Most deduction disputes don’t come down to what was damaged. They come down to knowing what can and can’t be deducted from a tenant’s deposit.
And in New York, property owners are getting a wake up call. If you’re withholding deposits without proper cause, you’ll pay the price.
The New York state attorney general recovered over $2.1 million from landlords specifically for improper deductions and failure to provide itemized statements. Improper deductions are one of the top categories in the AG’s security deposit complaint data going back to 2023.
In New York, like in many states, a landlord can deduct from a security deposit for unpaid rent, damage beyond normal wear and tear, unpaid utilities, and cleaning costs that exceed reasonable use with receipts. That’s the full list under New York security deposit law. Everything else must be returned.
This guide covers what New York law allows, what it prohibits, how to document deductions so they hold up, and what changed for rent-stabilized units under S952B in November 2025.
Maximum Security Deposit Amount in New York
Before getting into deductions, the cap matters. New York security deposit law limits the maximum security deposit amount to one month’s rent for most residential rentals. This applies regardless of unit type, building size, or lease terms.
Additionally, they must, in most cases, secure the deposit in an interest-bearing account. They can’t collect more than one month’s rent and a security deposit separately as two distinct charges.
No additional pet deposits. No cleaning deposits. No advance rent beyond first month plus security deposit. Under the FARE Act, which took effect in June 2025, landlords are also prohibited from passing broker fees to tenants, capping total permissible upfront charges at first month’s rent plus one month’s security deposit.
The maximum security deposit amount is also the maximum a landlord can retain under any circumstances. If the deposit is $3,900, the total of all deductions cannot exceed $3,900 regardless of actual damage costs.
What New York Landlords Can Deduct
Property managers and landlords may deduct under specific circumstances. They can dispute the deposit and provide an itemized list of deductions within 14 days of the tenant’s final day in the unit.
Under GOL §7-108, the allowable deductions from a security deposit in New York are:
- Unpaid rent: rent owed at the time of move-out, including any rent that became due during the notice period
- Damage beyond normal wear and tear: physical damage to the unit that exceeds reasonable use, with documentation
- Unpaid utilities: charges payable directly to the landlord under the lease that the tenant failed to pay
- Cleaning costs: costs that exceed reasonable use, supported by receipts and invoices
- Other lease obligations: specific defaults under the lease that create a monetary obligation payable to the landlord
They can’t use the security deposit to cover costs anywhere outside this framework. Cosmetic updates, general maintenance, or anything that would have been replaced regardless of the tenant’s occupancy are prohibited.
The FARE Act effect: Since June 2025, the security deposit is the only financial cushion a landlord has. No pet deposits. No cleaning deposits. No separate damage funds. Every deduction needs to hold up on its own, because there’s nothing else to fall back on.
When the Deposit Must Be Returned
New York security deposit law is clear: normal wear and tear is never deductible. Property owners must return the security deposit within 14 days, unless an itemized list of approved deductions is provided.
The definition matters because most deduction disputes hinge on it.
Normal wear and tear includes:
- Paint fading or scuffing after several years of normal occupancy
- Minor wall scuffs from furniture placement
- Worn carpet in high-traffic areas after four or more years
- Small nail holes from picture hanging
- Loose door handles or cabinet hinges from regular use
- Faded window blinds or curtains
None of these are chargeable to the tenant. A landlord cannot deduct for repainting a unit where the paint is three years old. A landlord cannot deduct for replacing carpet that was already worn at the end of a four-year tenancy.
What crosses the line: A wall with a large hole punched through it is damage. A wall with paint that’s three years old is wear and tear. Deep carpet stains that can’t be cleaned are damage. Carpet that’s worn from foot traffic after five years is wear and tear. The standard isn’t whether the condition costs money to fix. It’s whether the tenant caused damage beyond what reasonable use produces.
Other prohibited deductions:
- Repairs for pre-existing conditions documented at move-in
- Damage present before the tenancy began
- Cleaning charges without receipts or documentation
- Inflated contractor invoices that don’t reflect actual cost
- Any deposit or advance not permitted under GOL §7-108
Normal Wear and Tear vs. Damage: Drawing the Line
| Condition | Wear and Tear | Damage |
|---|---|---|
| Paint | Fading after 3+ years of normal use | Large holes, unauthorized paint color |
| Carpet | Worn from regular foot traffic after 4+ years | Deep stains, burns, pet damage |
| Walls | Minor scuffs, small nail holes | Large holes, gouges, water damage from negligence |
| Fixtures | Loose from regular use | Broken, cracked, or missing |
| Appliances | Normal operational wear | Damage from misuse or neglect |
| Doors | Hinges loose from regular use | Holes, broken frames, missing hardware |
The practical standard: document as if every deduction will be challenged. A deduction you can’t support with photographs, invoices, and a move-in baseline comparison is a deduction you’ll likely lose.
What’s coming: New York’s pending A8078 adds mandatory pre-exit walk-throughs. Document now as if this standard is already in effect.
The Pre-Move-Out Inspection (S952B, November 2025)
S952B, signed in November 2025, extended full HSTPA deposit protections to rent-stabilized units. One of the most operationally significant changes: rent-stabilized units now require a pre-move-out inspection.
What this requires:
- Property must offer the tenant a pre-move-out inspection before the lease ends
- Tenant has the right to attend
- Inspection must identify any conditions the landlord intends to deduct for
- Tenant must be given an opportunity to remedy those conditions before moving out
- Landlord must provide a written itemized list of any issues identified at the inspection
Why this matters for deductions: If the property fails to offer the pre-move-out inspection for a rent-stabilized unit, they may forfeit the right to deduct for conditions that could have been identified and remedied. The inspection is now a prerequisite to deduction rights on stabilized units, not an optional step.
For any portfolio that includes rent-stabilized apartments, the move-out workflow needs to include a documented inspection offer, a scheduled inspection date, and a written record of what was or wasn’t remedied before the tenant vacated. Otherwise, the standard return of the deposit within 14 days remains in effect.
The Itemized List: How to Do It Right
New York security deposit law requires the landlord to provide the tenant with an itemized list of deductions within 14 days of move-out, the same window as the deposit return itself. Both must happen within 14 days. Not one or the other.
What the itemized list must include:
- Each specific deduction listed separately
- The dollar amount for each item
- Supporting receipts and invoices for each claimed cost
- The remaining portion of the deposit being returned, if any
The property needs to provide specific deductions sent to the tenant’s name and address to identify the reason of the amount of the deposit retained.
Vague descriptions don’t hold up. “Cleaning” is not sufficient. “Professional carpet cleaning, invoice attached, $285” is.
Delivery: The itemized list should be delivered in writing. Where the tenant’s forwarding address is uncertain, use certified or registered mail and document the delivery attempt.
The 14-day rule is strict liability: In a case reviewed by the Appellate Division, a landlord lost the right to retain any portion of the deposit because the itemized statement arrived 20 days after the tenant left the unit, instead of day 14. Six days late. Full forfeiture. The court did not consider whether the underlying deductions were legitimate. If a landlord fails to provide the itemized list within 14 days, the landlord cannot retain any part of the deposit.
AG enforcement: Failure to provide an itemized list of deductions is one of the top violation categories in the AG’s security deposit complaint data. The Fairfield Properties enforcement action recovered $422,598 for 899 tenants. Missing itemized statements were among the core violations.
Documentation Standards That Hold Up
The difference between a deduction that holds up and one that gets reversed in small claims court is almost always documentation. Here’s what a defensible deduction file looks like.
Move-in documentation:
- Dated, signed move-in inspection report completed with the tenant
- Timestamped photographs of every room, every wall, every fixture
- Both parties sign the inspection report
- Copy retained in tenant file
Move-out documentation:
- Move-out inspection using the same checklist format as move-in
- Timestamped photographs of every condition being noted
- Comparison against move-in photos for each claimed item
- Written inspection report completed within 24 hours of vacancy
Supporting receipts:
- Contractor invoices showing actual costs, not estimates
- Receipts for cleaning services with line-item breakdown
- Invoices must reflect work performed at the specific unit, dated after move-out
Contractor invoices: The AG scrutinizes inflated contractor charges. An invoice for $1,200 in carpet cleaning for a one-bedroom apartment will draw scrutiny. Document what was done, why it was necessary, and what it cost. Invoices from contractors your company also uses for general maintenance create conflict of interest risk in deduction disputes.
Dispute Prevention: What PMs Get Wrong
The AG’s complaint data from nearly 5,000 security deposit complaints identifies a consistent pattern. These are the most common sources of deduction disputes.
Deducting for normal wear and tear. The most common violation. A landlord cannot charge for repainting after a multi-year tenancy, replacing carpet that was worn from use, or cleaning conditions that are consistent with normal occupancy.
Missing the 14-day deadline for the itemized list. When properties fail to provide the itemized statement within 14 days they lose all deduction rights. This happens most frequently at peak turnover volume in summer when the workflow is stretched.
No move-in documentation. Without a signed move-in inspection and dated photographs, a landlord cannot prove what condition the unit was in before the tenant moved in. Any damage claim becomes the tenant’s word against the landlord’s.
Deducting for pre-existing damage. A landlord cannot deduct for a damaged door frame that was damaged before the tenancy began. If it isn’t in the move-in inspection, it doesn’t exist as a deduction basis.
Inflating cleaning or repair costs. Deductions must reflect actual costs. A landlord cannot deposit funds into the security deposit account and charge above-market rates for work performed by affiliated vendors.
Failing the rent-stabilized inspection requirement. Since November 2025, failing to offer the pre-move-out inspection on stabilized units forfeits deduction rights on items that could have been identified and remedied. Every stabilized turnover now requires a documented inspection offer.
How Rentable Supports Deduction Compliance
Every deduction dispute has the same root cause: a process that breaks down somewhere between move-in and the itemized statement. Rentable covers the compliance layer that keeps that process tight.
Security Deposit Account Compliance
Rentable works with a network of banking partners to ensure security deposit funds are held in the correct account structure from day one: FBO title, interest-bearing where required, individual sub-accounts in NY, NJ, and MA. Account compliance is handled automatically.
14-Day Deadline Tracking
Rentable tracks the 14-day return and itemized statement deadline automatically from the move-out date. Your team is alerted before the window closes. The deadline doesn’t get lost in a peak-season backlog.
Post Move-Out Dormancy Tracking
When a deposit check goes uncashed after move-out, Rentable flags it and starts the dormancy clock. In New York, security deposit funds become unclaimed property and must be turned over to the state in the third year. Rentable tracks the full post move-out tail through to the KAPS reporting workflow if it gets there.
Full Compliance Tracking Across All Regulations
New York security deposit law changes. S952B changed the rules for stabilized units in November 2025. Rentable monitors compliance obligations across all applicable regulations automatically, so your team isn’t tracking legislative changes manually.
Documentation and Tenant Communication
Rentable helps property accountants with audit-ready records for every deposit: account details, interest calculations, return confirmations, and itemized statements. Tenant communication is handled within the platform, reducing the back-and-forth that creates dispute risk.
For a complete overview of how Rentable handles the full deposit lifecycle in New York, see our NYC security deposit compliance overview.
New York Security Deposit Lawful Deductions are Your Responsibility
Property managers are facing larger compliance issues than ever. Rental deposit management at scale isn’t an admin task. It’s an operational necessity and a real compliance burden.
Veteran portfolio managers and new owners both need to stay vigilant and have real processes and security deposit rules squared away as an SOP, not as a reaction.
Frequently Asked Questions
What can a landlord legally deduct from a security deposit in New York?
Under New York security deposit law, a landlord can deduct for unpaid rent, damage beyond normal wear and tear with documentation, unpaid utilities payable directly to the landlord under the lease, and cleaning costs beyond reasonable use with receipts. The total of all deductions cannot exceed the deposit amount, which is capped at one month’s rent. Everything outside this list must be returned to the tenant.
What is normal wear and tear in New York security deposit law?
Normal wear and tear is deterioration that results from ordinary, reasonable use of the rental unit over the course of a tenancy. It is never deductible. Examples include paint fading after several years of normal occupancy, minor wall scuffs, worn carpet after four or more years of regular use, small nail holes, and loose door handles. A landlord cannot deduct for conditions that result from the passage of time and reasonable use.
How long does a NYC landlord have to provide an itemized deduction statement?
14 days from the tenant’s move-out date. The itemized list of deductions must be delivered to the tenant within the same 14-day window as the deposit return. If the landlord fails to provide the itemized list within 14 days, the landlord forfeits the right to retain any portion of the deposit regardless of whether the underlying deductions were legitimate.
What changed for rent-stabilized units under S952B?
S952B, effective November 2025, extended full HSTPA deposit protections to rent-stabilized units. Landlords must now offer a pre-move-out inspection to rent-stabilized tenants before the lease ends and provide a written itemized list of any issues identified. Failure to conduct the inspection may forfeit deduction rights on conditions that could have been identified and remedied before move-out.
What documentation do I need to support a security deposit deduction in New York?
A defensible deduction file includes a signed move-in inspection report with timestamped photographs, a move-out inspection using the same checklist, timestamped photographs of each claimed condition compared against move-in photos, contractor invoices reflecting actual costs for work performed after move-out, and receipts for any cleaning or repair services. Without a move-in baseline, any damage claim is difficult to sustain in a dispute.
Last updated: March 2026. Statute referenced: New York General Obligations Law §7-108. This guide reflects New York security deposit law as amended by S952B (effective November 2025) and the FARE Act (effective June 2025). It is intended as operational guidance for property managers and does not constitute legal advice. Consult a qualified attorney for advice specific to your situation.
