It's no secret that being a landlord comes with a lot of risks. The people you rent your property to might damage it, stop paying rent, or cause disruptions to other tenants.
Security deposits are a great way to mitigate these risks. They encourage tenants to be on their best behavior and provide landlords with cash to fix any problems.
However, security deposit laws aren't always black and white. Keep reading to understand them.
How Much Can You Charge for Security Deposits?
Security deposits are paid at the beginning of the tenancy and must be equal to one month's rent. This New York security deposit law also states that the security deposit must be returned to the tenant within 14 days of moving out.
A security deposit will protect landlords from property negligence and necessary repairs caused by the tenant. Security deposits can also cover:
- Excessive cleaning costs
- Loss in monthly rent payments
- Unpaid bills
Regardless if the rental property is rent-regulated or not, landlords cannot ask tenants to pay a higher security deposit. They also cannot ask for an additional security deposit for pets.
What if Rent Increases?
If the rental amount increases during the tenancy or for a lease renewal, a landlord can legally collect the additional amount. The amount can only match the new monthly rent, not exceed it.
If you have questions about security deposit laws in New York, consider hiring a property management company. These professionals can help an NY landlord stay compliant.
Managing Security Deposits
When you collect a security deposit, you have to put the amount in an interest-bearing account. Connect with a New York State bank and notify the tenant of that bank.
A great property manager will be familiar with the banks you can utilize in the local area.
If a tenant keeps renewing their lease, you must pay the full annual interest of the security deposit each year. A tenant can ask that the interest be subtracted from the rent, held in a trust, or paid in a lump sum at the end of the year.
Returning a Security Deposit
The best landlord advice we can provide regarding security deposits is to stay up to date with NY security deposit laws. Landlords have 14 days from the end of the lease to refund the tenant.
If repairs are made from the deposit amount, a landlord has to provide a detailed report of the items paid for. You also need to outline how much each item costs.
Tenants can fix these issues themselves or opt to deduct costs from the security deposit.
If you fail to provide a report and use the funds for repairs, you have no claim to the security deposit. You will then be required by law to return the amount in full to the tenant.
How Rental Property Management Services Can Help
There are a lot of local laws and regulations landlords must know about their rental property. Understanding security deposits is one of the most important.
If you need help collecting, managing, and returning security deposits to tenants, hire a rental property management company. PMI Paramount is a full-service organization with 20 years of industry knowledge and experience.
Contact us today for dependable management solutions in the New York City area.
