Massachusetts landlords must pay interest on prepaid last month’s rent, even for tenancies shorter than a year. The obligation is 5% annually or the smaller amount actually earned at the bank holding the money. If the money was never banked, 5% applies. Last month’s rent does not carry the separate banking requirements that apply to security deposits. Massachusetts guidance

To check a balance, identify the prepayment, establish which calculation applies and account for interest already paid or credited. These rules address ordinary residential tenancies; special housing programs may have additional requirements.

1. Identify the last month’s rent payment

Start with the lease, move-in receipt and proof of payment. If a single transfer covered first month’s rent, last month’s rent and a security deposit, find the itemized breakdown. The total transfer alone does not establish the amount on which last-month interest should be calculated.

Under Section 15B(2)(a), the landlord must give a receipt when collecting last month’s rent in advance. It must identify:

• The amount, payment date and intended use as the final month’s rent.
• The person receiving payment and, if an agent receives it, the landlord.
• The rented premises.
• The tenant’s entitlement to 5% annual interest or the smaller amount received from the bank, payable under the statute.
• The instruction to provide a forwarding address at tenancy’s end for interest payment.

Record the payment date and tenancy start date separately. Interest begins on the first day of tenancy, even if the money was collected earlier.

2. Establish whether the money was banked

A security deposit must be kept in a separate, interest-bearing Massachusetts bank account. Last month’s rent has no equivalent requirement. The distinction also affects paperwork: the additional bank-information receipt required for a security deposit within 30 days is not required for last month’s rent. MassLegalHelp’s August 2025 guide

For last month’s rent, the calculation depends on where the money was held:

These are the alternatives in the state’s interest guidance. A hypothetical savings rate cannot substitute for actual bank earnings.

If the landlord uses the bank-interest alternative, ask for records showing the amount held, the relevant dates and the interest attributable to that money. This is a practical verification request, not a statutory bank-receipt requirement for prepaid rent. A statement that “no interest was earned” still needs an explanation of where the money was held.

3. Calculate the eligible interest period

Interest on last month’s rent excludes the final month covered by the advance payment. The statute does not impose the security-deposit provision’s one-year holding threshold on last month’s rent. Section 15B(2)(a)

Hypothetical calculation: A tenant prepaid $2,400, the tenancy began September 1, 2025, and the money was never held in a bank account. Assume an unchanged prepayment balance and use whole months as fractions of a year.

Interest = $2,400 × 0.05 × eligible months ÷ 12

The difference comes from when the prepaid rent is used. A tenancy continuing through its first anniversary has a different eligible period from one ending after twelve months.

These illustrations do not establish a statutory day-count convention. For partial months, record exact dates and ask how the fraction was calculated. For bank-held funds, reconcile actual earnings for the eligible period rather than assuming the example’s 5% rate.

4. Separate annual payments from final accounting

At the end of each tenancy year, the landlord must provide a statement showing interest payable and either pay it or notify the tenant that it may be deducted from the next rent payment. If 30 days pass after that year ends without payment or notice permitting the deduction, the tenant may deduct the interest due from the next rent payment. Annual payment requirements

Keep both the statement and evidence of the payment or credit. A notice authorizing a deduction does not establish that the tenant took it; the rent ledger should show what happened.

When the tenancy ends, outstanding interest must be paid within 30 days. In the hypothetical tenancy ending August 31, 2026, that deadline is September 30, 2026. An earlier annual payment does not automatically settle interest for the remaining period. Payment timing

Landlords can add these deadlines to the calendar they use for other rental-management responsibilities.

5. Reconcile the amount still owed

Build a worksheet with one row for each interest period. Record the prepaid balance, eligible dates, calculation basis, interest due, payments or credits already received, and remaining balance. Attach receipts, statements, rent-ledger entries and relevant correspondence.

Before counting a rent credit, check that it was identified as interest. Track security-deposit interest separately so the same payment is not counted against both obligations. For condition evidence, use the separate Boston move-in documentation guide.

If records disagree, send the landlord or manager a written request identifying the original payment and asking for the calculation, bank support for any lower amount, and dates of prior credits. At move-out, include a forwarding address.

If interest remains unpaid more than 30 days after tenancy ends, Section 15B(2)(a) provides for three times the interest owed, court costs and reasonable attorney’s fees upon proof in an action against the landlord. That provision does not award three times the prepaid rent itself. Statutory remedy

For a disputed rent deduction or damages claim, consult a Massachusetts landlord-tenant attorney or legal aid program. Related practical renting guides can help organize other tenancy paperwork. This reconciliation is complete when each interest period has a supported calculation and a documented payment, credit or identified unpaid balance.