Understanding New York’s security deposit law gives landlords a clear path to avoid preventable issues like improper withholding, missed statutory deadlines, and unlawful deductions.
To help, this guide outlines everything you need to know about these regulations, including the maximum amounts landlords can request, how to store deposits, whether they must pay interest, legal grounds for deductions, returning deposits, handling disputes, and more.
Statutes Regulating New York Security Deposits
New York’s security deposit laws appear in Sections 7-103 through 7-108 of the New York General Obligations Law, which regulate how landlords collect, store, manage, and return residential deposits.
Maximum Security Deposit Amounts Under New York Law
New York law limits residential security deposits to 1 month of rent. This rule applies to nearly all residential leases, regardless of lease type or contract length. Landlords follow the same limit for new agreements and renewals, which creates clear and consistent standards across the state.
New York offers a narrow exemption for owner-occupied buildings with fewer than three units that are not subject to the statewide cap. Apart from this exception, the 1-month limit generally applies to residential rentals.
Security Deposit Storage Regulations
New York requires landlords to place each security deposit in a separate account and never mix it with personal or business funds. Buildings with six or more units require an interest-bearing account at a New York bank. Landlords must also notify tenants of the bank name and address where the deposit is held.
For example, a landlord cannot store a tenant’s deposit in a personal checking account used for daily expenses.
Security Deposit Interest in New York
New York requires landlords who own buildings with six or more units to place each deposit in an interest-bearing account at a New York bank. Landlords must pay tenants the yearly interest or offer a rent credit, minus an administrative fee of up to 1 percent.
Making Security Deposit Deductions
Security deposit deductions help landlords protect the property’s overall condition. Tenants sometimes cause damage beyond normal wear and tear, and landlords depend on deposit funds to complete repairs that return the unit to its earlier condition and keep the property operating smoothly.
When Landlords Can Deduct
New York landlords may draw from a tenant’s security deposit for the following reasons:
- Repairs for damage beyond normal wear and tear
- Unpaid rent that remains outstanding after move-out
- Cleaning costs needed to address excessive dirt or negligence
- Unpaid utilities the tenant left at move-out
- Repairing fixtures or appliances damaged through tenant misuse
When Landlords Can’t Deduct
New York landlords may not draw from a tenant’s security deposit for the following reasons:
- Routine cleaning associated with a standard tenancy
- Minor cosmetic marks that develop through normal daily use
- Wear caused by the aging of flooring, walls, or appliances
- Repairs needed because of improper installation or defects
- Improvements that upgrade the rental beyond its earlier condition
Necessary Documentation to Accompany Deductions
New York requires landlords to provide tenants with an itemized statement detailing each deduction taken from the security deposit. Landlords should include receipts, invoices, or repair estimates that support the charges. This documentation shows that each cost relates to damage or unpaid obligations, keeping communication clear with the former tenant.
What to Do When Deductions are Greater Than the Deposit
Sometimes tenants leave damage that exceeds the total security deposit. When this happens, New York landlords should request the remaining balance from the former tenant and should keep thorough records of all repair expenses. Landlords must return any unused portion of the deposit within 14 days, which sets the timeline for identifying what the tenant still owes.
Landlords who cannot collect the balance may hire a collections agency to pursue the debt or file a claim through the New York small claims court.
Returning Security Deposits to Tenants
New York law sets clear rules for how landlords must return any remaining security deposit funds after applying eligible deductions.
Required Timeline for Return
New York requires landlords to return the remaining deposit within 14 days of the tenant vacating the unit and returning the keys. Landlords must also give the tenant an itemized statement of deductions within the same 14-day window.
Method for Return
New York landlords typically return deposits by check or money order, although another mutually agreed method can work. Landlords must include an itemized list of deductions along with the payment so the tenant understands how the final amount was calculated.
Penalties for Late Return
If a landlord does not return the deposit within 14 days, New York law requires the landlord to forfeit any right to keep a portion of it. Tenants are entitled to recover the full deposit and pursue additional damages if the landlord improperly withholds funds.
Security Deposit Disputes
Tenants who disagree with how a landlord handles their security deposit have every right to raise a dispute. They usually start by requesting clarification in writing, reviewing the itemized deductions, and requesting documentation supporting each charge. If the issue persists, tenants may pursue mediation or file a small claims case.
As a landlord, prepare for security deposit disputes by using move-in and move-out checklist tools, staying current with accounting and bookkeeping, and placing clear terms in your lease agreement. Strong documentation, familiarity with New York laws, and strict attention to timelines also help reduce the chance of conflicts.
Using Condition Reports to Document Damage
Security deposits in New York become far easier to manage when landlords use detailed move-in and move-out condition reports to capture the unit’s starting condition, record any changes during the tenancy, and simplify conversations about potential deductions.
Simplify the process by using property management software to build digital reports with photos and videos directly from a smartphone. Thorough documentation before move-in and after move-out can make security deposit deductions much harder for tenants to dispute.
Sign up for a free TurboTenant account to collect deposits, streamline documentation, and simplify every turnover.
FAQs: New York Security Deposit Law
Can a landlord deduct painting from a security deposit in New York?
A New York landlord can deduct painting costs only when the tenant causes damage beyond normal wear and tear. Minor scuffs or faded paint do not qualify. Landlords may charge for repainting when a tenant leaves significant damage that requires more than routine turnover work.
Are nail holes considered normal wear and tear in New York?
New York typically views small nail holes as normal wear and tear. Landlords cannot deduct for minor holes that appear during everyday use. Larger holes or wall damage that results from misuse can justify a deduction when repairs exceed what a standard tenancy would usually produce.
Who has to pay for carpet cleaning in New York, the landlord or the tenant?
Routine carpet cleaning qualifies as normal wear and tear, so a New York landlord cannot deduct these costs from the security deposit. If a tenant leaves excessive stains, pet damage, or other harm beyond normal use, the landlord may charge for cleaning or replacement related to that damage.
What happens if a landlord doesn’t return a security deposit within 14 days in New York?
If a landlord fails to return the deposit and provide itemized deductions within 14 days, New York law requires the landlord to forfeit any right to keep a portion of it. Also, tenants become entitled to recover the full deposit and seek additional damages if the landlord improperly withholds funds.
