When moving into a new apartment, one of the largest overhead costs is the security deposit. This added safety stash of money is kept by the landlord in case there is any damage to the property caused by the renter or his or her guests.
But once the renter turns over the deposit (usually a decent chunk of money) what happens to it? How do landlords make deductions when it’s time to move out? And if they don’t use all of it on repairs, how quickly must they return it to the person occupying the premises once he or she moves out?
Is There a Limit on New York Security Deposits?
New York has no limits on what a landlord can charge for a security deposit. However, many municipalities impose a cap, so it’s always important to check on the local level to ensure that everything is on the up and up.
Because there is no state imposed limit, it’s always best to know what’s normal to avoid being taken advantage of. In New York, is it customary for a landlord to charge the equivalent of one month’s rent for a security deposit. If the rent is later legally increased, they are within their rights to ask for a bump in the security deposit as well.
Where Do Security Deposits Go?
When a live-in tenant hands over a check for his or her security deposit, what does the landlord do with it? Do they just stick it in their sock drawer and save it for a rainy day? Do they deposit it in their personal or business bank account?
It’s important to remember that while the new tenant handed that money over, it is still his or her money until the moment it has to be used for repairs directly related to the actions that he, she or guests on the premises caused. A landlord does not have the ability to use it for general building repairs or anything unrelated to the paying tenant occupying the premises.
Security deposits in New York must be stored within a separate bank account and may not be commingled with any of the landlord’s personal funds. Landlords of rental buildings with six or more units must place the deposit in an interest-bearing account, which earns at a rate equivalent to similar deposits in the area.
The landlord is entitled to collect an annual fee from the interest equal to 1% of the security deposit. The tenant receives the remaining interest. The landlord can either hold onto it until the end of the lease, put the interest toward the tenant’s rent, or pay out the interest annually.
How are Deductions Made?
When it is time for the tenant to move out, the landlord will have the apartment inspected. At this time, they will determine any back rent or damage directly caused by tenant or his or her guests, outside of normal wear and tear.
Landlords must itemize the security deposit, accounting for every dollar they spend. Typically, a landlord will provide the tenant with a move-out letter telling him or her how they expect the unit to be left, what the final inspection procedures entail, and how they will send any refund that is due.
How Long Does a Landlord Have to Return a Security Deposit?
There is no official time frame which dictates how fast a landlord must return a security deposit. New York law demands a “reasonable time” period, which typically means somewhere between 21 and 45 days after the tenant has vacated.
Tenants who feel their security deposit has been mishandled by a landlord shouldn’t try to fight back alone. The landlord has control over the money. A skilled real estate attorney from a respectable law firm like New York’s Adam Leitman Bailey, P.C. can help tenants understand their rights and how to fight back against a bad landlord the right way.