New York Security Deposit Laws in 2025

Under the New York security deposit law, most residential landlords can collect no more than one month’s rent as a security deposit. Landlords are also expected to hold the deposit properly and have only 14 days after move-out to send an itemized deduction list and return the balance. 

If you manage rentals in New York, this guide works alongside Hemlane’s resources on rent control, squatters’ rights, and landlord-tenant law to show precisely how much you can collect, how to handle a security deposit in NYC, rules like interest and escrow, why landlords cannot use the deposit as last month’s rent, and what happens if you miss the aforementioned 14-day deadline.

6 Key Security Deposit Rules in New York

New York security deposit law, which is featured in GOL §7-103 and the Housing Stability and Tenant Protection Act, sets strict rules on how much you can collect, how you hold it, and how fast you return it. 

There are six core rules to keep in mind.

Rule #1: Deposit cap

For most residential rentals, you can charge no more than one month’s rent as a security deposit. Regardless of whether the unit is furnished, unfurnished, market, or rent-regulated, narrow exceptions exist, like certain specialized housing, that let you exceed that amount.

Rule #2: Trust and bank rules

The deposit is the tenant’s money held in trust; it cannot commingle with your own funds. For buildings with six or more units, you must maintain an interest-bearing account at a New York bank and follow the security deposit interest rules in NYC, including providing written notice to the tenant with bank details showing how you’re passing on interest, minus up to 1% as an administrative fee. 

Rule #3: Pre-move-out inspection

If the tenant requests it, you must offer a walk-through before move-out so the inspector can identify potential deductions and address any issues before you charge them.

Rule #4:14-day return + itemization

Within 14 days after the tenant vacates, you must send an itemized statement of any lawful deductions and return the balance; if you miss this deadline, you generally forfeit the right to keep any portion of the deposit. 

Rule #5: Non-compliance risks

Wrongful withholding, overcharging more than one month, or mishandling funds can trigger claims with the Attorney General or in court, where tenants may recover the full deposit and additional damages.

Rule #6: No fee stacking

Landlords cannot stack extra months for pets, utilities, or “move-in” fees, and landlords cannot treat last month’s rent as an additional deposit. Furthermore, you’re not permitted to increase the deposit when the rent goes up, or try to collect more than one month by calling it something else. These are all clear violations of security deposit laws.

Returning the Security Deposit in New York

Under the New York security deposit law, you have 14 days after the tenant vacates to send an itemized deduction statement and return any remaining balance. If you miss that deadline, the law stops caring how good your reasons were. We’ve already outlined the process above; here’s what happens if landlords get it wrong.

1. You may be required to return the full security deposit, even if there was no actual damage.
2. You may be liable for up to 2–3 times the deposit in damages, plus the tenant’s legal fees.
3. The tenant can pursue you in small claims court without the need for a lawyer.

To make matters simple, 14 days is not a suggestion, but a requirement that you should be hyper-attentive to.

What Should I Do if My Landlord Does Not Return My Security Deposit?

We’ve already covered what the New York security deposit law requires within 14 days and what landlords risk if they fail to comply. Here’s how a tenant can enforce those rights.

Send a formal written demand

Mail or email a short, dated letter (ideally via certified mail) stating your move-out date, confirming that 14 days have passed, citing Section 7-103, and requesting the full deposit or an itemized deduction list by a specific deadline.

Gather your documentation

Organize your lease, proof of payments, move-in and move-out photos, key return, forwarding address, and copies of any messages or letters about the deposit or condition of the unit.

File in small claims court

If the landlord still does not comply, file a small claims case in the appropriate New York court for the full deposit plus any statutory damages and costs. You do not need a lawyer, but you do need proper documentation.

Damages tenants can recoup

If a court finds the landlord violated New York's security deposit law, tenants may receive:

• The full security deposit amount
• Additional statutory or punitive damages (often up to an extra 1–2x the deposit, depending on the facts)
• Court filing costs
• Any unpaid interest that should have accrued on the deposit
• Reasonable attorney’s fees as appropriate

Before taking legal action, it’s best to send a clearly written demand first, then use small claims or civil court if the landlord still does not comply. It’s always best when attorneys and courtrooms aren’t involved.

Does the Security Deposit Increase with Rent Increase?

When rent increases in New York, the security deposit does not automatically increase with it. Under the New York security deposit law, the original deposit is locked at no more than one month’s rent at move-in and does not increase just because the rent does.

Let’s outline an example using easy, round numbers. If you started with a $1,000 deposit and later raised rent from $2,000 to $2,200, that same $1,000 stays the legal deposit; you cannot demand an extra $200 to “top it off,” or stack new “deposit-style” fees on top. Only in rare, extreme scenarios (like a brand-new tenancy at a radically different rent) would you reassess. Even then, you are capped at one month for that new agreement.

Interest on Security Deposits in New York

Interest depends on the building, not the tenant’s negotiating skills. For rentals in buildings with six or more units, New York security deposit law requires landlords to: 

1. Keep deposits in a New York interest-bearing bank account
2. Provide written notice of the bank details to the tenant
3. Pay out the security deposit with interest, allowing up to 1% annually as an admin fee. 

In smaller buildings (fewer than six units), interest is not mandatory. If you voluntarily use an interest-bearing account, follow the same basic rules. Mishandling security deposit interest by commingling funds, failing to provide notice, or retaining all the earnings can expose you to refunds, penalties, and increased risks in deposit disputes.

Using the Security Deposit as Last Month’s Rent

Under the New York security deposit law, the answer to “can I use my deposit to pay last month's rent” is a definitive no. The security deposit is reserved for damages and unpaid balances after move-out, not a prepayment of rent.

Consequences of misusing the deposit

If a tenant withholds the last month’s rent and “applies” the deposit, the full rent is still owed, the landlord can start a nonpayment case, and the tenant is likely to forfeit the deposit entirely.

Nonrefundable deposits in New York

All residential security deposits must be refundable. Creative labeling, such as “move-in fees,” “cleaning fees,” or “nonrefundable deposits,” does not exempt them from the law. Any attempt to make a standard security deposit nonrefundable conflicts with GOL §7-107 and is not allowed.

How tenants can challenge illegal fees

Tenants facing illegal nonrefundable fees or withheld deposits can send a written demand citing the statute claim, file in small claims court (up to the jurisdictional limit), and report the landlord to the New York Attorney General or housing agencies to enforce compliance.

Seasonal Rentals and Security Deposits

Short-term and seasonal rentals in New York are subject to the same security laws as year-round leases. The cap is still one month’s rent, landlords must return the deposit (with any itemized deductions) within 14 days after move-out, and there are no special exceptions just because it’s a beach house, ski cabin, or weekend rental.

5 Rules New York Landlords Can’t Afford to Miss

When you boil it down, the New York security deposit law is strict but simple. Landlords will find them easy to manage if you build the rules into your systems and processes.

1. Cap it at one month: For most rentals, you receive one month’s rent max. No fee stacking for pets, utilities, or “move-in” tricks.
2. Keep it in trust: Don’t commingle funds. Follow NYC/NY interest rules where applicable, and give tenants the required bank details.
3. Document everything: Conduct move-in/move-out walkthroughs, take photos, and clearly outline expectations in the lease.
4. Return it in 14 days: Itemized deductions plus any remaining balance in 14 days or risk losing the right to keep anything (and probably owe more).
5. Never swap it for last month’s rent: The deposit is for damage and unpaid balances, not a shortcut on the final payment.

If you want these rules built into your leases, payments, and move-out workflows, rather than tracking them manually, manage your units through Hemlane.

Frequently Asked Questions

What is the security deposit rule in New York?

Under the New York security deposit law (and NYS security deposit law), landlords for most residential units can charge no more than one month’s rent as a security deposit, must treat it as the tenant’s money held in trust, and must complete the apartment security deposit return within 14 days with an itemized deduction statement.

Can a landlord keep a security deposit for breaking a lease in New York?

Yes, if a tenant were to break the lease, the landlord can use the deposit to cover unpaid rent and real losses while re-renting. Landlords must still follow New York state rental laws and provide a timely, itemized explanation.

Can landlords charge a security deposit for painting and cleaning in New York?

Only when costs exceed normal wear and tear. The New York security deposit law does not let landlords bill routine repainting or standard cleaning as damage, so “extra dirty” or “obvious neglect” is chargeable, not ordinary use.

Can I use my security deposit as last month’s rent in New York?

No, questions like “can I use my deposit to pay last month’s rent” and “can your security deposit be used for rent” are both hard “no’s” under the law. 

Can a landlord charge a first month’s rent, last month’s rent, and a security deposit in New York?

For covered residential rentals, landlords cannot stack multiple months. Demanding more than one month’s deposit or “extra” advance payments is treated as a violation of the New York security deposit law.

Does the security deposit increase as rent increases?

No, once set, the deposit stays at that amount.

Is the security deposit refundable in New York?

Yes, the security deposit is refundable by default. Any lawful deductions must be documented.

Is there interest on security deposits in NYC?

In most situations (buildings with six or more units), landlords are required to hold deposits in interest-bearing accounts and follow the security deposit interest rules in NYC, passing along the security deposit with interest minus up to 1% as an administrative fee. In smaller buildings, this requirement may not apply.