Security Deposit Escrow Accounts & Interest Requirements by State

State Mandates on Escrow Accounts and Accrued Interest

In many states, residential security deposits remain the exclusive personal property of the tenant throughout the duration of the lease. The landlord acts solely as a fiduciary trustee. Consequently, numerous jurisdictions strictly require landlords to hold deposits in segregated escrow accounts and pay annual interest back to the tenant.

Key State Escrow & Interest Statutes

• Massachusetts (M.G.L. c. 186 § 15B): Landlords must place deposits in a separate, interest-bearing account in a Massachusetts bank within 30 days of receipt, provide written receipt stating bank details and account number, and pay 5% statutory interest or actual bank interest annually. Commingling funds or failing to pay interest entitles tenant to immediate return of the full deposit.
• Illinois (765 ILCS 715): Lessors of residential property containing 25 or more units who hold security deposits for more than six months must pay annual interest at the rate equal to the savings account rate of the largest commercial bank in Illinois.
• New Jersey (N.J.S.A. 46:8-19): Landlords must deposit security funds in an interest-bearing account in a state or federally chartered bank, notify tenant in writing within 30 days, and pay accrued interest or credit it toward rent annually.
• Maryland (Md. Code, Real Prop. § 8-203): Landlords must maintain deposits in an escrow account at a federally insured institution. If deposit is held for six months or more, landlord must pay statutory interest calculated per statute upon return.