Handle and store deposits properly: Once collected, security deposits must be handled with care. New York law mandates that landlords store these deposits in a separate, interest-bearing account at a New York State bank. The interest accrued on the deposit belongs to the tenant, minus a 1% administrative fee that the landlord can retain. Properly managing these funds not only ensures legal compliance but also builds trust with tenants.
Provide written notice of deposit details: Landlords are required to provide tenants with written notice detailing the name and address of the banking institution where the security deposit is held. This transparency ensures that tenants are informed about the status of their deposit throughout the lease term.
Return security deposits promptly: Upon the termination of the lease, landlords must return the security deposit within a reasonable timeframe, typically within 14 days. Any deductions for damages or unpaid rent must be itemized and provided to the tenant in writing. Failure to return the deposit or provide an itemized list of deductions can result in legal action and potential penalties for the landlord.
Be aware of prohibited deductions: Landlords should know that they cannot deduct from the security deposit for normal wear and tear. This includes minor scuffs on walls, worn carpets or other signs of regular use. Deductions are only permissible for damages that exceed normal wear and tear, such as significant holes in walls or broken fixtures.
Maintain detailed records in case of dispute resolution: In cases where disputes arise over the return of the security deposit, New York law provides tenants with the right to take legal action in small claims court. Landlords should be prepared to provide evidence of any damages and the associated costs to justify their deductions. Maintaining detailed records and photographs of the property’s condition before and after the tenancy can be invaluable in these situations.