New York property owners who rent residential premises know the importance of security deposits from tenants to help protect owner investment from tenant damage above and beyond normal wear and tear. As of June 14, 2019, a sweeping new state law placed new restrictions on residential landlords around security deposits.
Residential property owners had to change their practices under the new regime and if you as a residential landlord are not sure about compliance, it is important to be sure that your leases and security deposit practices are up to date.
Security deposits may only be for one month’s rent
While previously the one-month rent limit on the size of required residential security deposits applied to rent-stabilized units only, the new law applies this limit to all residential tenancies. This may raise concerns for some property owners that this smaller deposit will be high enough for some types of damages to premises.
A property owner may not require the prepayment of rent upfront before the lease starts such as for the first and last months of rent.
Required inspection of premises
A residential landlord must provide the opportunity for a new tenant to inspect the rental unit before moving in, followed by the owner and tenant executing an agreement that memorializes in writing any problems with the condition of the premises. Similarly, the property owner must give the tenant the opportunity to do a joint inspection before the end of the tenancy.
Retention of security deposit
To keep any part of a deposit to cover repairs, after the inspection the property owner must provide a statement itemizing needed repairs. Should they vacate the unit without making them, the owner may keep that part of the deposit to cover these costs if the owner provides the tenant an itemized statement within two weeks from vacation along with any part of the deposit not kept.
If this process is not followed, the owner may not keep any of the deposit.
The rules also allow the owner to keep security deposit money to cover unpaid rent or utilities as well as storage of personal property the tenant leaves behind. If a landlord willfully violates any of the deposit rules, it can be liable for punitive damages capped at double the deposit amount.
We will continue to provide information about how state and local law regulates residential property owners.