Overview:
New York security deposit laws are designed to ensure fairness and transparency in rental transactions. These regulations establish clear guidelines for how landlords must handle deposits, from collection to return.
Under New York General Obligations Law § 7-103 to § 7-108, landlords must follow specific procedures to protect tenant funds. Violations may result in financial penalties and legal consequences.
This guide covers:
How much landlords can charge
Where deposits must be stored
Rules for returning security deposits
Penalties for non-compliance
Related Statute: N.Y. Gen. Oblig. Law § 7-103 to § 7-108
1. Security Deposit Limits & Storage Requirements
Maximum deposit: Landlords may not charge more than one month’s rent as a security deposit for residential leases.
Storage requirements: Security deposits must be kept in a separate interest-bearing bank account located in New York State. The account must be used exclusively for holding tenant deposits.
Tenant notification: Within 30 days of receiving the deposit, the landlord must provide the tenant with the name and address of the bank and the account number where the deposit is held.
Law Reference: N.Y. Gen. Oblig. Law § 7-103(2)
2. Security Deposit Returns & Allowable Deductions
Return deadline: Landlords must return the deposit within 14 days of the tenant vacating the unit.
Permissible deductions: Deductions may be made for unpaid rent, damage beyond normal wear and tear, and costs associated with lease violations.
What landlords cannot deduct: Landlords may not deduct for normal wear and tear such as faded paint, worn carpet, or minor scuff marks.
Itemized statement required: If any portion of the deposit is withheld, the landlord must provide an itemized statement of deductions within the same 14-day window.
Law Reference: N.Y. Gen. Oblig. Law § 7-108(1-a)
3. Interest Payments & Documentation Requirements
Interest payments: Landlords must place deposits in an interest-bearing account for buildings with six or more units. Tenants are entitled to the interest earned, minus a 1% administrative fee that landlords may retain.
Move-in condition report: Landlords must offer tenants an opportunity to inspect the premises and complete a move-in inspection form to note any existing damages.
Tenant review period: Tenants should carefully review and return the condition form to help ensure accurate accounting at move-out.
Failure to provide documentation: If a landlord fails to return the deposit or provide an itemized list of deductions within 14 days, they forfeit any right to retain part of the deposit.
Law Reference: N.Y. Gen. Oblig. Law § 7-108(1-a)(c)-(d)
4. Penalties for Mishandling Security Deposits
New York imposes strict penalties for landlords who mishandle security deposits.
Failure to return the deposit within 14 days results in automatic forfeiture of any right to withhold funds and may entitle tenants to recover the full amount.
Failure to comply with escrow or interest rules can result in financial liability and potential civil action.
Law Reference: N.Y. Gen. Oblig. Law § 7-108(1-a)(e)
Key Takeaways
- Landlords may not charge more than one month’s rent as a security deposit.
- Deposits must be held in a separate interest-bearing account at a New York-based bank, with written disclosure to the tenant.
- Deposits must be returned within 14 days of move-out, along with an itemized list of any deductions.
- Interest must be paid annually for buildings with six or more units, minus a 1% administration fee.
- Non-compliance may result in forfeiture of deposit rights and possible legal penalties.
- By understanding and following New York security deposit laws, landlords can avoid costly violations, and tenants can better protect their rights.
