New York Security Deposit Requirements: 6+ Unit Buildings

In New York, security deposit rules for buildings with 6 or more units add one major obligation on top of the statewide rules: the landlord must place every tenant’s deposit in an interest-bearing account at a bank located in New York State, and must tell the tenant in writing where it sits.¹ Everything else — the one-month cap, the 14-day return window, the short list of allowed deductions, and the penalties for getting it wrong — applies the same way it does in smaller buildings.

The Interest-Bearing Account Requirement

This is the rule that separates larger buildings from the rest. When a deposit is collected for a unit in a building with six or more family dwelling units, the landlord has to put it in an interest-bearing account at a bank within New York State. The account must pay interest at the prevailing rate that banks in the area pay on similar deposits.¹ Smaller landlords can choose to do the same, but at six units and up it is not optional.

Every New York landlord, regardless of building size, has to hold deposits in trust. The money never belongs to the landlord. It cannot be mixed with the landlord’s personal or business funds, and any lease clause that tries to waive these protections is void.¹

Written Notice to the Tenant

Once the deposit is in the account, the landlord has to send the tenant written notice stating the bank’s name and address and the amount deposited.¹ The statute doesn’t give a specific number of days, but the word “thereupon” signals it should go out promptly. Skipping or delaying this step opens the door to the penalties described below.

Interest, the 1% Administrative Fee, and How It’s Paid Out

Interest earned on the deposit belongs to the tenant. The landlord can keep 1% of the deposit each year as an administrative fee, calculated on the principal rather than on the interest earned, and that 1% replaces any other custodial or administrative charge the landlord might try to collect.¹

After subtracting the 1%, the remaining interest has to be handled one of three ways, at the tenant’s choice: paid to the tenant annually, credited against rent, or held in trust and released when the lease ends.¹ If a lease ends between regular interest-payment dates, the landlord has to pay whatever interest the bank has made available as of that date.

How Much Can Be Collected

The maximum deposit for any New York apartment is one month’s rent.² That cap took effect with the Housing Stability and Tenant Protection Act of 2019 and replaced the older practice of asking for larger deposits on furnished units or from tenants with thin credit histories. The landlord cannot ask the tenant, a guarantor, or any third party for more than one month’s rent as a deposit.³

When a lease renews at a higher rent, the landlord can collect the difference so the deposit stays at one month of the new rent.³ A tenant receiving a Senior Citizen Rent Increase Exemption or Disability Rent Increase Exemption still owes the increased security even though the rent increase itself is frozen.

Returning the Deposit Within 14 Days

Once the tenant moves out, the landlord has 14 days to return the full deposit or deliver an itemized statement of deductions along with whatever balance remains.² Missing the 14-day deadline isn’t a technicality. The landlord forfeits the right to keep any part of the deposit, even if the apartment was left in genuinely bad shape.

The itemization has to list each charge and the reason for it. Vague entries like “cleaning” or “repairs” won’t hold up.

What Can Be Deducted

New York limits deductions to four categories:

Unpaid rent owed at the time of move-out.
Damage beyond normal wear and tear — holes in walls, broken fixtures, stained or burned carpeting, and the like. Faded paint, minor furniture scuffs, and carpet wear from everyday use are not chargeable.
Unpaid utility charges, but only utilities the tenant was required to pay directly to the landlord under the lease.
Moving and storage costs for personal property the tenant left behind.

Ordinary wear and tear is off limits, and the landlord cannot charge for damage caused by a prior tenant.² Using deposit money to renovate or upgrade a unit for the next tenant is not a lawful deduction.

The Pre-Move-Out Inspection

A lot of deposit disputes could be avoided through the inspection process built into the statute. Within a reasonable time after either side signals the tenancy is ending, the landlord has to notify the tenant in writing of the right to request an inspection before moving out and the right to be present for it.²

If the tenant asks for one, the inspection has to take place no earlier than two weeks and no later than one week before the tenancy ends. The landlord gives at least 48 hours’ written notice of the date and time. Afterward, the landlord provides an itemized list of any repairs or cleaning that could lead to deductions, and the tenant has until the end of the tenancy to fix those issues and avoid the charges.²

Any statement produced during the inspection is only admissible in court proceedings about the deposit. One exception: if the tenant gives less than two weeks’ notice before leaving, the landlord is not required to offer an inspection.

When the Building Changes Hands

A landlord selling a building with six or more units cannot pocket the deposits and leave the new owner to sort it out. Deposits held in trust have to be transferred to the new owner along with accurate records of each deposit and any accrued interest.¹ The statute points to a separate provision (GOB 7-105) governing the duty to turn over deposits when ownership changes. Without proper transfer and documentation, the original owner can remain liable for returning those deposits after the sale closes.

Penalties for Non-Compliance

New York treats deposit violations seriously. Missing the 14-day return-or-itemize deadline forfeits the landlord’s right to keep any part of the deposit, regardless of what the tenant left behind.²

Beyond forfeiture, a landlord who violates any part of the deposit statute is liable for the tenant’s actual damages. If a court finds the violation willful, the tenant can recover punitive damages of up to twice the deposit amount.² On a $3,000 rent, that could mean $6,000 in punitive damages on top of the deposit itself.

Tenants can file in small claims court or contact the New York Attorney General’s office, which handles deposit disputes as a consumer protection matter.⁴

Rent-Stabilized Units in the Same Building

Buildings with six or more units often contain rent-stabilized apartments, and those sit under a separate statute, GOB 7-107, rather than the GOB 7-108 rules that govern non-stabilized tenancies.⁵ In practice the two statutes impose nearly identical obligations: the one-month cap, the 14-day return deadline, the same allowable deductions, and punitive damages up to twice the deposit for willful violations. The interest-bearing account requirement under GOB 7-103 applies to every unit in a building with six or more apartments regardless of whether a particular unit is stabilized.¹ A landlord with a mixed building should track which statute governs each unit, but the day-to-day obligations line up.

1
New York State Senate. New York Code GOB 7-103 – Money Deposited or Advanced for Use or Rental of Real Property
2
New York State Senate. New York Code GOB 7-108 – Deposits Made by Tenants of Non-Rent Stabilized Dwelling Units
3
New York State Homes and Community Renewal. Renting an Apartment – Security Deposits and Other Charges
4
New York State Office of the Attorney General. Recovering Rent Security Deposits and Interest
5
New York State Senate. New York Code GOB 7-107 – Deposits Made by Tenants of Rent Stabilized Dwelling Units