The State of New York has clear legislation on the topic of security deposits. Landlords should know the law, and follow it. This is good for business for two reasons:
- It promotes good landlord/tenant relations, and
- It also saves landlords from spending time and money defending their actions
Let's look at the topic of New York security deposit law in a simple, logical order.
- Landlords have the right to collect a security deposit in addition to the first month's rent.
- There is no state-wide limit as to how much that deposit may be, but a limit can apply. If it is a rent stabilized apartment, then the limit is the equivalent of one month's rent.
- If the apartment becomes rent-stabilized after the tenancy begins and the deposit was no more than the equivalent of two months' rent, then the original deposit amount stands.
- Non-refundable deposits are illegal. The deposit is, in effect, held in trust on behalf of the tenant and subject to the terms of the lease
- The deposit should be lodged in an account in a banking institution that has a New York state location.
- Landlords must give their tenants written notice of receipt, how much deposit they received, and must indicate the name and address of the institution where the money is held.
- If the landlord has 6 or more units, the deposit must be held in an interest-bearing account paying a typical interest rate.
- The interest is the tenant's money. It may be paid to the tenant each year, used towards the rent amount, or held until the end of the lease before being returned to the tenant.
- The money may not be co-mingled. That is, it cannot be deposited in an account used to hold general business or personal monies. Landlords may not use the deposited funds for general business or personal expenditure.
- Security deposits may be used in whole or in part to pay for damage or loss, in excess of normal wear and tear, or to cover unpaid rent when the tenancy ends.
- Deposits due to be returned must be within a reasonable number of days following the end of the tenancy. New York law does not specify what it means by "reasonable".
- If ownership changes during a tenancy, then the landlord has 5 days to transfer all deposits to the new owner, and to give written notification to affected tenants stating the name and address of the new owner.
Simple, straightforward and fair to both parties.
Please don't hesitate to contact us for more information.