Security Deposit Rules in New York
In New York, landlords are entitled to demand a security deposit from their tenants — typically equivalent to 1 month’s rent — that will provide a form of collateral to the landlord for any excessive damage caused to the premises (or to cover a situation in which the tenant abandons the premises without paying for the remaining term of the lease). Security deposit issues frequently give rise to disputes, in part because the security deposit amount itself may be substantial in relation to the total rent, but more often because the tenant may disagree with the landlord as to whether the any damage has been caused to the premises that would justify the landlord withholding the deposit.
New York law imposes a variety of security deposit rules (the statute that implements the baseline rules is the NY General Obligations Law, sections 7-103 through 7-108), though there is a surprising amount of statewide and contractual variance. As such, if you have any questions or concerns about safety deposit rights and limitations in New York, it’s recommended that you seek the guidance of an experienced landlord-tenant attorney.
So, what security deposit rules does New York impose on landlords and tenants? Consider the following.
No Limits on Security Deposit Charge
New York law does not impose a limit on how much landlords may charge for their security deposit, though, as a matter of industry custom, security deposits tend to be equivalent to about one month’s rent. As rent increases, naturally, the landlord may increase the security deposit to compensate.
Bear in mind that despite the lack of a statewide limit on the security deposit amount charged to a tenant, there may be municipal-level and county-level variance in the rules — particularly in relation to rent controlled properties. For example, buildings in New York City under 421-a rent stabilization are limited in charging a security deposit which cannot exceed an amount equal to one month of the maximum allowable rent. Make sure to assess whether your local laws impose a security deposit limit if you intend to go above and beyond the customary charge.
Storage Rules Are Strict
Security deposit storage is tightly regulated. If you own a property that has fewer than six tenancy units, the security deposit must be held in trust. If you own a property that has six or more tenancy units, then the security deposit must be held in an interest-bearing account at a banking institution located in the state of New York. Interest earned on the security deposit accounts must be paid out to the tenants. Landlords are entitled to collect a 1% administrative fee on the interest for their troubles, however.
A landlord must not commingle security deposit funds with their personal accounts. New York law prohibits such commingling, and further, prohibits landlords from accessing security deposit funds for personal use.
Lawfully Claiming the Security Deposit
A landlord may withhold funds from the security deposit (partially or in full) for the reasonable costs of repairs to correct damages that are in excess of the normal expectations of wear and tear. Funds may also be withheld to cover any unpaid rent, and may further be withheld to compensate for various considerations, such as if the tenant failed to meet certain contractual obligations.
Returning the Security Deposit
The law requires that a landlord return whatever remains of the security deposit a reasonable time after the tenant has vacated the property and surrendered it to the landlord. The law does not specify — by statute — a standard for what is considered a reasonable amount of time, so in the event of a landlord-tenant dispute, the court will decide whether the security deposit was returned within a reasonable amount of time after the end of the tenancy (given the circumstances). Generally, a landlord should not wait more than a month to return the security deposit, as a court might find that such a delay is unreasonable.
If you are a New York landlord concerned about your security deposit rights, or are facing a dispute relating to a tenant’s security deposit, you should consult as soon as possible with an attorney who has experience handling New York landlord tenant law. Let the skilled attorneys at Griffin Alexander, P.C. assist you!