New York security deposit laws for landlords: one month, a trust account and 14 days
New York limits a security deposit to one month's rent, requires you to hold it in trust apart from your own money, and gives you 14 days after the tenant vacates to send an itemized statement and the rest of the deposit. Miss the 14 days and you forfeit the right to keep any of it. The rules are in General Obligations Law sections 7-103 and 7-108, and they apply to most dwellings outside rent stabilized units.
How much deposit can a New York landlord collect?
Section 7-108(1-a)(a) says no deposit or advance shall exceed one month's rent. It covers deposits and advances, so a first month paid in advance is fine as rent, but an extra "last month" deposit on top of a full security deposit would break the cap. The section has narrow exceptions, among them seasonal use dwelling units that meet the section's registration conditions, owner-occupied cooperative apartments and certain licensed senior and care communities. Rent stabilized units fall under section 7-107 instead, which is outside this post.
Section 7-108(1-a)(b) also says the whole deposit is refundable except for the reasonable, itemized costs of unpaid rent, damage beyond normal wear and tear, unpaid utility charges payable directly to the landlord under the lease, and moving and storage of the tenant's belongings. You may not keep any of it for ordinary wear and tear or for damage caused by a prior tenant.
Where must the deposit be held?
Section 7-103(1) says the money stays the tenant's money, is held in trust, and may not be mingled with your personal money or become an asset of yours. If you put it in a bank, you must notify each tenant in writing of the bank's name and address and the amount deposited (7-103(2)), and the bank must have a place of business in New York.
In buildings with six or more family dwelling units, section 7-103(2-a) requires an interest bearing account that earns the prevailing rate for similar deposits in the area. If you use an interest bearing account you may take one percent a year of the deposit as your administration expense, and the rest of the interest belongs to the tenant, either held in trust or paid out each year.
Example a made-up 8 unit building holds a $2,400 deposit in an interest bearing account that pays a made-up 3% a year. The account earns $72. The landlord may keep 1% of the deposit, $24, as the administration expense. The tenant is owed the other $48 for the year, so a tenant who leaves after two years is owed $96 in interest, on top of the $2,400.
If the lease ends in a month when the bank does not pay interest, 7-103(2-b) says you pay the tenant whatever interest you are able to collect at termination.
What inspections does New York require?
New York adds two inspection steps that most states do not have. Under 7-108(1-a)(c), after the lease is signed and before the tenant moves in, you must offer an inspection with the tenant. If the tenant asks, you both sign a written agreement describing the condition and any defects, and you may not later keep money for a condition noted in it.
Under 7-108(1-a)(d), within a reasonable time after either side gives notice to end the tenancy, you must tell the tenant in writing of the right to request a move-out inspection and to be present. The exception is a tenant who gives less than two weeks' notice. If the tenant asks, the inspection happens no earlier than two weeks and no later than one week before the tenancy ends, with at least 48 hours of written notice of the date and time. Afterwards you give an itemized statement of proposed repairs or cleaning, and the tenant can fix those items before leaving.
What is the 14 day rule?
Within fourteen days after the tenant has vacated, you must give the tenant an itemized statement of the basis for any amount kept and return the remaining portion (7-108(1-a)(e)). If you fail to provide the statement and the deposit within fourteen days, you forfeit any right to retain any portion of the deposit. The clock runs from the day the tenant vacates, not from the end of the lease.
Example a made-up tenant moves out on March 1 from a unit with a $2,400 deposit. The landlord deducts $600 for rent for the days the tenant stayed past the paid period and $350 to repair a burn in the carpet that is beyond normal wear. The statement lists both items with the amounts and goes out with a $1,450 refund by March 15. If it goes out on March 20, the deductions are forfeited and the full $2,400 is due.
What are the penalties and who has to prove what?
In any dispute about the amount kept, the landlord bears the burden of proof that the amount was reasonable (7-108(1-a)(f)). A person who violates the subdivision is liable for actual damages, and one found to have willfully violated it is liable for punitive damages of up to twice the amount of the deposit or advance (7-108(1-a)(g)). Any agreement by a tenant waiving or modifying these rights is absolutely void (7-108(3)).
If I buy or sell a building, who owes the deposits?
Under 7-108(2), a buyer who does not receive the deposits is still liable to the tenant, with accrued interest, for any deposit it has actual knowledge of. A buyer is treated as knowing about a deposit placed in a bank in the six months before closing, one acknowledged in a lease in effect at closing, or one the tenant proves with documents. A buyer must notify tenants within thirty days of closing when there is no record, and may demand an escrow of one month's rent for those units. See also security deposits when an apartment building is sold.
How DoorKeeping handles it
In DoorKeeping each property has its own books and bank account, and the deposit for each tenant is recorded in that property's books as money you owe back. That makes the bank and amount letters to tenants and a sale-day deposit list a copy job. Leases are e-signed and kept as documents. DoorKeeping never holds the deposit, and a payout waits for your one tap. It does not give legal advice.
Sources
Questions
- What is the maximum security deposit in New York?
- One month's rent for most dwellings (N.Y. Gen. Oblig. Law 7-108(1-a)(a)), with narrow exceptions such as registered seasonal use units and owner-occupied cooperative apartments.
- How long does a New York landlord have to return a deposit?
- Fourteen days after the tenant vacates, with an itemized statement of anything kept. Late means you forfeit the right to keep any of it.
- Does a New York landlord owe interest on a security deposit?
- In buildings with six or more dwelling units, yes: the prevailing rate in an interest bearing account, less 1% a year the landlord may keep as an administration expense. Smaller buildings that use an interest bearing account follow the 1% rule too.
- Can I keep money for a prior tenant's damage?
- No. Section 7-108(1-a)(b) says you may not keep any of the deposit for ordinary wear and tear or for damage caused by a prior tenant.