Chicago Security Deposit Interest: What a Landlord Owes

Who owes it

Every landlord covered by the Residential Landlord and Tenant Ordinance, which means every rental agreement for a dwelling unit in Chicago except the excluded ones, and the exclusion that matters is a unit in an owner-occupied building of six units or fewer, both conditions required. There is no unit threshold, unlike the state Act’s 25, and no minimum deposit. A landlord in an excluded building owes no Chicago interest; the Chicago deposit law guide covers the exclusions in detail.

What earns interest, and from when

A landlord who holds a security deposit or prepaid rent pursuant to this section for more than six months shall pay interest to the tenant accruing from the beginning date of the rental term specified in the rental agreement at the rate determined in accordance with Section 5-12-081 for the year in which the rental agreement was entered into. Chicago Mun. Code 5-12-080(c) (extract)

Four things follow from the wording. Interest runs on prepaid rent as well as the deposit, so last month’s rent held from the start earns interest too. The six months is a trigger, not a start: once the deposit has been held more than six months, interest accrues from the first day of the rental term, so a deposit returned in month seven earns seven months, on our reading. It accrues from the beginning of the rental term stated in the lease, not from the day the money changed hands, which is the state Act’s rule. And the rate is the one for the year the agreement was entered into.

The ordinance does not say whether the interest compounds. We compute simple interest, the natural reading of a rate stated per year with an annual payment, and the amounts are small enough that compounding at 0.01% would change nothing a landlord could pay. On a $2,000 deposit the 2026 rate yields 20 cents a year.

The 2026 rate, and how the Comptroller sets it

The rate for 2026 is 0.01%, announced by the City Comptroller in a notice dated December 31, 2025. The ordinance tells the Comptroller how: on the first business day of each year, review the rates the commercial bank with the most branches in the city pays on savings accounts, insured money market accounts and six-month certificates of deposit, and announce the average of the three. The rate has been 0.01% every year since 2015, so the arithmetic has been stable for a decade.

One fact about the documents, stated as a fact and nothing more: the Comptroller’s notices for 2019 through 2026 average two account types, a savings account and a six-month certificate of deposit, where the ordinance and the Department of Housing’s own lease rider name three. Every component has been 0.01%, so the figure is the same either way.

Which year’s rate applies

The year the rental agreement was entered into fixes the rate for that agreement. The rate section adds that the announced rate applies to agreements “made or renewed” after the announcement, so on our reading a renewal is a new agreement for rate purposes and takes the rate for its own year. A lease signed in 2008 and renewed each year since earned 1.26% in its first year and each later year’s rate after that. The tool asks for the agreement date and any renewal dates and applies each year’s rate to its own stretch of the tenancy. Because every rate since 2015 has been 0.01%, the question only changes the figure for a tenancy that began before then.

Published rate history

Every rate below comes from the City’s published table and is the same table this site’s calculator uses. The year is the year the rental agreement was entered into.

Two gaps, and the calculator refuses both rather than guessing. The City’s table has no row for 1998; a tenants’ organization table gives a figure, and we do not publish it as the City’s. That table also gives 3.42% for July to December 1997 and 3.38% for 1998, where the City’s row reads 1997: 3.38%, so the City’s 1997 figure may really be its 1998 one; the calculator uses the City’s table as published. Agreements made before July 1997 carried a flat 5% under the earlier ordinance, and whether that rate still governs a tenancy that old, or what applies after a renewal, is not something the City’s table answers. For either case the tool states the duty and leaves the figure to you.

When it has to be paid

Within 30 days after the end of each 12-month rental period, by cash or by credit applied to the rent due, and the remainder with the refund, which is due within 45 days of move-out. The state Act’s $5 threshold and its exception for a tenant in default are not in the Chicago text, so a Chicago landlord owes the annual payment however small it is and whatever the tenant owes. An appellate court has treated each missed annual payment as its own violation with its own date for limitations purposes, which matters because the two-year clock on the tenant’s claim runs from each one.

If it is not paid

The damages subsection reaches “any provision” of subsections (a) through (e), and interest is in (c): the tenant is awarded two times the security deposit plus interest, with no bad-faith element. The Illinois Supreme Court said so in a case about exactly this, a landlord who paid interest on only part of the deposit and argued the shortfall was unintentional: the duty is absolute and there are no exceptions. The award is a single one per deposit, the deposit itself comes back on top, and the tenant’s attorney fees are added.

The one cure. Subsection (f)(2) protects a landlord who paid interest on time but got the amount wrong: the tenant must give written notice, and the landlord then has 14 days to pay the correct interest plus $50, or to provide a written explanation of how the interest was calculated, before damages follow. An appellate court has held the cure is available only where some interest was actually paid within the period; it does not reach interest paid late or not at all. A lease clause waiving the interest is unenforceable.

The state Act can apply too

The state Interest Act has no carve-out for Chicago, and the ordinance preserves state law, so a Chicago landlord with 25 or more units in one building or a contiguous complex is under both, on our reading; no court or City publication says otherwise. The two differ: the state Act runs from the date of the deposit rather than the term start, uses the rate the largest Illinois bank paid on passbook savings on December 31 of the year before the lease began, and has the $5 threshold. For 2026 the state figure is 0.01% as a yield (0.005% as a rate); paying the higher of the two figures satisfies both. The Illinois deposit interest guide covers the state Act.

What is pending

Both ordinances pending before the City Council would end deposit interest in Chicago. The Mayor’s “Protecting Renters Ordinance” would strike the interest sentence and repeal the rate sections from January 1, 2027, with interest accrued to that point returned at the end of the tenancy or at renewal; the rival “FAIR” ordinance would strike them from July 1, 2027. Both were deferred on September 23, 2026 and the Council next meets on December 8 and 9, 2026. Neither is law, and until one passes the interest above is owed. The Chicago deposit law guide describes both in full.

Work out a Chicago return

The free Illinois deposit tool asks for your dates and renewal history, applies the right rate to each period, lists the annual payments that fell due, and shows the figure beside the refund. It also handles the rest of the return: the 45- and 30-day clocks, the two lawful deductions, the owner-occupied exclusion, and a statute-cited return letter.

Chicago security deposit interest: common questions

Does a Chicago landlord have to pay interest on a security deposit?

Yes, if the rental is covered by the city’s Residential Landlord and Tenant Ordinance and the deposit, or prepaid rent, has been held for more than six months. There is no unit threshold and no minimum amount. The exclusion that matters is a unit in an owner-occupied building of six units or fewer; a landlord there owes no Chicago interest, though the state Interest Act may still apply at 25 or more units. (Chicago Mun. Code 5-12-080(c), 5-12-020)

What is the Chicago security deposit interest rate for 2026?

0.01%, for rental agreements entered into in 2026, as announced by the City Comptroller. The rate has been 0.01% every year since 2015. It is set each year as the average of the rates the city’s largest bank by branch count paid on savings accounts, insured money market accounts and six-month certificates of deposit. (Chicago Mun. Code 5-12-081)

How is Chicago security deposit interest calculated?

Simple interest on the deposit, and on any prepaid rent, from the beginning date of the rental term stated in the lease, at the rate for the year the agreement was entered into. The six months is a trigger, not a start: once the deposit has been held more than six months, interest runs from the first day of the term, so a deposit returned in month seven earns seven months. On a $2,000 deposit at 0.01%, that is 20 cents a year. (Chicago Mun. Code 5-12-080(c))

Which year’s rate applies if the lease was renewed?

The ordinance fixes the rate by the year the rental agreement was entered into, and the rate section speaks of agreements "made or renewed" after the Comptroller’s announcement. On our reading, a renewal is a new agreement for rate purposes and picks up its own year’s rate, so a lease signed in 2008 at 1.26% and renewed every year since has earned at each renewal year’s rate, not at 1.26% throughout. The rate has been 0.01% since 2015, so for most current tenancies the question changes nothing. (Chicago Mun. Code 5-12-080(c), 5-12-081)

When does Chicago deposit interest have to be paid?

Within 30 days after the end of each 12-month rental period, by cash or by credit applied to rent due, and whatever remains is returned with the deposit within 45 days of move-out. There is no $5 threshold and no exception for a tenant in default: those are state Interest Act rules, and Chicago has neither. Each missed annual payment is a separate violation with its own date. (Chicago Mun. Code 5-12-080(c), (d))

What happens if a Chicago landlord does not pay the interest?

The tenant is awarded two times the security deposit plus interest, with no need to show bad faith; the Illinois Supreme Court has held the duty is absolute. One cure exists, and it is narrow: if interest was paid on time but the amount was wrong, the tenant must give written notice and the landlord has 14 days to pay the correct amount plus $50 or to explain the calculation in writing. A court has held that the cure applies only where some interest was actually paid within the period. (Chicago Mun. Code 5-12-080(f); Lawrence v. Regent Realty Group, Inc., 197 Ill. 2d 1 (2001); Faison v. RTFX, Inc., 2014 IL App (1st) 121893)

Is interest owed on prepaid rent in Chicago?

Yes. The ordinance says a landlord who holds "a security deposit or prepaid rent" for more than six months shall pay interest, so last month’s rent held from the start of the tenancy earns interest too. One unpublished order held that the two-times damages are not available where no security deposit at all was collected, only prepaid rent; as an unpublished order entered before 2021 it cannot be cited as precedent. (Chicago Mun. Code 5-12-080(c))

Can a Chicago lease waive deposit interest?

No. A rental agreement may not provide that the tenant waives any right or remedy under the ordinance, and a provision that does is unenforceable. A release signed after the tenancy ends is a different thing: an appellate court enforced a post-tenancy release that paid the deposit plus $10 of interest. (Chicago Mun. Code 5-12-140(a); King v. Gerber Realty, 2022 IL App (1st) 211189)

Sources

• Chicago Municipal Code 5-12-080(c) and (f), 5-12-081 (the rate), 5-12-140 (waivers)
• City Comptroller: security deposit interest rate notice (Department of Finance)
• Chicago Department of Housing: security deposit interest rates by year
• Lawrence v. Regent Realty Group, Inc., 197 Ill. 2d 1 (2001): the duty is absolute
• Faison v. RTFX, Inc., 2014 IL App (1st) 121893: the (f)(2) cure, and each missed payment as its own violation
• Landis v. Marc Realty, L.L.C., 235 Ill. 2d 1 (2009): the two-year limitations period
• King v. Gerber Realty, 2022 IL App (1st) 211189: a post-tenancy release
• The Illinois security deposit tool and full cited rules

About this page

The quoted passage is the codified text of the Chicago Municipal Code as the City’s publisher serves it; the rates are the City’s own published figures, and the Comptroller’s and Department of Housing pages are on this site’s weekly watch, so a new year’s rate is flagged when it posts. How we verify the law explains the process. This is general information that cites the law, not legal advice, and Orygn LLC is not a law firm. For advice about your situation, talk to a licensed Illinois attorney.