New York Security Deposit Law

Maximum Security Deposit Amount

Maximum amount: New York landlords are allowed to charge up to 1 month’s rent as a security deposit, regardless of furnishings, lease length, or number of properties that a landlord owns. If the rent increases, landlords can collect funds from the tenant to make up the difference from the originally collected deposit.

Pet deposits: Landlords can charge a pet deposit at any amount, as long as it does not exceed one month’s rent when combined with the regular security deposit. Landlords should note that they cannot charge pet deposits for service or emotional support animals (ESAs).

Penalties: Exceeding the New York security deposit law limits could entitle the tenant to the entire amount refunded, plus punitive damages if the tenant takes the landlord to small claims court.

Handling Damage Deposits

When dealing with money still considered the tenant’s property, such as the security deposit, New York landlords should follow the law wholly and accurately to avoid penalties.

Security deposit storage: Landlords in New York must keep all security deposits in a regulated financial institution, in an account separate from their personal funds. Those with six or more units must store the security deposit in an interest-bearing account. The landlord is entitled to retain 1% of that interest. The rest belongs to the tenant.

Interest-bearing account: Landlords with six or more units must store the security deposit in an interest-bearing account and pay the tenant those interest payments, minus 1%. Landlords with fewer than six units are not required to store the funds in such an account, but if they do, the same rules apply.

Receipt: New York landlords must give the tenant a security deposit receipt after accepting the funds. The receipt should list the amount collected, the date of collection, and the name and address of the financial institution holding the funds.

Documentation: While a move-in checklist isn’t required, providing one to the tenant is a good practice. It helps establish a baseline of the unit’s condition and can help resolve disputes. More on that below.

Ownership transfer: If the landlord sells the property during a tenancy, they must transfer the deposit to the new owner, who is then required to follow New York security deposit law. The tenant should be notified in writing of the change, and the notice must include the name and address of the new bank holding the funds.

Deductions

New York security deposit law allows landlords to deduct and use funds from the security deposit in certain circumstances, like significant damage or unpaid rent. Deducting funds to cover expenses not included in the list below (including normal wear and tear) could open them to liabilities and financial penalties.

Landlords can deduct for:

Unpaid rent. If the tenant leaves the unit with a balance remaining on their rent payments, the landlord can deduct funds from the deposit to help cover the debt. Landlords who use TurboTenant can easily track rent payments and collect rent online to reduce the risk that a tenant might fall behind.

Damage beyond normal wear and tear. Damage to the property beyond the normal wear of daily life can be corrected and paid for with funds from the damage deposit. This could include large holes in the walls, floors, or ceilings, missing or damaged appliances, unauthorized painting or graffiti, torn or excessively stained carpet, or broken doors and windows.

Unpaid utility bills. If the lease agreement outlines that the tenant is responsible for paying the landlord for utilities, any unpaid utilities may be covered by funds from the security deposit after the tenant has moved out. This is not allowed if the tenants pay the utility company directly or if it’s not explicitly written into the lease.

Smoking-related damage. If smoking is prohibited in the lease, the landlord may use money from the damage deposit to replace smoke-damaged carpets, mitigate unpleasant odors, and clean nicotine stains off the wall.

Excessive cleaning. If the tenant leaves the unit in highly unsanitary conditions, the landlord may use funds from the deposit to clean it. Light cleaning, however, is expected after a tenancy ends and is not a valid reason for a deduction.

Landlords cannot deduct for:

Damage caused by normal wear and tear. Occupying a property throughout a tenancy is bound to cause minor wear and some damage. Nail holes, scuffed baseboards, marks on walls, faded paint, old wallpaper, worn carpet, and loose doorknobs are all considered normal wear and tear, and landlords cannot cite them as a reason for a deduction.

Damage caused by natural causes. Landlords cannot use security deposit funds to cover weather-related damage, unless the tenant is directly responsible for not properly maintaining the unit in a way that allowed weather damage.

Routine property maintenance or improvements. New York landlords cannot use security deposit funds to conduct regular property maintenance or to improve the property between tenants.

Costs not included in the lease. Landlords cannot retroactively charge a tenant for a cost not included in the list of allowable deductions unless explicitly listed in the lease (like utility payments).

Return Timeline

Timeframe: New York law for security deposits states that the deposit must be returned within 14 days of the tenant moving out. If the landlord intends to make deductions, they must provide an itemized list of those deductions within 14 days. If not, they forfeit the right to withhold anything.

Deduction tracking: Landlords must itemize deductions and deliver the document to the tenant within 14 days of move-out. It must include a clear list of each damage charge, an explanation of why it’s a necessary deduction, and copies of invoices, repair estimates, and receipts. If the landlord does not provide the tenant with an itemized list, they forfeit any right to make deductions and must return the entire deposit.

Itemized deduction notification: The landlord must deliver the notification to the tenant via a method that tracks the communication, like a certified letter. This way, if a dispute over the timing of the notification comes up, there’s a paper trail.

Penalties: If you do not correctly return the security deposit, New York landlords could be liable for returning the full amount of the security deposit, plus additional interest and penalties, even if you intended to deduct funds.

Handling Disputes

Sometimes, a tenant may take issue with the deductions or some other aspect related to New York security deposit law. But by keeping consistent in your practices and documenting everything along the way, you’ll be prepared in case a dispute suddenly pops up.

Move-in/move-out checklist: A move-in checklist is a great way to establish a baseline with your tenant regarding the physical condition of the property. The checklist form lists the major features of the residential unit and can even include photos and detailed descriptions to become the basis of comparison when the tenant moves out. If a tenant disputes a deduction you’ve made for a necessary repair due to damage caused by the tenant, the checklist and photographs can be used as evidence to support any claims.

Tenant challenge: If a tenant challenges any deduction claims, respond promptly to the notice and gather all supporting documentation, including move-in and move-out checklists and photos. Depending on the claim, consider negotiation with the tenant to find a compromise and avoid further escalation.