BBG News

Security Deposit Regulations for Non-Regulated Tenants That Are Often Overlooked by Agents and Owners

Sep 20, 2022

Although counterintuitive, just because a tenant is not subject to rent regulation does not mean that the tenant’s security deposit is not regulated. In 2019, radical changes were made to the security deposit requirements affecting non-regulated tenants as part of the Housing Stability & Tenant Protection Act of 2019; the changes were reflected as amendments to General Obligations Law §7- 108. However, although effective since 2019, it would appear that these changes have not been incorporated into the practice and procedures of many owners and property managers to this day.

As a threshold matter, the new provisions limit the amount of security deposit to one month’s rent. The only exception is where the deposit is for a “seasonal dwelling”, which is defined as a dwelling registered as a “seasonal dwelling” with the local or county governmental agency having jurisdiction over the dwelling, and does not involve a lease over 120 days, and the tenant has a primary residence to return to, the address of which is outlined in the lease.

Under the new provisions, the entire amount of the deposit is refundable to the tenant at the expiration of the lease except for (i) reasonable and itemized costs due as a result of the nonpayment of rent, (ii) damages caused by the tenant beyond normal wear and tear, (iii) the nonpayment of utility charges payable directly by the owner, and (iv) moving and storage costs concerning the tenant’s belongings not removed from the dwelling when the tenant vacated.

One of the most overlooked provisions of the new provisions is the requirement that, after the initial lease signing but before occupancy, the owner is required to offer the tenant the opportunity to inspect the apartment to determine its pre-occupancy condition. If the tenant accepts such inspection offer, the parties are to meet and execute a written agreement attesting to the condition of the apartment prior to the tenant taking occupancy. This written agreement is admissible as evidence in Court as to the condition of the apartment at the inception of the tenancy.

Equally overlooked is the requirement that, within a reasonable time after notification by either party of intention to terminate the tenancy, unless the tenant gives less than two weeks’ notice, the owner must notify the tenant in writing of the tenant’s right to request an inspection before vacating the premises. If the tenant requests such inspection, it must take place no earlier than two weeks and no later than one week before the end of the tenancy. The owner must provide the tenant at least 48 hours’ notice of the date and time of the inspection. After the inspection, the owner must provide the tenant with an itemized statement specifying repairs or cleaning that are proposed to be the basis for any deduction from the deposit.

In response, the tenant is to be given the right to cure any such condition before the end of the tenancy. The foregoing right appears to be the first time a tenant is afforded the right by statute to remedy conditions claimed to be the basis for a proposed deduction from a security deposit.

Within 14 days after the tenant has vacated the apartment, the owner must provide the tenant with an itemized statement indicating the basis for the amount of the deposit retained, if any, and return the balance to the tenant. If an owner fails to provide the tenant the itemized statement (if deductions are being made) and the full amount of the deposit (or the balance if deductions are made) within such 14 days, the new provisions provide that the owner forfeits the right to retain any of the deposit.

Since non-compliance could result in forfeiture of the right to retain any part of the deposit, it is recommended that management companies communicate the foregoing rules and procedures to property managers so that owners are not at risk of losing this valuable right.

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