Overview of NY Security Deposit Laws

Here is your ultimate guide to the New York security deposit law!

Most landlords in Westchester County, New York require a deposit from their tenants. This is due to the fact that security deposits in New York help protect them from any careless or negligent property damage caused by their tenants.

Aside from this, security deposits also help a landlord:

  • Cover unpaid utilities. Examples of utilities that security deposits can cover include high-speed internet, cable connection for TV, trash removal, electricity, water, heat, and gas. Most of these will fall under the tenant’s name. A tenant should ensure that they have cleared the bills when they move out. If they don’t, the landlord must deduct the appropriate amount from their deposit.
  • Cover excessive cleaning costs. A tenant must return the unit in the same condition they found it. Unfortunately, some tenants leave their units in a bad state. So, the money from the security deposits covers this.
  • Cover unpaid rent. New York landlords may also use the security deposits to cover for lost rental income. This is often the case when the prior tenant vacates the unit early and puts an end to the lease.
  • Cover loss in monthly rent payments. Failure to pay rent is a serious violation of the lease. Unfortunately, it is arguably among the most common lease violation that New York landlords may face. In such cases, the state law permits a landlord to deduct the appropriate amounts from the deposit.

Whether you are a landlord, a tenant, or just interested in learning more about the deposit law in New York, this post is for you.

Guide to the Security Deposit Laws in New York for Landlords

Keeping a Tenant’s Deposit

Under the deposit law in New York, a landlord may keep all or a part of the deposit to cover negligent or careless damage. Examples of such damage include:

  • Pet stains, burns, or holes in the carpet
  • Broken doors or disabled locks
  • Unapproved paint on the walls


  • Excessive dirtiness in the bathroom or kitchen
  • Broken appliances due to misuse

If a tenant causes any of the aforementioned damages, the landlord is permitted to deduct the cost of repair from their security deposit.

That said, a landlord may not charge their tenants for damage resulting from normal wear and tear. They can only deduct from the security deposit for issues beyond normal wear and tear.

Simply put, wear and tear is the expected decline in a unit’s condition due to everyday use.

Examples of wear and tear include:

  • Normal dirt and wear in carpets
  • Broken light bulbs
  • Small pinholes in the wall
  • Loose door handles
  • A couple of scrapes or dings on a wood floor
  • A couple of small stains on a carpet


Security Deposit Limit

In New York, a landlord may charge the tenant a maximum of one month’s rent as a security deposit. You cannot charge more than one month’s rent.


Written Notice after Receiving the Security Deposit

New York laws note that a landlord must provide notice to their tenant in writing after receiving their security deposit. The notice must be written and include three important aspects:

  • Total money deposited;
  • The name of the banking institution;
  • The address of the banking institution.


Non-Refundable Security Deposits

In the state of New York, a security deposit is considered the belonging of the tenant. As such, any nonrefundable security deposits in New York are considered illegal.

A New York landlord is only responsible for storing the security deposits in a trust account for the entire term of the lease agreement.


Security Deposit Storage

Security deposit laws state that a landlord must store a security deposit at a financial institution. This law also requires them to abide by two things. One, not to use the money for their own purposes. Two, not to combine the security deposit with their own money.

Furthermore, if a landlord has six or more units, they must place the security deposits in an interest-bearing account. The rate of interest must be equal to the interest rate for similar security deposits in the area.

A landlord who has five or fewer units isn’t required to place their tenant’s security deposit in an interest-bearing account within a banking organization.

For an interest-earning security deposit, the landlord must collect a yearly fee that is equal to 1% of the tenant’s security deposit. The rest of the annual interest (99%) will belong to the tenant.

The New York landlord has three options as they must pay interest when it is accrued:

  • Hold it for their tenants in trust in a separate bank account until the written agreement comes to an end.
  • Put it toward the tenants’ last month’s rent.
  • Pay the remaining portion of the security deposit directly to the tenants or to be used as part of months’ rent.

Security Deposit Return New York

In New York, a landlord must return the security deposit back to the tenant within 14 days of the tenant vacating, or the termination or end of the lease. The landlord must include an itemized statement indicating what the security deposit is being used for and the amount of deposit retained. The itemized statement is crucial.

In some cases, tenants may want to use their deposit for their final month’s rent. But this would be depending on the original agreement.

If the landlord fails to return the security deposit at the end of the lease, the tenant may sue them in a Small Claims Court.


Transfer of Property Ownership – What Happens to the New York Security Deposit?

In case the ownership of the unit changes during a tenancy, a landlord has two options:

  1. They transfer all the security deposits to the incoming owner.
  2. They notify the tenant of the change in ownership in writing. Additionally, a landlord must provide the notice by sending it via registered or certified mail.

In the notice, the landlord must ensure they provide the tenant with the contact details of the new landlord.

What Happens to the Security Deposit’s Interest?

The owner can keep 1% of the deposit amount every year as an administrative fee.

Tenants need to have the option of having this interest paid to them every year or paid to them at the end of the tenancy term. Alternatively, it can be applied to their rent.

The Bottom Line – Security Deposit Laws in New York

There you have it – an overview of the security deposit law in the state of New York. Always be sure to include a security deposit clause in the lease agreement.

As a landlord, the security deposit will help cover unpaid rent or utilities and cleaning costs when a tenant vacates and breaks the lease early.

The security deposit law is part of the statewide landlord-tenant law. For more information on New York rent laws, read the post here.

As a landlord, if you have more questions about the security deposit law, please seek professional legal services from a licensed attorney. Alternatively, you may contact a professional management company. We are always happy to help a landlord!

Disclaimer: This article about the security deposit laws is purely informational. It is not intended to constitute legal advice. For legal help, contact a licensed attorney or small claims court in New York.