Deposit Interest

Full Definition

Deposit interest is the return on investment that accrues on a security deposit during the tenancy, which certain states require landlords to pay to tenants when the deposit is returned. States with mandatory interest requirements include Massachusetts (the current passbook savings rate, paid annually), New York City (for buildings of six or more units), New Jersey (at least the rate paid by banks on savings accounts), Maryland (at least 1.5% annually), and a handful of others. The requirement is typically tied to the landlord's obligation to hold the deposit in an interest-bearing bank account. In some jurisdictions, interest must be paid annually to the tenant rather than held until move-out. The accrued interest becomes part of the deposit return the tenant is owed, and failing to pay required interest can itself trigger penalty provisions. Tenants in states without interest requirements are not legally owed interest, though a landlord may voluntarily pay it.