Tenants' Security Deposit Rights in New York
Important Rules for New York Landlords and Tenants
Landlord tenant law in the state of New York protects specific rights of tenants in the state. An important set of rules included in these laws involves the security deposit. Here are eight basic rights every tenant should know.
Maximum Security Deposit Amount in New York
In general, New York does not set a limit on the maximum amount a landlord can charge a tenant as a security deposit.The landlord can charge whatever a tenant is willing to pay.
Rent stabilized apartments may have different rules. In these apartments, landlords are only able to collect a maximum amount equivalent to one month's rent as a security deposit. An exception to this rule is if the security deposit terms were put into place before the unit became rent stabilized. In these cases, the landlord and tenant must follow the original security deposit amount until the termination of the lease, as long as the security deposit was not more than two months' rent.
Are Nonrefundable Deposits Allowed in New York?
In New York state, security deposits are always considered the property of the tenant, so it is illegal for a landlord to try to collect a security deposit that cannot be returned if the tenant follows all the terms of the lease. n the state of New York, the security deposit is always considered the property of the tenant. The landlord is responsible for placing this deposit in a trust for the term of the lease or rental agreement.
Rules for Storing the Security Deposit
New York landlords must store a tenant's security deposit at a banking institution that is located within the state of New York. The deposit cannot be combined with any personal money of the landlord and the landlord must not attempt to use the money from the security deposit as if it is his or her own.
Rental Properties With Six or More Units:
- If a landlords has a rental property with six or more units, the tenants’ security deposits must be placed in an interest-bearing account. The account must earn interest at a rate that is equivalent to the interest rate for similar deposits in the area. Landlords who own rental property with fewer than six units are not required to place a tenant’s security deposit in an interest-bearing account.
Who Gets the Interest?:
- Landlord- If security deposit earns interest, the landlord is allowed to collect an annual fee equal to one percent of the security deposit.
- Tenant- The remaining interest earned belongs to the tenant. The tenant has three options for this interest. The landlord can:
- -Hold this money for the tenant in the trust until the end of the lease.
- -Put this money toward the tenant’s rent.
- -Pay this interest to the tenant each year.
Written Notice Required After Collecting the Security Deposit
When a New York landlord deposits a tenant’s security deposit in a banking institution, the landlord must notify the tenant in writing. This written notice must include:
- The Name of the Banking Institution
- The Address of the Banking Institution
- The Total Amount of Money Deposited
3 Reasons New York Landlords Can Keep a Security Deposit
In the state of New York, a landlord can keep all or a portion of a tenant's security deposit to cover:
- Damage in excess of normal wear and tear
- Unpaid rent.
- Additional breaches of the lease agreement.
Is a Walk Through Inspection Required in New York?
Timeline for Returning a Tenant’s Security Deposit in New York
Landlords in the state of New York must return a tenant’s security deposit at the termination of tenancy or within a “reasonable time” thereafter. The law does not specify an exact number of days.
Security Deposit Rules When Property Is Sold
If an investment property is sold or otherwise changes ownership, the landlord must do two things within five days of the transfer of ownership.
- Transfer all security deposits to the new owner.
- Notify all tenants, in writing, by certified or registered mail, of the change in ownership. In this written notice, the landlord must provide the tenant with:
- The Name of the New Owner/Owners.
- The Address of the New Owner/Owners.
Different rules may apply if a property has been foreclosed on, so you should seek legal counsel if your property has been foreclosed on or if you are buying a foreclosure to determine the appropriate actions.
What Is New York's Security Deposit Law?
For the original text on security deposit laws in the state of New York, please see New York General Obligations Law §§ 7-103 to 7-108.