Short answer

A Massachusetts landlord who has held a residential security deposit for one year or longer owes interest at the end of each year of the tenancy under M.G.L. c.186, s.15B. At that point, the landlord must give or send the tenant an annual statement with bank and account details, and must either pay the interest at the same time or notify the tenant that the tenant may deduct it from the next rent payment. If 30 days pass after the end of the year of tenancy and the tenant has received neither the statement nor the payment, the statute lets the tenant deduct the interest from the next rent. If the tenancy ends before the anniversary, accrued interest is due within 30 days of termination.

What to check

• Confirm the deposit has been held for one year or longer. The 5% annual interest obligation under s.15B applies to deposits held that long, or the lesser amount actually received from the bank holding the deposit.
• Prepare the annual statement for each anniversary. The statute requires the name and address of the bank, the deposit amount, the account number, and the amount of interest payable to the tenant.
• Choose one of the two delivery options at the same time: pay the interest to the tenant, or include a notice that the tenant may deduct the interest from the next rent payment.
• Mark the 30-day tenant self-help window. If no statement or payment has reached the tenant by 30 days after the end of the year of tenancy, the tenant is authorized to deduct the interest from the next rent.
• If the tenancy ends before the anniversary, pay the accrued interest within 30 days of termination, alongside the 30-day security deposit return process under s.15B(4).

Why this matters

The Massachusetts security deposit statute is procedural. Most landlord exposure around interest does not come from a dispute over the amount; it comes from a missed or late annual statement, a missing bank detail, or a year-end that passed without either a payment or a rent-deduction notice. Treating the interest deadline as a recurring workflow tied to each tenancy's anniversary date is what keeps the file clean.

Keep the interest workflow separate from the initial 30-day receipt obligation (which requires giving the tenant a receipt with bank and account information within 30 days of receiving the deposit) and from the 30-day move-out return window. They are three distinct deadlines under the same section, and mixing them up is a common source of trouble.