By LeaseHelper
New York caps security deposits at one month's rent, requires landlords to return the deposit — with a written itemized statement — within 14 calendar days of move-out, and strips you of all deduction rights if you miss that deadline by even one day.
This post covers every rule a New York landlord needs to know in 2026: the one-month cap under the Housing Stability and Tenant Protection Act (HSTPA), the trust-account and interest-bearing account requirements under N.Y. Gen. Oblig. Law § 7-103, the return and itemization rules under GOL § 7-108, and what you can and cannot legally deduct. We walk through a concrete hypothetical at each step so the rules land as policy, not abstraction.
The Legal Framework: GOL §§ 7-103 Through 7-108
New York's security deposit laws are governed primarily by the General Obligations Law (GOL) §§ 7-103 through 7-108, amended significantly by the Housing Stability and Tenant Protection Act of 2019 and updated again by S952B in November 2025. If you self-manage anywhere in the state — from a two-family house in Buffalo to a six-unit walkup in Queens — these statutes apply to you.
Effective November 15, 2025, changes to Section 7-107 of the General Obligations Law governing security deposits extended certain protections to rent-stabilized tenants. That means the same 14-day return rule and pre-move-out inspection rights that previously applied only to market-rate tenants now apply to stabilized tenants as well. There are no more two-track rules to track — one framework governs all residential units.
GOL § 7-103(1) requires landlords to treat security deposits as trust funds, not personal assets. Commingling occurs when a landlord mixes deposit funds with their own, violating the law. Practically speaking, you need a dedicated bank account for deposits before the tenant's check clears — not after.
The Deposit Cap: One Month's Rent, No Exceptions
Although security deposits had long been limited to one month's rent for rent-stabilized tenants, HSTPA amended the GOL effective June 14, 2019, to extend this limit to unregulated tenants statewide. The practice of requiring pre-paid rent, typically as the "first and last months' rent," is now prohibited.
The Housing Stability and Tenant Protection Act (HSTPA) of 2019 limits the amount of a security deposit for any apartment to one month's rent. It is unlawful for the owner to ask for an additional amount of money from the tenant, guarantor, or third party. That prohibition extends to pet deposits collected as additional security — if a separate "pet deposit" pushes the total above one month's rent, it's unlawful.
Collect no more than one month's rent as a security deposit. No exceptions for unit type, building size, or pets. If your rent increases upon renewal, according to HCR Fact Sheet #9, when a lease is renewed at a higher rental amount, the owner can collect additional money from the tenant to bring the security deposit up to the new monthly rent.
Holding the Deposit: Trust Accounts and Interest
Whenever money is deposited or advanced on a contract for the use or rental of real property as security for performance, such money, with interest accruing thereon, shall continue to be the money of the person making such deposit and shall be held in trust by the person with whom such deposit shall be made and shall not be mingled with the personal moneys or become an asset of the person receiving the same.
In buildings with six or more units, deposits must be held in an interest-bearing account, with interest often returning to the tenant. If the person depositing the security money in a banking organization shall deposit same in an interest-bearing account, he shall be entitled to receive, as administration expenses, a sum equivalent to one per cent per annum upon the security money so deposited, which shall be in lieu of all other administrative and custodial expenses. In other words, you keep 1% annually as a management fee; the rest of the interest belongs to the tenant.
For buildings with fewer than six units, an interest-bearing account is not required by statute — but the trust-account and non-commingling rules of GOL § 7-103 still apply. A separate non-interest-bearing account is compliant for smaller landlords; a shoebox of cash is not.
Scenario Walkthrough: Maria's Move-Out
This is a labeled hypothetical for illustration purposes only. It does not constitute legal advice.
Setup: Maria rents a two-bedroom apartment in Rochester for $1,800/month. She paid a $1,800 security deposit at move-in. She gives notice and vacates on June 30, 2026. The landlord, David, owns four units and self-manages. The apartment has a large stain burned into the kitchen countertop and a broken towel bar. The hallway walls have minor scuffs consistent with moving furniture.
Step 1 — Pre-move-out inspection. Tenants are given the right to an inspection of the apartment upon timely notification of the owner or tenant's intent to end the tenancy. New York is unique among states in giving the tenant a statutory right to request a pre-move-out inspection within a reasonable time before the tenancy ends. The landlord must conduct the inspection if requested and provide an itemized statement of expected deductions during the inspection. David schedules the inspection, notes the countertop and towel bar, and gives Maria a written list. Maria can attempt to fix the towel bar herself before vacating — the statute gives her that chance.
Step 2 — The 14-day clock starts June 30. GOL § 7-108(1-a)(f) imposes a strict 14-day return deadline. Within 14 calendar days after the tenant vacates, the landlord must either return the full deposit or provide an itemized statement of deductions. For David, that deadline is July 14, 2026. There is no grace period.
Step 3 — What David can deduct. The entire amount of the deposit or advance shall be refundable to the tenant upon the tenant's vacating of the premises except for an amount lawfully retained for the reasonable and itemized costs due to non-payment of rent, damage caused by the tenant beyond normal wear and tear, non-payment of utility charges payable directly to the landlord under the terms of the lease or tenancy, and moving and storage of the tenant's belongings. The burned countertop qualifies — it's beyond normal wear. The landlord may not retain any amount of the deposit for costs relating to ordinary wear and tear of occupancy or damage caused by a prior tenant. The hallway scuffs do not qualify. David gets countertop replacement and towel bar repair; he cannot charge for repainting the hallway.
Step 4 — The itemized statement. Owners who withhold any part of the security deposit must provide the tenant with an itemized list of damages and the cost of repairs. The landlord carries the burden of proving each deduction is reasonable under General Obligations Law section 7-108. David attaches a contractor estimate for the countertop and a receipt for the towel bar. He mails a check for the balance ($1,800 minus documented repair costs) by July 14.
Step 5 — What if David misses July 14? If a landlord fails to return the security deposit or fails to provide an itemized list of deductions within 14 days, the landlord must return the full amount of the security deposit. Every deduction is void. The landlord is not entitled to retain any portion of the deposit regardless of what the unit looked like at move-out. Even the burned countertop becomes non-recoverable if the paperwork is late.
Allowed vs. Prohibited Deductions at a Glance
| Condition | Deductible? | GOL Basis |
|---|---|---|
| Unpaid rent | ✅ Yes | § 7-108(1-a)(b) |
| Tenant-caused damage beyond normal wear and tear (e.g., burned countertop, large holes in walls) | ✅ Yes | § 7-108(1-a)(b) |
| Unpaid utilities owed directly to landlord under lease | ✅ Yes | § 7-108(1-a)(b) |
| Moving and storage of tenant's abandoned belongings | ✅ Yes | § 7-108(1-a)(b) |
| Normal wear and tear (faded paint, minor scuffs, lightly worn carpet) | ❌ No | § 7-108(1-a)(b) |
| Damage pre-existing before tenant's occupancy | ❌ No | § 7-108(1-a)(b) |
| Damage noted on the move-in inspection (Precondition Agreement) | ❌ No | § 7-108(1-a)(c) |
| Any deduction made after the 14-day deadline | ❌ No — all forfeit | § 7-108(1-a)(f) |
| Nonrefundable fees labeled as "deposits" | ❌ No | § 7-103 |
Penalties for Getting It Wrong
Tenants are protected against unreasonable withholding, with rights to dispute charges, receive pre-move-out inspections, and sue for damages, including punitive damages up to twice the deposit amount for willful violations. The key word is "willful" — courts require intentional, not merely negligent, conduct to award the double-damage penalty, but a pattern of ignoring the deadline or refusing to respond to demand letters can cross that line.
If the violation was willful, the court may award up to 2x the deposit. Beyond court action, tenants can file a complaint with the NYS Attorney General. The Attorney General's office investigates security deposit complaints, especially failure to place deposits in trust accounts, failure to pay interest, and failure to return deposits. For landlords managing even a handful of units, an AG complaint is a serious operational disruption.
Late or incomplete statements are the single most common reason landlords lose deposit disputes in New York courts. The fix is entirely procedural: calendar the 14-day deadline the day the tenant hands over keys, and don't wait until day 13 to pull together receipts.
Common Landlord Mistakes — and How to Avoid Them
The following mistakes appear regularly in New York small claims and housing court proceedings and in state agency guidance:
- Collecting more than one month's rent upfront. Requiring "first, last, and security" became unlawful on June 14, 2019. The practice of requiring pre-paid rent, typically as the "first and last months' rent," is now prohibited. Landlords who still do this face exposure to tenant claims and AG complaints.
- Commingling deposit funds with operating accounts. A landlord is required to hold a security deposit in trust for its tenants because a tenant's security deposit continues to be the money of the tenant and may not be commingled by the landlord with the landlord's own money. Using a single checking account for rents, repairs, and deposits violates GOL § 7-103 on its face.
- Skipping the move-in inspection offer. After initial lease signing but before the tenant begins occupancy, the landlord shall offer the tenant the opportunity to inspect the premises with the landlord or the landlord's agent to determine the condition of the property. If the tenant requests such inspection, the parties shall execute a written agreement before the tenant begins occupancy attesting to the condition of the property and specifically noting any existing defects or damages. Failing to offer this inspection weakens your ability to prove pre-existing conditions weren't caused by the prior tenant.
- Sending a vague itemized statement. A statement that says "cleaning — $300" without receipts or supporting detail is legally insufficient. The landlord carries the burden of proving each deduction is reasonable under General Obligations Law section 7-108.
- Assuming the 14-day deadline is flexible. The 14-day return rule is strict liability. New York courts do not consider whether the lateness was intentional, whether the deductions were legitimate, or whether the landlord made a reasonable effort. The deadline is the deadline.
About LeaseHelper: LeaseHelper builds AI-powered lease, eviction, and rental document generators for small landlords and property managers, and publishes guides on landlord-tenant law, security deposits, and evictions.
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Create your New York lease — $39 →Frequently asked questions
Can I charge a separate pet deposit on top of the security deposit in New York?
No. New York General Obligations Law § 7-103, as amended by HSTPA, caps the total amount collected as security at one month's rent with no exceptions for unit type, building size, or pets. A pet deposit that pushes total upfront money above one month's rent is unlawful. You can include a pet addendum in the lease and address damage in the itemized deduction statement at move-out, but you cannot collect additional security upfront. If you need more protection for high-risk tenants, discuss a qualified guarantor arrangement with an attorney.
What happens if my tenant leaves before the lease ends and I can't do a move-out inspection in time?
The 14-day clock under GOL § 7-108(1-a)(f) starts when the tenant vacates the premises — not when the lease formally ends. If the tenant abandons the unit early, your best practice is to document the condition immediately with timestamped photos, treat the abandonment date as the vacate date, and issue the itemized statement within 14 days of that date. Waiting for the official lease-end date is a common mistake and may push you past the deadline. When in doubt, return the deposit in full by day 14 rather than risk forfeiting all deductions.
Do I have to pay interest on the security deposit if I own a small building with fewer than six units?
The interest-bearing account requirement under GOL § 7-103 applies specifically to buildings with six or more family dwelling units. If your building has fewer than six units, you are not statutorily required to hold the deposit in an interest-bearing account. However, the trust-account and non-commingling rules still apply regardless of building size — the deposit must stay in a dedicated, separate account and cannot be treated as your personal funds. Paying interest voluntarily is not prohibited and may reduce disputes at move-out.
If a tenant owes back rent and I want to apply the deposit to it, do I still have to send the itemized statement within 14 days?
Yes — the 14-day deadline applies to every situation where you retain any portion of the deposit, including applying it to unpaid rent. Unpaid rent is a lawful basis for deduction under GOL § 7-108(1-a)(b), but you must still provide a written itemized statement within 14 calendar days of move-out that specifies the amount of rent owed and the dates it covers. If you apply the deposit but fail to send the statement on time, you forfeit the right to retain even the rent arrears from the deposit. Document the unpaid rent clearly in the statement and return any remaining balance with the statement.