As a scattered site Property Manager working inside Chicago and the surrounding suburbs I get asked this question all the time and the answer is, it depends. It depends on where you are at and what type of property you have. Below is a breakdown of what you need to know.
Do Landlords Need To Pay Interest On Security Deposits In Illinois
Do I need to pay Security Deposit Interest in Chicago?
Yes. In Chicago the security deposit interest requirement falls under the Chicago Residential Landlord & Tenant Ordinance (CRLTO). Section 5-12-080 provides specifics on what you need to know about holding security deposits in Chicago proper. If you collect a security deposit in Chicago you must pay interest based on the rate set by the City Of Chicago for that calendar year based on the lease start date. In January each year the City of Chicago will post the rate of interest you must pay any tenants. An example interest rate for Chicago in recent years is 0.01% in 2022 or 0.01% in 2021. It is typically low and only costs a few cents on an average Chicago rent amount but the process must be followed exactly as outlined.
Are there other CRTLO Security Deposit items I must know?
Yes. There are a lot of requirements to be compliant and you must research this and speak to your attorney, but below is a list of a few items you should know:
- You must provide the tenant a receipt for the deposit
- The receipt must be signed by the tenant
- The interest rate changes every year
- There are specific deadlines to when you must return the deposit after the tenant moves out or details on why the deposit will not be returned
- You must hold the funds in a specific security deposit interest bearing trust account
Do I need to pay Security Deposit Interest in Cook County Outside Of Chicago?
No. If you own a building that is 24 units or less in any of the 128 Cook County suburbs such as Schaumburg, Berwyn, Elmwood Park, Hoffman Estates, or Arlington Heights, you do not have to pay security deposit interest.
Do I need to pay Security Deposit Interest in DuPage, Kane, or McHenry County?
No. If you own a building that is 24 units or less in any of the Chicago collar counties you do not have to pay security deposit interest.
Do I need to pay security deposit interest to my tenants outside of Chicago?
Yes, but only if you have a single building that has 25 units or more anywhere outside of Chicago you must follow the Illinois Security Deposit Interest Act and pay security deposit interest.
These laws and ordinances tend to change with new legislature so be sure you are up to date with any of the new requirements. Chicago, Cook County, & Illinois have many hoops to jump through to stay compliant as a landlord so it is important you have a great team around you to help. This team may include your attorney, CPA, and Property Manager.
Every day homeowners / landlords have questions about renting their property in the Chicago market. We create these articles to help owners find this information easily and all together in one place. Oftentimes owners don’t know what questions to ask or what they need to know. We would love to talk more about your plans to rent or how things are going with your current tenants so you can reach out to us anytime. Our goal is to provide value to housing providers like you through being a resource for all things when it comes to being a real estate investor in Chicago and surrounding suburbs.
Disclaimer - All info in this article is subject to change without knowledge of GC Realty & Development, LLC. All info is deemed accurate as of 12/2/22.
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