Chicago Security Deposit Law: Interest, Deductions, and Deadlines

Chicago security deposit law is set by the city’s Residential Landlord and Tenant Ordinance (RLTO), which requires your landlord to give you a signed receipt, keep your money in a separate Illinois bank account, pay you interest each year you stay past six months, and return the deposit with an itemized statement of any deductions within tight deadlines. Miss any of these steps and the tenant can recover two times the deposit amount plus attorney fees, regardless of whether the landlord actually caused any harm.

Which Rentals Are Covered

The RLTO applies to most residential units inside Chicago city limits, with a handful of exemptions. The one that catches the most tenants by surprise is owner-occupied buildings with six or fewer units: if the landlord genuinely lives in the building, the ordinance does not apply. Occasional visits or a mail drop do not count as occupancy, and every unit in the building counts toward the six-unit threshold whether or not it is rented.¹

Other exempted arrangements include hotels and rooming houses (until a tenant has stayed 32 or more continuous days paying monthly rent), hospitals, convents, monasteries, extended care facilities, not-for-profit homes for the aged, school and university dormitories, pre-closing or post-closing occupancy by a buyer or seller, employee housing tied to a job, and co-op units held under a proprietary lease.¹ If your rental falls outside these categories, everything below applies.

What You Should Get at Move-In

The moment your landlord accepts a deposit, they owe you a signed receipt. It has to show the dollar amount, the date, the name of the person who received the money, the landlord’s name, and a description of the unit. If an agent took the payment, the agent’s name has to be on it too. When you pay electronically, an electronic receipt with a digital signature is acceptable as long as it contains the amount, date, unit description, and signature.²

Separately, the written lease must disclose the name and address of the bank where the deposit will be held. Leaving that information out, or listing the wrong bank, is a standalone violation that can trigger the full penalty.²

The RLTO sets no maximum on the amount of the deposit. Most Chicago landlords collect one to one and a half months’ rent, but nothing in the ordinance caps it.

How Your Deposit Must Be Held

Your deposit stays your property the whole time you rent. The landlord is holding it in trust. Under the RLTO, the money has to sit in a federally insured, interest-bearing account at an Illinois bank, savings and loan, or similar institution. Out-of-state accounts, personal savings accounts, and operating accounts all violate the rule.²

Because the money legally belongs to you, the landlord’s creditors cannot reach it in a bankruptcy or foreclosure, provided the landlord kept the account separate and in Illinois as required.³

Annual Interest Payments

If you live in the unit for more than six months, you are entitled to interest on your deposit. The rate is set each January by the city comptroller. For 2026, it is 0.01%.⁴

The landlord must pay that interest within 30 days after the end of each 12-month rental period, either as a cash payment or as a credit against the next month’s rent. This obligation repeats every year the lease continues. The landlord cannot save it all up for move-out.²

At the current rate the actual amount is trivial. A full year of interest on a $1,500 deposit is about 15 cents. The penalty for skipping the payment is not trivial: two times the full deposit, plus attorney fees. Landlords who dismiss the interest as pointless are the ones who most often lose thousands over it.

Cure Period for Short Interest

If the landlord paid interest but the amount was low, you cannot sue over the shortfall right away. You have to send written notice of the deficiency first. The landlord then has 14 days to either pay the corrected amount plus a $50 penalty or send you a written explanation of how they calculated it. If you dispute their math, you can take it to court, and the two-times-deposit penalty only applies if the court finds the calculation wrong.²

What Can and Cannot Be Deducted

The RLTO permits exactly two types of deductions: unpaid rent that was not lawfully withheld by the tenant, and the reasonable cost of repairing damage the tenant caused beyond normal wear and tear.² Anything outside those two categories is not a valid charge.

Normal wear and tear covers what happens through everyday living: faded paint, carpet worn from foot traffic, small scuffs on walls. A landlord cannot charge you for those. Damage that exceeds ordinary use, such as large holes in drywall, broken windows, or dye-stained fixtures, can be deducted.

Cleaning Fees

Cleaning is the most common battleground. General cleaning, carpet shampooing, and appliance wipe-downs are not on the RLTO’s list of permitted deductions, and turnover cleaning is treated as a landlord’s ordinary cost of doing business. A clause in your lease saying you owe a cleaning fee at move-out is unenforceable, because the RLTO prohibits lease terms that waive tenant rights. Only when the unit’s condition crosses into actual damage, rather than mess, can cleaning be charged.

Last Month’s Rent Clauses

Some leases say the security deposit cannot be applied to the last month’s rent. Under the RLTO, that language is unenforceable because it effectively waives your right to have the deposit returned under Section 5-12-080(d). A landlord who tries to enforce it risks the same two-times penalty plus attorney fees.

Move-Out Deadlines

Once you move out, the landlord has 45 days to return your full deposit plus accrued interest, minus any lawful deductions. If they intend to deduct anything for damage, they must deliver a written, itemized statement listing the specific repairs within 30 days of the move-out date.²

Within 30 days of sending that itemized statement, the landlord must follow up with paid receipts for the repairs. A good-faith estimate is acceptable if the work isn’t finished, but the cost still has to be documented. If the landlord’s own staff does the work, a statement of hours spent and hourly rate stands in for the receipt.³

Missing either the 30-day itemization deadline or the 45-day return deadline forfeits the landlord’s right to keep any portion of the deposit. If a fire renders the unit uninhabitable, the deadline compresses: the landlord has seven days from your termination notice to return the money.

Document the Condition at Move-In

The RLTO does not require a move-in condition report, but signed photographs and a checklist are the best protection a tenant has. Deposit disputes come down to evidence of what the unit looked like when you arrived versus when you left. Tenants who walk through the unit and record every mark on a signed form make it far harder for a landlord to charge them at move-out for conditions that were already there.

Pet Deposits and Other Refundable Charges

Chicago courts have applied Section 5-12-080 to pet deposits, key deposits, elevator deposits, and any other refundable charge. The label does not matter. If the money is refundable, every requirement in the ordinance applies: separate Illinois account, annual interest, itemized deductions, and the full penalty structure.

Non-refundable fees fall outside the RLTO. A one-time move-in fee that the landlord keeps no matter what is not a deposit. But if the lease does not clearly say the fee is non-refundable, a tenant can argue it functions as a deposit, and Illinois courts have reclassified fees that way when the payment looked like it was meant to cover potential damage or unpaid rent.

When the Building Is Sold

Selling a rental property does not extinguish your deposit rights. The new owner becomes immediately responsible for every deposit in the building, even if the seller never transferred the money. Within 14 days of the sale, the new landlord has to send each tenant a written notice stating that the deposit has been transferred and is being held under the RLTO. The notice must include the new owner’s name, address, and phone number, or the contact information for their property manager.²

The successor landlord’s liability applies whether or not they knew about the deposits at closing. A buyer who never asked about tenant deposits still owes them.⁵

Penalties for Violations

The penalty provision is what gives the ordinance its force. Failure to comply with any part of Section 5-12-080, from the receipt and banking rules to the interest payments and return deadlines, entitles the tenant to two times the security deposit plus interest. The prevailing tenant also recovers court costs and reasonable attorney fees, which frequently exceed the deposit penalty itself.²

The penalty is not discretionary. A court does not weigh whether the violation was minor or whether the tenant was actually harmed. It applies regardless of intent, and it applies even when the landlord eventually returns the money but misses a procedural step. On a $1,500 deposit, a landlord who returns it on day 46 instead of day 45 is exposed to $3,000 in penalties plus the tenant’s attorney fees.

How to Pursue a Claim

A tenant whose landlord violated the deposit rules can sue in Cook County. For claims up to $10,000, small claims court handles the case without the expense of a full civil trial. Pro se small claims, where you represent yourself without an attorney, are heard at the Richard J. Daley Center for amounts up to $3,000. Between $3,000 and $10,000 you can still file in small claims but may want a lawyer, especially since the RLTO’s fee-shifting means a winning tenant recovers their legal costs.

Before filing, send the landlord a written demand letter laying out the specific violations and the amount you believe you are owed. Some landlords will settle once they see the numbers. And if the issue is a short interest payment, remember that you have 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.²

Keep every document from the tenancy: the lease, the deposit receipt, the bank disclosure, correspondence about interest payments, your move-in checklist and photos, and evidence of the unit’s condition when you left. In deposit litigation the landlord carries the burden of proving that deductions were legitimate, and a tenant with solid documentation makes that burden almost impossible to meet.

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