Who owes the security deposits after an apartment building is sold?
In the states covered here, the deposits follow the building: the seller transfers them to the buyer, tells the tenants, and the buyer becomes responsible for returning them. New York gives the seller five days after the deed to do it by certified or registered mail, California lets the seller transfer or refund with notice, and Florida presumes the new owner received each deposit up to one month's rent. A buyer who closes without the money is usually still on the hook.
Why buyers lose money here
A security deposit is the tenant's money, held by whoever owns the building. When the building changes hands, the tenant does not move and does not sign anything new, so the law has to say who now owes the deposit back. The answer in the states below protects the tenant first. If the seller kept the cash and the buyer did not get credit at closing, the tenant can still usually look to the new owner.
That makes the deposit list one of the most important pages in a purchase. Our post on the first 30 days after buying a building covers the Texas rule; this one covers three more states and what to do on both sides of the closing table.
Three states compared
| California | New York | Florida | |
|---|---|---|---|
| Statute | Civil Code 1950.5(i) to (l) | General Obligations Law 7-105 | Statutes 83.49(7) |
| What the seller does | Within a reasonable time, either transfers the remaining deposit (after lawful deductions) to the buyer, or returns it to the tenant with an accounting | At delivery of the deed or within five days after, turns the deposit over to the buyer | Transfers the deposit and any earned interest to the new owner, with an accounting |
| Tenant notice | By personal delivery or first-class mail: the transfer, any claims, and the buyer's name, address and phone | By registered or certified mail: the turnover and the buyer's name and address | Not stated in this subsection; the new owner then holds the deposit under 83.49 |
| Seller released when | The seller complies with (i) | The deposit is turned over as the statute says | The new owner gives a written receipt |
| If it goes wrong | Seller and buyer are jointly and severally liable for the deposit; a buyer who believed in good faith after reasonable investigation that it was transferred is protected | The buyer is responsible once it receives the deposit; failure to comply is a misdemeanor | The new owner is presumed to have received the deposit, a presumption limited to one month's rent |
Sources: California Civil Code 1950.5, New York GOL 7-105, Florida Statutes 83.49. Other states have their own versions. Check your state's statute and ask the closing attorney how they handle it.
California adds a practical rule: before a voluntary transfer, the seller gives the buyer a written statement of each remaining deposit, any lawful deductions, and whether the seller chose to transfer or refund. And a buyer who has not restored the original deposit or given the tenant an accounting generally cannot demand a new one.
A worked closing
Example a made-up 12 unit New York building closes on March 3. The seller's rent roll lists 12 deposits totaling $18,600, but the seller's deposit account holds $17,050 because unit 4's $1,550 deposit was spent years ago. The buyer asks for a closing credit of the full $18,600, since the buyer will owe every deposit on the list when tenants leave. The seller agrees. By March 8, five days after the deed, the seller sends 12 certified letters naming the buyer and its address. The buyer opens a deposit account for the building's LLC and moves the $18,600 into it the same week.
If the buyer had accepted $17,050, the missing $1,550 would have become the buyer's cost the day unit 4 moved out.
Checklist for the buyer
- Ask for a deposit list unit by unit: tenant, amount, date paid, where it is held, and any interest owed.
- Check each amount against the signed lease. Leases are the evidence; a spreadsheet is not.
- Ask each tenant to confirm their deposit amount in writing before closing, where your purchase contract allows it.
- Take a credit at closing for the full total on the confirmed list, plus any interest the state or lease requires.
- Make sure the seller sends the tenant notices your state requires, and keep copies.
- Put the money where your state requires it (Florida, for example, has three holding options and a 30-day tenant notice) and record the total as a liability, not income.
Checklist for the seller
- Decide, where your state allows a choice as California does, whether to transfer each deposit to the buyer or refund it to the tenant with an accounting.
- Give the buyer a written statement of each deposit and any lawful deductions before closing.
- Send the tenant notices on time and by the method the statute names. New York's five-day window is short.
- Get a written receipt from the buyer for the deposits transferred. In Florida, that receipt is what releases you.
- Keep the deposit statement, notices and receipt with your closing file.
Where DoorKeeping fits
In DoorKeeping, each property sits in its own LLC books with its own bank account and its own deposits-held balance, so a buyer can enter the confirmed deposit list on day one and see the liability match the cash. A seller can pull the deposit list from the same books by asking Claude or ChatGPT. Signed leases and documents stay with the property. DoorKeeping does not hold deposits or rent; they sit in the owner's own bank account.
Sources
- California Civil Code section 1950.5, read Oct 30, 2026
- New York General Obligations Law section 7-105, read Oct 30, 2026
- Florida Statutes section 83.49, read Oct 30, 2026
Questions
- Does the new owner have to return the old owner's security deposits?
- Usually yes. In California both can be liable if the seller did not transfer or refund properly, in New York the buyer is responsible once it receives the deposit, and Florida presumes the new owner received it, up to one month's rent.
- How long does a New York seller have to transfer deposits?
- General Obligations Law 7-105 says at delivery of the deed or within five days after, with notice to each tenant by registered or certified mail.
- Should deposits be a credit on the closing statement?
- That is the common way to move them, because the buyer takes on the duty to return them. Confirm the amounts against the leases first, and follow what your closing attorney and state law require.