Security Deposit Rules in New York: Limits, Interest and 14-Day Return

New York law controls how much deposit a landlord can ask, where it is held and how fast it comes back. The rules below follow the Attorney General’s tenants’ guide and the statute behind it. Other tenant protections are on the renting hub.

What is the maximum security deposit in New York?

All tenants can be required to give a deposit at the start of the tenancy, limited to no more than one month’s rent. The statute, General Obligations Law section 7-108, bars any deposit or advance above one month’s rent, with exceptions for seasonal-use units and owner-occupied co-ops. A seasonal-use unit is one whose tenant occupies it for no more than 120 days or a shorter period set in the lease. Any agreement in which a tenant waives these rights is void. The one-month limit also means a landlord cannot ask for last month’s rent and a deposit.

If the lease is renewed at a higher amount, or the rent rises during the lease, the landlord may collect extra money to bring the deposit up to the new monthly rent. For broader tenant rules, see tenant rights in New York.

Where the landlord must keep the money

Landlords, whatever the number of units, must treat deposits as trust funds belonging to tenants and may not mix them with their own money. Buildings with six or more apartments must keep all deposits in a New York bank account earning interest at the prevailing rate. Each tenant must be told in writing the bank’s name and address and the amount of the deposit.

Interest splits two ways. The landlord may keep annual administrative expenses of 1% of the deposit, and all other interest belongs to the tenant. In the Attorney General’s worked example, the tenant is entitled to $5.00 and the landlord may keep $10.00, 1% of the deposit, as an administrative fee. A landlord of a building with fewer than six apartments who voluntarily uses an interest-bearing account must follow the same rules.

When you move in

After the lease is signed but before the tenant begins occupancy, the landlord must offer the tenant a chance to inspect the premises with the landlord or the landlord’s agent to determine the condition of the property. If the tenant asks for the inspection, both sides sign a written agreement before move-in that notes existing defects and damage. At move-out the landlord may not keep any of the deposit for a condition noted in that agreement, or for damage caused by a prior tenant.

The move-out inspection

A tenant planning to move out can ask the landlord to inspect before the move-out date. The landlord must allow the tenant to be present and must say what needs to be fixed or cleaned.

The statute sets the sequence. The landlord must tell the tenant in writing of the right to request a move-out inspection and to be present at it. If the tenant asks, the inspection must happen no earlier than two weeks and no later than one week before the end of the tenancy. The landlord must give at least 48 hours written notice of the date and time. After the inspection the landlord gives an itemized statement of the repairs or cleaning that may be deducted, and the tenant can fix those items before the tenancy ends.

The 14-day return and itemized statement

For tenants in units that are not rent stabilized or rent controlled, the landlord must return the deposit within 14 days of move-out. Within those 14 days the landlord must give an itemized statement showing the basis for any amount kept and return the rest. A deduction for damage needs an itemized receipt describing the damage and its cost.

What can come out of the deposit is narrow. A landlord may use it for unpaid rent or the reasonable cost of repairs beyond normal wear and tear if the tenant damages the apartment. The statute also lists unpaid utility charges payable directly to the landlord, and moving and storage of the tenant’s belongings, as lawful itemized costs. The landlord may not retain any amount for ordinary wear and tear or for damage by a prior tenant. If the landlord misses the 14-day deadline, the landlord forfeits any right to keep any part of the deposit. If the landlord fails to send the receipt in 14 days, the whole deposit must go back, damage or not.

Rent-regulated units follow a different rule. The 14-day move-out provisions currently apply only to units that are not rent regulated. For a rent-regulated unit, the landlord must return the deposit, less lawful deductions, at the end of the lease or within a reasonable time after, whether or not the tenant asks.

If the building is sold

When a building is sold, the landlord must transfer all deposits to the new owner within five days or return them to the tenants. The landlord must tell tenants the new owner’s name and address by registered or certified mail. Buyers of rent-stabilized buildings are directly responsible to tenants for returning deposits and any interest.

The statute adds two buyer duties. A new owner with actual knowledge of a deposit is liable to the tenant for repaying it plus accrued interest. Where a unit has no record of a deposit, the new owner must notify the tenant in writing no later than 30 days after closing, and may demand that the seller set up an escrow account equal to one month’s rent for that unit.

If the deposit does not come back

Tenants should first try to resolve a deposit problem with the landlord. If that fails, they may contact the nearest local office of the Attorney General. In a dispute over deductions, the landlord bears the burden of proof as to the reasonableness of the amount retained.

A landlord who violates the deposit statute is liable for actual damages, and a willful violation adds punitive damages of up to twice the deposit. Under the Uniform District Court Act section 1801, a small claim covers money only, up to $5,000 excluding interest and costs, and can be brought where the claimant is or was a tenant of the defendant’s property and the claim relates to the tenancy.

Long Island Housing Services offers counseling to both tenants and landlords at 631-567-5111 ext. 376. Before you sign, compare rents in North Shore apartments by town or read the Sea Cliff guide.