legislative history of the act or in its terms which would
support the view that the legislature intended to include security deposits paid by
students in dormitories in which they reside without reference to whether their
agreement is a license or a lease.
We would note that there appears to be no public policy which would prevent the
legislature from enacting a statute which would require that interest be paid on
deposits made by persons in the class of the plaintiffs or others similarly situated.
However, we conclude that the legislature has not done so and that the remedy in
these circumstances is within the legislative domain.
The judgment is therefore affirmed.
Affirmed.
REINHARD and HOPF, JJ., concur.
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