Security deposits exist to protect a landlord’s interest in a property. Irresponsible tenants could cause substantial damage to a unit well beyond the standard wear and tear likely during a rental period. If a tenant leaves without finishing their lease or if they cause major damage, the security deposit on the unit helps reimburse the landlord for their losses.
Unfortunately, there is a lot of confusion about the rights of tenants and landlords to the funds from a security deposit. Understanding what New York allows and does not allow makes it easier for both parties to assert their rights and comply with the law.
New York doesn’t limit security deposits
Many states set a maximum for security deposits, often one or two times the monthly rent. New York does not have similar restrictions, which means that landlords can charge whatever reasonable amount they want for a security deposit.
Security deposits should go into an escrow account
The funds for a security deposit should not go into a general business account. Instead, they should go into a special escrow account that the landlord opens for the tenant and closes at the end of their tenancy. Neither the landlord nor the tenant has the right to touch the security deposit funds until the end of the lease.
When can a landlord retain the security deposit?
Generally speaking, a landlord can only retain the security deposit to recover unpaid rent from a tenant who leaves before the lease is up or to cover damage to the property that exceeds the standard wear that would be reasonable during the lease.
What must landlords do if they want to keep the deposit?
In order to legally retain the security deposit, landlords must provide their former tenants with an inventory in writing of the cost and reasons they retained the deposit within 14 days of the end of their tenancy.