6 Basics of Illinois' Security Deposit Law

Landlord/tenant laws can vary a bit from state to state. One specific area of concern to tenants often involves guidelines for security deposits.

The Illinois landlord/tenant code includes six basic rules for deposits, and they're somewhat generous compared to rules in place in other jurisdictions—at least for landlords.

The Illinois Security Deposit Limit

The state of Illinois doesn't set a limit on the maximum amount a landlord can collect from a tenant as a security deposit, even for subsidized housing. 

Rules for Storing Deposits

Illinois landlords who own buildings of fewer than 25 units don't have to follow any specific laws for storing a tenant's security deposit while it's in their possession.

Illinois landlords who own 25 rental units or more must pay tenants interest on their deposits under two circumstances: The 25 rental units are located in one building or complex, and the landlord keeps the tenants' security deposits for longer than six months.

The interest rate must be equal to that paid on minimum deposit savings accounts by the largest commercial bank in Illinois. The interest must be paid to the tenant within 30 days of the end of a 12-month lease term. The landlord can either pay the tenant this amount or credit it toward the tenant’s next month’s rent.

A landlord isn't required to pay a tenant interest if the tenant has defaulted on their lease in any way.

Written Notice After Receipt

An Illinois landlord isn't required to provide a tenant with written notice after a security deposit is received.

Reasons for Keeping a Tenant's Security Deposit

Landlords can keep all or a portion of a tenant’s deposit to cover certain expenses:

• Unpaid rent
• Damage in excess of normal wear and tear
• Additional costs associated with a breach of the lease
• Utility bills the tenant hasn't paid but was liable for under the lease's terms
• Costs to clean the property if the tenant hasn't done so

Returning the Security Deposit

Landlords who own five or more units have two options for returning a tenant's security deposit under Illinois law.

The landlord has 30 days from the date a tenant moves out to return the deposit if deductions are being taken from the deposit. The landlord must give the tenant written notice by mail or by personal delivery as to their intention to keep all or part of the tenant’s security deposit.

This notice must include an itemized statement of deductions, the actual or approximate cost to fix the damage, and copies of any receipts or invoices.

A landlord has 45 days from the date a tenant vacates the unit to return the security deposit if they intend to return it in full. There's no need to provide the tenant with written notice that this is going to occur.

Transferring Security Deposits During Sale

A landlord is responsible for transferring all security deposits plus any accrued interest to the new landlord if the property changes ownership. An exception to this rule exists if ownership is transferred to a party who has a lien on the property.

The new owner must post a notice on the “primary entrance” of any tenant’s unit for whom they've received a deposit. The owner has 21 days to do so after receiving the money. The notice should inform the tenant that the new owner is now in possession of the tenant’s security deposit, plus any accumulated interest.