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New York SECURITY DEPOSITS
Virtually all New York leases require tenants
to give their landlords a security deposit. The security deposit
in New York is usually one month's rent. The landlord must
return the security deposit, less any lawful deduction, to the
tenant at the end of the lease or within a reasonable time
thereafter. A landlord may use the security deposit: (a) as
reimbursement for the reasonable cost of repairs beyond normal
wear and tear, if the tenant damages the apartment; or (b) as
reimbursement for any unpaid rent.
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New York Landlords, regardless of the number
of units in the building, must treat the deposits as trust funds
belonging to their tenants and they may not co-mingle deposits
with their own money. Landlords of buildings with six or more
apartments must put all security deposits in New York bank
accounts earning interest at the prevailing rate.
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Each tenant
in New York must be informed in writing of the bank's name and address and
the amount of the deposit.
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Landlords are entitled to annual administrative expenses of 1%
of the deposit. All other interest earned on the deposits
belongs to the tenants. Tenants must be given the option of
having this interest paid to them annually, applied to rent, or
paid at the end of the lease term. If the building has fewer
than six apartments, a landlord who voluntarily places the
security deposits in an interest bearing bank account must also
follow these rules. For example: A tenant pays a security
deposit of $400. The landlord places the deposit in an interest
bearing bank account paying 2.5%. At the end of the year the
account will have earned interest of $10.00. The tenant is
entitled to $6.00 and the landlord may retain $4.00, 1% of the
deposit, as an administrative fee. All figures subject to
change.
If the building is sold, the landlord must
transfer all security deposits to the new owner within five
days, or return the security deposits to the tenants. Landlords
must notify the tenants, by registered or certified mail, of the
name and address of the new owner. Purchasers of rent stabilized
buildings are directly responsible to tenants for the return of
security deposits and any interest. This responsibility exists
whether or not the new owner received the security deposits from
the former landlord.
Purchasers of rent-controlled buildings or
buildings containing six or more apartments where tenants have
written leases are directly responsible to tenants for the
return of security deposits and interest in cases where the
purchaser has "actual knowledge" of the security
deposits. The law defines specifically when a new owner is
deemed to have "actual knowledge" of the security
deposits. Typically, when a building is sold, the attorneys,
buyers and sellers will complete paperwork stating the amount of
security deposit held by each tenant. Often, the tenant will be
required to sign a statement verifying the amount of the
security deposit.
When problems arise, tenants should first try
to resolve them with the landlord before taking other
action.
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