Security Deposit Interest Act

The Security Deposit Interest Act (765 ILCS 715) requires that the lessor of residential real property, consisting of 25 or more units, pay interest to the lessee on any security deposit held for six months or more. Interest must be paid to the lessee in cash or in the form of credit towards rent within 30 days after the end of each 12 month rental period at a rate equal to the interest paid by the largest commercial bank in Illinois on minimum deposit passbook savings accounts as of December 31 of the calendar year preceding the inception of the rental agreement. This Act does not apply to deposits made with respect to public housing, nor to a lessee who is in default under the terms of the lease.

For more information, please see the Security Deposit Interest Act.

For the most recent information go to http://www.obre.state.il.us/cbt/cbt.htm and click on Banks and Trust News and Announcements.

The City of Chicago imposes more stringent requirements:

The rates set forth here are calculated according to the following formula, which is set forth in Chicago's RLTO § 081:

"on the first business day of each year, the city comptroller shall announce the rates of interest, as of the last business day of the prior month, on passbook savings accounts, insured money market accounts and six-month certificates of deposit at the commercial bank having its main branch located in the city and having the largest total asset value. The rates for money market account shall be based on the minimum deposits for such investments. The rates for certificates of deposit shall be based on a deposit of $1,000.00. The comptroller shall calculate and announce the average of the three rates. The average of these rates so announced by the city comptroller shall be the rate of interest on security deposits under rental agreements governed by this chapter and made or renewed after the most recent announcement."

It is important for landlords and tenants to understand that the rate of interest depends on the date the lease was entered into, or renewed. A new rate is announced every January. That rate applies to all interest earned on all deposits held under leases or renewals entered into that year. So even if a lease is entered into on December 31, 2006, and the interest is earned throughout all of 2007, the interest is payable at the rate announced in January 2006, not 2007.