Key Takeaways
New York limits security deposits to one month’s rent for most rentals and prohibits nonrefundable fees.
Landlords must store deposits in separate accounts and follow specific procedures when collecting, deducting from, or returning them.
Violating security deposit laws can result in financial penalties, legal disputes, or forfeiture of the right to make deductions.
If you’re considering renting out a property in New York, it’s essential to understand the state’s security deposit laws. New York is known for having tenant-friendly legislation, and noncompliance, even if accidental, can result in steep fines, lawsuits, and difficult relationships with tenants.
Learning how security deposits must be collected, stored, and returned will help you avoid legal trouble while building trust with your tenants. These rules are designed to protect both parties: landlords have a financial safeguard against property damage, and tenants have the assurance that their money is being handled fairly.
In this guide, the team at Yourway Properties, Inc. will walk you through everything you need to know about New York’s security deposit laws so you can confidently and legally manage your rental property.
A Comprehensive Guide to Security Deposit Laws in New York
New York has detailed, tenant-focused laws that regulate security deposits. Whether you’re a first-time landlord or manage several units, knowing the rules will help you avoid expensive mistakes when it comes to a security deposit. From how much you can collect to how and when the money must be returned, nearly every aspect is covered by the law. Below, we break down the most important points.
Security Deposit Limit
In most cases of the security deposit rules, New York landlords can charge no more than one month’s rent as a security deposit. However, there are exceptions. Owner-occupied cooperative apartments and seasonal-use dwellings are not subject to this limit on the security deposit, but if the building is rent-regulated, tenants are still required to pay a security deposit for staying in one of these rent-stabilized buildings.
While landlords may charge a pet deposit, the total security deposit (pet fee included) still cannot exceed one month’s rent unless the property qualifies for an exemption. Importantly, landlords are not allowed to charge pet deposits or additional fees for emotional support or service animals. Additionally, ongoing charges like monthly pet rent or nonrefundable pet premiums are not permitted in exchange for allowing pets.
Nonrefundable Fees
New York landlord-tenant law does not allow landlords to charge any nonrefundable fees in addition to the security deposit of one month’s rent. The security deposit itself is meant to cover damages beyond normal wear and tear or cover unpaid rent and must be fully refunded if the tenant meets all lease terms and leaves the unit in good condition not past normal wear and tear.
While deductions to the security deposit are allowed under certain circumstances, any additional, nonrefundable charges are not. If a landlord refuses to follow this, there could be legal repercussions under the Tenant Protection Act or even the Fair Housing Laws.
Collecting the Security Deposit
Before collecting a deposit, landlords must inform tenants of their right to inspect the property before moving in. If the tenant opts for this inspection, both parties must complete and sign a written statement detailing the unit’s condition. This should be sent to the tenant through registered or certified mail and kept in a New York State bank account. Any damages or defects noted during this initial inspection cannot be used as grounds for deductions from the security deposit at the end of the lease or eviction process.
Storing the Security Deposit
Security deposits in New York must be kept separate from other landlord funds. If the landlord owns a building with six or more rental units, the deposit must be stored in an interest-bearing account and cannot exceed that of the first month’s rent or last month’s rent.
In such cases, the landlord must inform the tenant in writing of the name and address of the financial institution where the full security deposit is held. This notice should also include the exact deposit amount, especially if deposits from multiple tenants are kept in the same account.
Written Notice After Receipt
Although landlords are not legally required to provide tenants with a written receipt for their deposit, they must still deliver a written notice stating where the deposit is being held. This includes the name and address of the financial institution and, when relevant, the specific amount held on behalf of the tenant, which should be equal to the monthly rent.
Deductions from the Security Deposit
Under the rent laws, landlords in New York can keep part or all of a tenant’s security deposit under specific conditions. Common reasons for deductions include unpaid rent, damage that exceeds normal wear and tear, and outstanding utility bills. Landlords may also deduct costs associated with replacing lost or damaged furniture and personal property, or for moving and storage expenses if a tenant fails to vacate the property on time or pay rent owed.
There is no strict cap on how much can be deducted from the deposit, but all charges must be reasonable and reflect actual expenses caused by the current tenant and not a prior tenant. If the damage exceeds the amount of the security deposit, landlords can pursue additional reimbursement through legal channels like small claims court.
Returning the Security Deposit
At the end of a lease, tenants have the right to request a final property inspection. Following the inspection, the landlord must provide a written statement outlining any repairs or cleaning that may result in deductions. Landlords then have 14 days from the date the tenant vacates to return the remaining deposit, along with an itemized list of any deductions.
If a landlord fails to return the deposit or provide the required documentation within the 14-day period, they forfeit their right to make deductions. Tenants can then seek legal recourse and may be awarded up to twice the original deposit amount, in addition to any funds wrongfully withheld.
Bottom Line
Security deposits offer landlords protection against damages and unpaid rent, but they’re also one of the most common sources of landlord-tenant conflict. Understanding and following New York’s security deposit laws will help you avoid costly mistakes and maintain positive relationships with your tenants. A clear, legal process builds professionalism and trust from the start of every lease.
If you have questions about security deposit laws or need help managing your rental property in New York, contact Yourway Properties, Inc. Our team is here to help you navigate the legal landscape and protect your investments.
Disclaimer: This blog is for informational purposes only and does not constitute legal advice. Laws frequently change, and this content may not reflect the most recent updates. For legal guidance specific to your situation, consult a licensed attorney in your state or contact your local housing authority.