It’s tough enough to save two months’ rent plus a security deposit (plus a brokers’ fee) for your last move into a city apartment. You might have thought you’d never have anything to show for that security deposit beyond getting back the cash once you move out. But if you’re renting in New York, you might be entitled to interest on that security deposit.
Landlords are required to keep security deposits in an interest-bearing account at a New York State bank, according to New York State regulations. The landlord must notify you of the bank’s details and pay you the full annual interest, minus 1% for administrative costs. You can decide whether you want the interest subtracted from your rent, held until the end of your tenancy, or paid in a lump sum each year.
But there’s a catch: with interest rates often below 1%, you might not end up with any interest at all.
Here’s the deal:
- If your building has six or more apartments, or your landlord has put your deposit in an interest-bearing account, you’re entitled to receive interest.
- If the building has fewer than six apartments and the deposit isn’t in an interest-bearing account, you won’t get any interest.
For example, if you paid a $2,000 security deposit, and it earned 2.5% interest, and then you moved out five years later, you would get $150 in interest after the landlord takes their 1% administrative fee (plus your initial deposit assuming there was no damage to the apartment).
Also, if your rent goes up, your landlord can ask you to increase your security deposit to match the new rent, even if you’re exempt from the rent hike due to senior or disability exemptions.
If your landlord refuses to return your security deposit with the interest you’re entitled to, you can file a suit in small claims court. Remember, knowing your rights can save you money, so you can call Housing and Community Renewal (HCR) for clarification.
What if a landlord hasn’t disclosed whether they have put their security deposit in an interest-bearing account OR denies that they did but you suspect otherwise? Are there legal measures a tenant could take to confirm?
A representative from the Attorney General’s Office (OAG) points to General Obligations Law 7-103:
“It requires the landlord to disclose the name of the bank where the security is held and yes, provides the additional protection of mandating that the bank account where security is deposited be an interest bearing account for tenants in buildings with six or more units,” the staffer told Epicenter NYC. “There also may be a provision in the specific lease which governs the obligations of the landlord re: releasing information on the security account.”
Any New Yorkers with complaints about rent security deposits are encouraged to report their issues to the OAG at this link.
