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Virtually all leases require tenants to give their landlords a security deposit.
The security deposit 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.
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. Each tenant must be informed in writing of the bank's name
and address and the amount of the deposit. 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.
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.
When problems arise, tenants should first try to resolve them with the landlord
before taking other action. If a dispute cannot be resolved, tenants may contact
the nearest local office of the Attorney General, listed at the end of this
booklet. (General Obligations Law, Article 7)
This article is an extract of the "New York Tenant's Rights Guide" from the Office of New York Attorney
General Eliot Spitzer. For information about tenant's rights in other States, you should contact your local
Tenants/Landlords association.
1800roommates.com provides general legal information to help people understand their
legal rights, but is not a substitute for personal legal advice from an attorney.
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