Security deposit interest owed to tenant
About 15 states and several cities (Chicago, DC, NYC, Seattle) require landlords to pay interest on your security deposit. If your lease is silent on interest and you're in one of those places, the landlord still owes it.
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What it actually means
In interest-bearing-deposit states, the landlord has to hold your deposit in a separate account and pay you interest annually or at move-out. Rates are often tied to a state-published figure (CT: 1.5%; IL: local bank average) and can add up to real money on a large deposit.
The lease should disclose (a) where the deposit is held, (b) the interest rate, and (c) how and when it's paid. Missing this disclosure is a violation in Chicago, NJ, MD, and other jurisdictions — often with penalty damages equal to 1–3× the deposit.
What it looks like in a lease
"Tenant's security deposit shall be held in a federally insured interest-bearing account at [Bank Name]. Interest shall accrue at the rate published by the [State Agency] and shall be paid to Tenant annually or credited against Rent."
What to watch for
- Whether your state or city requires interest (check state law + city ordinance)
- The account information disclosure — required in NJ, MA, MD, CT, IL (Chicago), NY, and others
- The rate — should be tied to a public benchmark, not 'zero' or 'as determined by Landlord'
- Whether interest is paid annually or only at move-out
How to negotiate it
If your state requires interest and the clause is missing, ask for one added: 'The security deposit shall accrue interest at the rate required by [state/city law], paid annually.'
When it crosses into a red flag
- Silent on interest in a required-interest state
- 'Interest rate: 0%' when local law sets a floor
- Deposit commingled with landlord's operating funds (illegal in most interest states)
Frequently asked questions
How do I know if my state requires deposit interest?
States that require it include CT, IL, IA, MA, MD, MN, NH, NJ, NY, PA (over 2 years), and others. Cities like Chicago, Washington DC, and Seattle add their own rules. When in doubt, search '[your city/state] security deposit interest'.
Want to know how this works in your specific state? Read the Security deposit laws guide, or pick your state from the guide index.
Related clauses
General information, not legal advice. Clauses are interpreted differently across states and courts. For a binding interpretation of your specific lease, consult a licensed attorney in your state.
