Are landlords required to pay interest, as well, on security deposit refunds?
Ans. Most state statutes require landlords to pay interest on security deposits, despite the fact it may not have been stipulated in the lease terms. If, state laws state interest has to be paid on security deposit amounts, then landlords must comply or else be held guilty. Some may try to get around this statute by calling security deposit amounts ‘prepaid rent’. Yet, certain state laws affirm, even pre-paid rent earns interest. After, Chicago City passed a local landlord-tenant ordinance requiring interest to be paid on security deposit amounts, some unscrupulous landlords converted security deposits to pre-paid rent for the last month of a rental agreement. This compelled City Council to amend the ordinance, stipulating interest has also to be paid on pre-paid rent.
