In a perfect world, a tenant who vacates a residential apartment will leave the apartment in pristine condition.
Unfortunately, in the real world–and in New York specifically–tenants are known for leaving apartments with damage that is beyond normal wear and tear. Because of this, New York State allows for the collection of security deposits on the rental of real property.
Security Deposits for the rental of residential apartments are covered by New York General Obligations Law Section 7-103. Building owners are required to treat security deposits as being held in trust, and cannot commingle tenants’ security deposits with the owner’s own accounts.
The law requires building owners with six (6) or more apartments to deposit security deposits in interest bearing accounts in a bank located in New York State, and the accounts must earn interest at a prevailing rate.
Once a security deposit is placed in an interest-bearing account, the owner is entitled to receive, as administrative expenses, up to 1% of the interest accrued annually on the account. If the interest accrued annually exceeds 1%, the tenant is entitled to receive the balance, and, at the tenant’s choice, continue to be held in trust or paid out annually.
With the passing of the Housing Stability and Tenant Protection Act of 2019 on June 14, 2019, the legislature passed laws that affect how an owner collects and returns security deposits.
Pursuant to General Obligations Law Section 7-108:
- The amount of a security deposit may not exceed one month’s rent;
- If a tenant requests a pre-occupancy inspection, all damage found during the inspection must be memorialized in an agreement, and shall not be subject to any reduction of the security deposit upon the tenant vacating the apartment;
- If a tenant requests a pre-surrender inspection on at least two weeks’ notice, after the inspection is conducted, the owner must provide the tenant with an itemized statement specifying proposed repairs and cleaning with corresponding costs. A tenant shall have the opportunity to cure any of the conditions before the end of the tenancy;
- Within 14 days after a tenant has vacated, an owner must return the security deposit to the tenant, minus any permissible deductions, along with an itemized statement of deductions, if any. If an owner does not return the security deposit and statement within such 14 days, the owner forfeits the right to retain any portion of the security deposit;
- If an owner retains any portion of a security deposit due to damage, and an action is commenced by a former tenant disputing those deductions, the burden is placed on the owner to substantiate the reasonableness of the amounts retained.
Both DHCR and the Attorney General’s office have jurisdiction to handle complaints regarding security deposits. BBWG is ready to assist clients in addressing such issues.