Does Your Landlord Owe You Interest on Your Security Deposit?

States That Require Deposit Interest

Several states and cities require landlords to pay interest on security deposits held during your tenancy. This requirement exists because the deposit is your money being held in trust. Just as a bank account earns interest, your deposit should earn a return while the landlord holds it. The specific requirements vary significantly by jurisdiction.

States with deposit interest requirements include Connecticut, Florida (for certain deposits), Illinois (in some cities), Iowa, Maryland, Massachusetts, Minnesota, New Jersey, New Mexico, New York (some localities), North Dakota, Ohio, Pennsylvania (for certain leases), and Virginia. Cities like Chicago and several New Jersey municipalities have their own interest requirements that may differ from or exceed state requirements.

The interest rates required vary. Some states specify a fixed rate, others tie it to a published rate like the Consumer Price Index or treasury bill rates, and some use whatever rate the bank actually pays on the deposit account. The rate is often modest, but over a multi-year tenancy it can add up to a meaningful amount.

How Deposit Interest Works

When interest is required, the landlord must hold your deposit in an interest-bearing account and pay you the accrued interest, either annually or at the end of the tenancy. Some jurisdictions allow the landlord to retain a small administrative fee, typically one percent, from the interest earned.

The landlord is usually required to provide you with specific information about where your deposit is held, including the name and address of the financial institution and the account number or type. This transparency requirement ensures you can verify that your deposit is being held properly.

Interest payments may be made directly to you on an annual basis, credited toward your rent, or included with your deposit refund at the end of the tenancy. The method depends on your state's specific requirements. Some landlords include interest in the annual lease renewal process.

What to Do if Your Landlord Is Not Paying Interest

If your state requires deposit interest and your landlord has not been paying it, start by confirming the requirement applies to your situation. Some state interest requirements only apply to buildings with a certain number of units or to deposits over a certain amount. Check the specific conditions in your state statute.

Once you confirm the requirement applies, send a written request to your landlord asking about the interest on your deposit. Reference the specific state statute and ask for a statement showing the account where your deposit is held and the interest accrued. Many landlords are simply unaware of the requirement and will comply once informed.

If the landlord refuses or ignores your request, the penalties can be significant. Some states allow tenants to collect double or triple the interest owed, or even the full deposit amount, when landlords fail to comply with interest requirements. In some jurisdictions, failure to pay required interest means the landlord forfeits the right to retain any portion of the deposit for damages.

Calculating Your Interest

To estimate how much interest you are owed, you need to know your deposit amount, the applicable interest rate, and the duration of your tenancy. If your state specifies a fixed rate, the calculation is straightforward. If the rate varies, you may need to look up historical rates for each year of your tenancy.

For example, if your deposit is $2,000, the required interest rate is 1.5 percent per year, and you lived in the unit for three years, you would be owed approximately $91 in interest. While this is not a life-changing amount, it is money you are legally entitled to and it adds up across the renting population.

Note that some states compound interest annually while others use simple interest. The difference is small for typical deposit amounts and tenancy lengths, but it can matter for large deposits held over many years. Check your state's statute for the specific calculation method required.