New York Security Deposit Law 2026 — Beyond the NYC Rules

The biggest misconception about New York security deposit law is that it's an NYC rule that varies upstate. It isn't. The 2019 Housing Stability and Tenant Protection Act (HSTPA) capped deposits statewide at one month's rent and set a 14-day return + itemization requirement, alongside GOL § 7-103's trust rule and its interest-bearing account rule for properties of 6+ family dwelling units. The rules apply equally in Buffalo, Syracuse, Rochester, the Hudson Valley, and the five boroughs. Here's what actually changed and where landlords keep getting tripped.

One month's rent. Statewide. Narrow exceptions.

NY GOL § 7-108 caps the security deposit — and any advance — at one month's rent for residential tenancies across New York State (the exclusions are narrow and listed under "Upstate exemptions" below), and § 7-103 makes it the tenant's money, held in trust and never mingled with the landlord's own funds. There is no exception for:

• Furnished units.
• Short-term tenancies — unless the unit qualifies as a registered seasonal use dwelling unit (occupancy of no more than 120 days, registered with the local or county registry, lease terms required by § 7-108(4)–(5)).
• First-time renters or applicants with thin credit history.
• Higher-rent units.
• Co-op or condo rentals — the only co-op carve-out is for an owner-occupied cooperative apartment, where the tenant is the unit's owner, purchaser or shareholder (§ 7-108(6)).

A lease that collects two months' rent as a deposit on a covered unit violates § 7-108 (check HSTPA's effective-date rules for leases signed before it). The tenant can recover actual damages, plus punitive damages of up to twice the deposit if the violation is found willful (§ 7-108(1-a)(g)). Lease renewals are an opportunity to correct the deposit downward to the statutory cap.

The 14-day return + itemization rule

NY GOL § 7-108 requires the landlord, within 14 days after the tenant vacates the premises, to provide an itemized statement indicating the basis for any amount retained and to return any remaining portion of the deposit.

If the landlord fails to provide the tenant with the itemized statement and the deposit within 14 days, the landlord forfeits any right to retain any portion of the deposit (§ 7-108(1-a)(e)). This is the rule that catches operators who think "we have a year to deal with this." The 14-day clock is strict.

Where the interest rule kicks in

For property containing six or more family dwelling units, NY GOL § 7-103 requires the deposit to be held in an interest-bearing account in a banking organization within the state, earning the prevailing rate for such deposits in the area. The landlord is entitled to 1% a year of the deposit as administration expenses (in lieu of all other administrative and custodial expenses); the rest of the interest is the tenant's and must either be held in trust until repaid or applied to rent, or paid to the tenant annually.

For property with fewer than six family dwelling units, § 7-103 does not require an interest-bearing account — but if you use one, the interest, less 1% a year of the deposit, belongs to the tenant.

When you deposit the money in a bank, you must notify the tenant in writing of the bank's name and address and the amount deposited.

Willful withholding and the doubled-deposit remedy

NY GOL § 7-108 makes a landlord who violates its deposit rules liable for actual damages — and, if the violation is found willful, for punitive damages of up to twice the amount of the deposit. On a $2,400 deposit, a willful violation can therefore add up to $4,800 in punitive damages on top of the actual damages — and a landlord who missed the 14-day deadline has already lost the right to keep any of the deposit. In any dispute over the amount retained, the landlord bears the burden of proving it was reasonable.

The statute does not define "willful." These are the patterns that put a landlord at risk:

• Failing to send the itemized statement at all.
• Itemizing damages without supporting documentation when challenged.
• Deducting for anything outside the statutory categories (unpaid rent, tenant damage beyond normal wear and tear, unpaid utilities owed to the landlord under the lease, moving and storage), such as ordinary wear and tear or a prior tenant's damage.
• Holding the deposit past the 14-day window without explanation.

What about the "last month's rent" charge?

A long-standing operator workaround was to collect a separate "last month's rent" payment at move-in alongside the security deposit. HSTPA put advances under the same rule: under § 7-108(1-a)(a), no deposit or advance may exceed one month's rent, and the entire advance is refundable on move-out on the same terms as a deposit, less amounts lawfully retained for the itemized categories (unpaid rent, damage beyond normal wear and tear, unpaid utilities owed to the landlord, moving and storage).

Practical implication: the safe upper limit is one month's rent across the deposit and any advance combined. Collecting a full month of each relies on a reading of the statute it does not spell out — confirm it with counsel before you do.

The "trust account" question

New York requires every deposit, whatever the building size, to be held in trust and never mingled with the landlord's own money or treated as the landlord's asset (GOL § 7-103(1)). For property with 6+ family dwelling units it must also sit in an interest-bearing account at a banking organization within the state.

For most New York operators, the practical compliance path is:

1. Open a separate "deposits" account at a bank with a place of business in New York — interest-bearing for properties with 6+ family dwelling units, non-interest-bearing acceptable for smaller properties.
2. When you deposit it, notify the tenant in writing of the bank's name and address and the amount deposited.
3. Use the same account for every tenant's deposit, separated by ledger entries.
4. Where the account bears interest, either pay the tenant's share annually or hold it in trust until it is repaid or applied to rent.

Upstate exemptions and special configurations

HSTPA did not create exemptions for upstate or rural rentals. The same one-month cap, 14-day return, and itemization rule applies in Albany, Plattsburgh, and Watertown as in Brooklyn.

Where you find variation:

• Units outside § 7-108's deposit rules: units subject to the city rent and rehabilitation law or the emergency housing rent control law, licensed continuing care retirement communities, assisted living providers and adult care facilities, senior residential communities that have filed an offering plan with the attorney general, and certain not-for-profit independent retirement communities.
• Rent-stabilized units (NYC and municipalities that have opted into the ETPA — check your locality's current status) follow rent-stabilization deposit rules, which mirror but slightly differ from the general HSTPA framework. The DHCR is the authority for stabilized units.
• Co-op rentals governed by board approval often carry separate "move-in fees" charged by the co-op board. The statutes do not address those fees, so check with counsel before treating one as outside the deposit rules; § 7-108(6)(c) only excludes payments that are part of the purchase price of the unit or shares.
• Public housing has separate federal rules.

Outside those exclusions and the seasonal-use and owner-occupied co-op carve-outs, the general rule for non-stabilized, market-rate rentals across New York State is the one-month cap, 14-day return, and itemization requirement, regardless of geography.

Compliance checklist

For every New York rental:

1. Cap the deposit (and any advance) at one month's rent on every covered unit — the only carve-outs are qualifying seasonal use units and owner-occupied co-ops (§ 7-108(4)–(6)). Re-check on renewal.
2. Interest-bearing account if the property has 6+ family dwelling units. Whenever the deposit sits in a bank, tell the tenant in writing the bank's name and address and the amount deposited.
3. Move-in inspection offer: after lease signing and before occupancy, offer the tenant a joint inspection; if they ask for one, sign a written agreement noting existing defects (photos help). Move-out: once either side gives notice to end the tenancy (unless the tenant gives less than two weeks' notice), tell the tenant in writing of their right to request an inspection and to be present; hold it one to two weeks before the end of the tenancy with 48 hours' written notice, then give an itemized list of proposed deductions they can cure.
4. Written itemized statement of any deductions, provided within 14 days of the tenant vacating.
5. Documented mailing to the forwarding address (or last known address if no forwarding was provided).
6. Interest, less the 1%-a-year administration expense, held in trust for the tenant until repaid or applied to rent, or paid annually — wherever deposits sit in an interest-bearing account.

How Proprietio handles New York deposits

Proprietio's New York-tier lease template caps the deposit at the statutory one month and prompts for the 6+ unit interest-bearing disclosure when applicable. The 14-day return clock is tracked from move-out and the itemized statement template prompts for the specific deduction categories that survive HSTPA scrutiny. For rent-stabilized units, the workflow distinguishes between free-market and stabilized rules and pulls the current DHCR guidance into the renewal flow.

HSTPA didn't make New York deposit law easier — it made it more consistent. The same rules now apply whether you're operating one unit in Watertown or thirty in Brooklyn. The compliance discipline is the same; the geography excuse is gone.