Rules from the start of the lease
For most residential tenancies in New York, state law caps the security deposit at an amount tied to the monthly rent and treats the deposit as the tenant's money held in trust rather than as the landlord's property. The landlord may not mix it with personal funds. In larger buildings, the deposit generally has to be kept in an interest-bearing account at a New York bank, the tenant must be told where it is held, and interest is owed to the tenant less a small administrative fee the landlord may keep. Rent-stabilized apartments and certain housing programs have additional rules. Commercial leases are governed largely by their own terms, although the trust principle can still apply to a commercial deposit.
Inspections and the itemized statement
A tenant may ask for an inspection before moving out, so the landlord can point out problems the tenant can fix before leaving. After the tenant leaves, a landlord who keeps any part of the deposit must provide an itemized statement of deductions within a set period, and a landlord who fails to do so generally loses the right to keep any of it. Deductions are limited to unpaid rent, damage beyond ordinary wear and tear, and a few other charges the law allows. Photos and video at move-in and move-out, the lease, proof of payment, and any written requests or responses are the core evidence on both sides. Landlords should keep repair invoices and dated photographs to support each deduction.
When the building changes hands
If the building is sold, the deposit and any interest are generally supposed to transfer to the new owner, who then becomes responsible for returning it, and the tenant should be notified of the transfer. Disputes often arise when neither the old nor the new owner admits holding the money, and New York law can make the buyer responsible in some situations even if it never received the deposit, particularly for rent-stabilized apartments. Willful violations of the deposit rules can expose a landlord to additional damages under state law. When a deposit dispute reaches us, we look at the type of building, the lease, and the payment trail, and we discuss whether a demand letter, small claims court, or another route fits the amount and the relationship.
