Quick Answer
As the Illinois Attorney General summarizes the rule, a landlord of a building with at least 25 units pays interest on a security deposit held for at least six months. The landlord pays the interest, or credits it to rent, every 12 months. A willful failure to pay may support a claim for an amount equal to the deposit, plus court costs and attorney’s fees. Statute text last checked October 22, 2026.
Key Takeaways
- Twenty-five units. The threshold is the building or complex size.
- Six months. The deposit must be held at least six months.
- Every 12 months. Pay or credit the interest each year.
- Track it. A ledger line for interest each year.
- Smaller owners. Know the threshold in case you add buildings.
1. Who Is Covered
The rule applies to buildings with at least 25 units. Many small owners will not reach the threshold, but a growing set of buildings may, so record the unit count for each building.
2. How Interest Is Handled
The landlord pays the interest to the tenant or credits it to rent every 12 months. Choose one method, state it in the lease, and apply it consistently.
3. Rate and Calculation
Confirm the rate that applies to your deposits from the statute and the account where the deposit is held. Record the rate, the period and the result.
4. Ledger Practice
Add a deposit sub-ledger for each tenant: the deposit, interest accrued, interest paid or credited, and the dates. At move-out, the sub-ledger feeds the itemization.
5. If a Payment Is Missed
As summarized, a willful failure may support a claim for an amount equal to the deposit, plus costs and fees. Catch up promptly and document the correction.
6. A Checklist
- Record the unit count for each building.
- Note each deposit date and the six-month date.
- Calculate interest each year.
- Pay or credit it and write a receipt.
- Reconcile at move-out.
Example Walk-Through
A tenant pays a deposit on March 1. On September 1 the six-month mark passes, and the tenant becomes eligible for interest. Twelve months after the start of the period, you either pay the interest or credit it to rent and write a short statement that shows the amount, the rate and the dates. Repeat each year, and carry the totals into the move-out itemization.
Communicating With Tenants
Tell tenants in the lease and at move-in how interest will be handled. A single sentence is enough. Clear expectations at the start prevent questions later, and the sub-ledger lets you answer them in minutes.
7. What This Guide Does Not Cover
This guide covers the interest rule at the summary level. It does not cover the interest rate formula, account structure, or Chicago’s ordinance. It states the statute and does not predict how a court will rule.
8. Questions Owners Ask
Is interest owed from day one? The summary refers to deposits held at least six months.
Can I credit it to rent? Yes, the summary lists paying or crediting it.
Does it apply to a duplex? The rule described applies to buildings with 25 or more units.