Almost all landlords require that tenant’s provide them with a security deposit. As the name suggests, the security deposit is money that the tenant deposits with the landlord for their financial security. If you damage the property, leave without paying rent, etc, the security deposit provides the landlord with a way to become “financially whole” again. Generally, the security deposit is equal to one month’s rent. However, unless the property is a rent stabilized unit (in which case the deposit can NOT be more than one month’s rent), the deposit amount can be set by the owner.
In New York, there are very strict rules as to the usage of the security deposit.
- A landlord must return the security deposit at the end of the lease or within a reasonable time thereafter. Generally a “reasonable time” is considered to be 30 to 60 days. This provides the landlord with enough time to assess any damage and to have repair work completed. It is important that you attend the end of tenancy inspection. This insures that you and your landlord are aware of any repairs and any disputes can be addressed immediately.
- A landlord may retain a potion of the security deposit or all of the deposit in the event that the apartment is damaged and repairs beyond normal wear and tear must be made or to cover unpaid rent. However, the costs must be considered “reasonable.”
- A tenant can not use the deposit as the final month of rent. While this may be more convenient for the tenant, it robs the landlord of the ability the cover damages.
New York also has strict rules as to the maintenance of the deposit money.
- A landlord must treat the deposit money as “funds in trust.” That means that the landlord can’t treat the deposit as their money and can’t co-mingle their money with that of the tenant.
- If the landlord owns six or more apartments, the security deposit must be held in a New York bank that pays the prevailing interest rate. A tenant must be informed in writing as to the name and location of the bank and must receive the interest (less an allowed 1% administration fee that the landlord may retain). A tenant has the right to determine if they wish to have the interest paid annually, paid at the end of the lease term, or applied to the rent.
Using your security to your advantage
Offering an increased security deposit is a great way to counter bad credit or lack of citizenship. This gives the landlord the added security of knowing that an otherwise “bad risk” is offset to a greater degree. You should remember however, that an increased security deposit is not the same as pre-paid rent. The security deposit is held in account until the end of the lease period and can’t be accessed by the tenant. If the money that you are offering is money that you need to live, ask to pre-pay the rent instead.
If at the end of your lease, you agree to renew and the lease amount is higher, you will generally be responsible for proving additional security money’s to equal the entire month rent.
originally posted February 24, 2007