Here is your ultimate guide to the New York security deposit law!
Most landlords in Westchester County, New York require a security deposit from their tenants. This is due to the fact that a security deposit helps protect them from any careless or negligent property damage caused by their tenants.
Aside from this, a security deposit also helps:
- Cover unpaid utilities. Examples of utilities that security deposits can cover include high-speed internet, cable connection for TV, trash removal, electricity, water, heat, and gas. Most of these will fall under the tenant’s name. A tenant should ensure that they have cleared the bills when they move out. If they don’t, the landlord must deduct the appropriate amount from their security deposit.
- Cover excessive cleaning costs. A tenant must return the property in the same condition they found it. Unfortunately, some tenants leave their units in a bad state. So, the security deposits cover this.
- Cover lost rental income. A landlord may also use the security deposit to cover for lost rent income. This is often the case when a tenant puts an end of the lease early or abandons the property.
- Cover loss in rent payments. Failure to pay rent is a serious violation of the lease. Unfortunately, it is arguably among the most common lease violation that New York landlords may face. In such cases, the state law permits a landlord to deduct the appropriate amounts from the renter’s security deposit.
Whether you are a landlord, a tenant, or just interested in learning more about the security deposit law in New York, this post is for you.
Guide to the New York Security Deposit Laws
Keeping a Tenant’s Security Deposit
In New York, a landlord may keep all or a part of the tenant’s security deposit to cover negligent or careless property damage. Examples of such damage include:
- Pet stains, burns, or holes in the carpet
- Broken doors or disabled locks
- Unapproved paint on the walls
- Excessive dirtiness in the bathroom or kitchen
- Broken appliances due to misuse
If a tenant causes any of the aforementioned damages, the landlord is permitted to deduct the cost of repair from their security deposit.
That said, a landlord may not charge their tenants for damage resulting from normal wear and tear. Simply put, wear and tear is the expected decline in a property’s condition due to everyday use.
Examples of wear and tear include:
- Normal dirt and wear in carpets
- Broken light bulbs
- Small pinholes in the wall
- Loose door handles
- A couple of scrapes or dings in a wood floor
- A couple of small stains on a carpet
New York Security Deposit Limit
In New York, you may charge your tenant a maximum of one month’s rent as a security deposit.
New York laws note that a landlord must provide notice to their tenant in writing after receiving their security deposit. The notice must be written and include three important aspects:
- Total money deposited;
- The name of the banking institution;
- The address of the banking institution.
Non-Refundable Security Deposits
In the state of New York, a security deposit is considered the property of the tenant. As such, any nonrefundable security deposits are considered illegal.
A New York landlord is only responsible for storing the security deposits in a trust account for the entire term of the lease agreement.
New York Security Deposit Storage
New York security deposit laws state that a landlord must store a tenant’s security deposit at a financial institution. This law also requires them to abide by two things. One, not to use the money for their own purposes. Two, not to combine the tenant’s security deposit with their own money.
Furthermore, if a landlord has more than five units, they must place the security deposits in an interest-earning account. The rate of interest must be equal to the interest rate for similar deposits in the area.
A landlord who has five or fewer units isn’t required to place their tenant’s security deposit in an interest-earning account.
For an interest-earning security deposit, the landlord must collect a yearly fee that is equal to 1% of the tenant’s security deposit. The rest of the annual interest (99%) will belong to the tenant.
The New York landlord has three options when it comes to the interest accrued:
- Hold it for their tenant in trust until the lease comes to an end.
- Put it toward the tenant’s rent.
- Pay it directly to the tenant.
Security Deposit Return New York
In New York, you must return the security deposits to the tenant within 14 days of the termination or end of the lease.
Transfer of Property Ownership
In case the ownership of the property changes during a tenancy, a landlord has two options. One, they transfer all the tenant’s security deposit to the incoming owner. Or two, they notify the tenant of the change in ownership in writing. Additionally, you must provide the notice by sending it via registered or certified mail.
In the notice, the landlord must ensure they provide the tenant with the contact details of the new landlord.
The Bottom Line – Security Deposit Law in New York
There you have it. An overview of the security deposit law in the state of New York. If you have more questions, please seek professional legal services from a licensed attorney. Alternatively, you may contact a professional property management company.
Disclaimer: This article is purely informational. It should not be used as a substitute for legal advice from a licensed attorney in New York.