Chicago Security Deposit Law: Interest, Deductions, and Returns

Chicago security deposit law is set by the city’s Residential Landlord and Tenant Ordinance (RLTO), and it is unusually strict: a landlord who collects a deposit must give a signed receipt, keep the money in a separate Illinois interest-bearing account, pay yearly interest to tenants who stay longer than six months, and return the deposit within 45 days of move-out with any deductions itemized in writing. Miss any one of those steps and the tenant can recover two times the deposit plus attorney fees, regardless of whether the tenant actually damaged the unit.¹

Does the Ordinance Apply to Your Rental

The RLTO covers most residential rentals inside Chicago, but a few categories are carved out. The biggest exception is an owner-occupied building with six or fewer units, where the owner genuinely lives on-site. Occasional visits or using an address for mail do not count, and every unit in the building counts toward the six-unit limit whether it is rented or not.²

Other exempt arrangements include hotels and rooming houses (until a guest has stayed 32 or more days and pays monthly rent), hospitals, convents, extended care facilities, not-for-profit homes for the aged, school and university dormitories, pre- and post-closing occupancy by a buyer or seller, employee housing tied to a job, and cooperative units occupied under a proprietary lease.² If your situation does not fall into one of these buckets, every rule below applies to your landlord.

Receipts and Bank Disclosure at Move-In

When the landlord accepts your deposit, you are owed a signed receipt on the spot. It must list the amount received, the date, the name of the person who took the money, the landlord’s name, and a description of the unit. If an agent collected the deposit, the agent’s name has to appear as well. Electronic payments can be acknowledged with an electronic receipt that includes the same information plus a digital signature.¹

Separately, the written lease must disclose the name and address of the bank where the deposit will be held. A missing or inaccurate disclosure is its own violation and can trigger the full penalty, even if everything else was done right.

How the Deposit Must Be Held

Your deposit stays your property for the entire tenancy. The landlord is holding it in trust. Under the RLTO, it has to sit in a federally insured, interest-bearing account at a bank, savings and loan, or other financial institution located in Illinois. Mixing the money with the landlord’s operating funds, or stashing it in an out-of-state or personal account, breaks the rule.¹

Because the deposit legally belongs to the tenant, the landlord’s creditors cannot reach it, and it should survive a landlord bankruptcy or foreclosure. That protection depends on the landlord actually keeping the money separate.³ The ordinance does not cap the deposit amount; most Chicago landlords ask for one to one-and-a-half months’ rent, but no statute sets a ceiling.

Yearly Interest Payments

If you live in the unit for more than six months, you earn interest on your deposit. The city comptroller sets the rate every January, based on the average interest paid on savings accounts and certificates of deposit at the commercial bank with the most Chicago branches (currently Chase). For 2026, the rate is 0.01%.⁴

The landlord has to pay the interest within 30 days after the end of each 12-month rental period, either as cash or as a credit against the next month’s rent. The obligation repeats every year the tenancy continues. The landlord cannot wait until move-out to settle up.¹

On a $1,500 deposit, a year of interest at the current rate works out to about fifteen cents. The dollar amount is trivial; the penalty for skipping it is not. A missed interest payment opens the landlord to a judgment of two times the entire deposit.

If the Interest Payment Is Short

When the landlord paid some interest but shorted the amount, you have to send written notice of the deficiency before suing. The landlord then gets 14 days to pay the correct amount plus a $50 penalty, or to send a written explanation of how the interest was calculated. If you still disagree, you can take the calculation to court. The two-times-deposit penalty only applies if the court finds the landlord’s math was wrong.¹

What a Landlord Can and Cannot Deduct

The RLTO allows exactly two types of deductions: unpaid rent that the tenant did not lawfully withhold, and the reasonable cost of repairing damage the tenant caused beyond normal wear and tear.¹ Everything else is off-limits.

Normal wear and tear is the ordinary deterioration that comes from living in a space: faded paint, carpet worn down by foot traffic, small scuffs on walls. A landlord cannot charge for those. Large holes in drywall, broken windows, or a bathtub stained with hair dye go beyond ordinary use and can be deducted.

Cleaning Fees

Cleaning charges are one of the most common disputes, and the law is unfavorable to landlords here. General cleaning, carpet shampooing, and appliance wipe-downs are not valid deductions. The ordinance does not list cleaning as a permitted deduction category, and turnover cleaning is treated as a cost of doing business. A lease clause requiring the tenant to pay a cleaning fee at move-out is unenforceable, because the RLTO prohibits lease terms that waive tenant rights. Cleaning can be deducted only when the condition of the unit crosses from messiness into actual damage.

Last-Month-Rent Clauses

Some leases say the deposit cannot be applied toward the last month’s rent. That provision is unenforceable under the RLTO because it effectively waives the tenant’s right to have the deposit returned under Section 5-12-080(d). A landlord who tries to enforce it risks a penalty of two months’ rent plus attorney fees.

Return Deadlines and Itemization

After you move out, the landlord has 45 days to return the full deposit plus accrued interest, less any lawful deductions. To keep anything for damage, the landlord has to send a written, itemized statement listing the specific repairs within 30 days of the move-out date.¹

Within 30 days of that statement, the landlord also has to provide copies of paid receipts for the repairs. A good-faith estimate works when the work has not been finished, but the cost still has to be documented. If the landlord’s own staff did the repairs, a statement of hours and hourly rate serves the same purpose.³

Missing either deadline is costly. If the 30-day itemized statement never arrives, or the 45-day return date passes, the landlord loses the right to keep any portion of the deposit at all. If a fire makes the unit uninhabitable, the clock shortens: the deposit must be returned within seven days of the tenant’s termination notice.

Why a Move-In Checklist Matters

The ordinance does not require a formal move-in condition report, but a signed checklist with photographs is the single strongest piece of evidence in a deposit dispute. Walking the unit and noting every scratch, stain, and dent on a dated form protects a tenant from being charged for pre-existing conditions. For a landlord, skipping the walk-through makes it hard to prove that damage happened during the tenancy, which matters a great deal when the penalty for a bad deduction is twice the deposit.

Pet Deposits, Move-In Fees, and Other Refundable Charges

Chicago courts have treated pet deposits, key deposits, elevator deposits, and other refundable charges as security deposits for purposes of the ordinance. What the landlord calls the money does not matter; what matters is whether it is refundable. If it is, every requirement in Section 5-12-080 applies, including the Illinois account, the yearly interest, the itemized-deduction rules, and the penalty structure.

A genuinely non-refundable move-in fee that the landlord keeps regardless of tenant conduct falls outside the RLTO. The lease has to label the fee as non-refundable, though. Illinois courts have reclassified fees as deposits when the payment looks designed to cover potential damage or unpaid rent, no matter what the lease called it.

When the Building Is Sold

A sale does not erase your deposit rights. The new owner is immediately responsible for every security deposit in the building, even if the seller never handed the money over at closing. Within 14 days of the transfer, the new landlord has to send each tenant written notice that the deposit has been transferred and is being held under the RLTO, along with the new owner’s name, address, and phone number (or the property manager’s contact information).¹

Whether the buyer knew about the deposits is irrelevant. A buyer who closes without asking does not get a pass.⁵

Penalties for Violations

The penalty provision is what gives the ordinance teeth. A landlord who fails to comply with any part of Section 5-12-080, from the receipt and banking rules to the interest payments and return deadlines, owes the tenant two times the security deposit plus interest. The winning tenant also recovers court costs and reasonable attorney fees, which often exceed the deposit penalty.¹

The penalty is not discretionary. Courts do not weigh how serious the violation was or whether the tenant was actually harmed. It applies regardless of intent, and it applies even when the deposit is eventually returned but a procedural deadline is missed. A landlord who returns $1,500 on day 46 instead of day 45 faces potential liability of $3,000 plus the tenant’s legal fees.

How to Pursue a Claim

A tenant whose landlord violated the deposit rules can file suit in Cook County. Claims up to $10,000 can go to small claims court; pro se small claims (where you represent yourself) are heard at the Richard J. Daley Center and cover claims up to $3,000. Between $3,000 and $10,000, small claims is still available, but the RLTO’s fee-shifting makes hiring an attorney a sensible option.

Send a written demand letter before you file. Lay out the specific violations and the amount you believe is owed. Some landlords will settle once the penalty math is in front of them. If the issue is a short interest payment, you are required to send written notice of the deficiency and give the landlord 14 days to correct it or explain the calculation before you can sue over the shortfall.¹

Save everything from the tenancy: the lease, the deposit receipt, the bank disclosure, any correspondence about interest, your move-in checklist and photos, and documentation of the unit’s condition when you left. The landlord carries the burden of proving that deductions were legitimate, and a tenant with solid records makes that burden very hard to carry.

1
Municipal Code of Chicago. Municipal Code of Chicago 5-12-080 Security Deposits
2
Municipal Code of Chicago. Municipal Code of Chicago 5-12-020 Exclusions
3
City of Chicago. Chicago Residential Landlord and Tenant Ordinance
4
City of Chicago. Security Deposit Interest Rates
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City of Chicago. Chicago Residential Landlord and Tenant Ordinance