Interest on security deposit?
Are landlords in NYC supposed to pay their tenants interest each year on the security deposit they are holding? Our lease is one of those standard stationery-store leases, and it says the security “will only bear interest if required by law.” Is it required by law here? Thanks.
Are landlords in NYC supposed to pay their tenants interest each year on the security deposit they are holding? Our lease is one of those standard stationery-store leases, and it says the security “will only bear interest if required by law.” Is it required by law here? Thanks.
According to New York landlord book, landlords don’t have to pay interest to tenant if the dwelling is less than 6 units. BUT deposit must be kept in a separate account. Account does not have to be in tenant’s name
So it sounds like there are 2 different conditions depending on the number of units. No interest to be paid if it’s less than 6 units, but interest must be paid (minus the 1% fee) if it’s 6 or more units. Just paraphrasing here.
5:17 – what you’re saying contradicts the poster above who quoted the NY State Attorney General and also advice I got from my lawyer, quoted below:
“The security deposit must be in a segregated account, earning interest for the benefit of the tenant. Account need not be in the name of the tenant.”
No interest is required by law
If the Premises is a house, duplex, or an apartment in a building with five or fewer units, then the following provision shall apply: Such security deposit shall be returned to Tenant, without interest, and less any set off for damages to the Premises upon the termination of this Agreement. In the event that Landlord shall at any time apply any of such security deposit to cover unpaid rent, the late fee, or to repair damage caused to the Premises, then, upon the request of Landlord to Tenant specifying the amount so applied, Tenant shall immediately deposit with Landlord, as an additional security deposit, the amount so applied, so that the security deposit held by Landlord shall at all times during the term hereof be equal to the aforementioned amount specified in this section. Tenant Initials: ______ ______ ______ ______ Landlord Initials: ______ ______
If the Premises is an apartment in a building with six or more units, then the following provision shall apply: As required under Section 7-103 of the General Obligations Law, Landlord shall hold such security deposit in an interest bearing bank account located in New York state as security for any damage caused to the Premises or for any unpaid rent or late fees during the term hereof. Landlord hereby notifies Tenant that the name of the bank in which the security deposit funds shall be deposited is: _________________________________________________________. In the event that Landlord shall at any time apply any of such security deposit to cover unpaid rent, the late fee, or to repair damage caused to the Premises, then, upon the request of Landlord to Tenant specifying the amount so applied, Tenant shall immediately deposit with Landlord, as an additional security deposit, the amount so applied, so that the security deposit held by Landlord shall at all times during the term hereof be equal to the aforementioned amount specified in this section. At the end of the term of the Agreement, Landlord shall pay Tenant the interest earned on such amount, less the one percent (1%) administrative fee referred to in Section 7-103 of the General Obligations Law. Tenant Initials: ______ ______ ______ ______
Really? I’m new to this as well.
My laywer advised me that it need not be in the name of the tenant… didn’t realize it’s a special type of acct.
anon 4:21 : You need a special account actually, its like a custodial account. You call up a bank and they have special interest bearing accounts for landlords where each person’s security deposit is contained seperately. The landlord recieves a statement that shows how much is in each tenant’s security account and how much interest it earned. I know for a fact sovereign bank has these accounts.
… or if you want to simplify your life, just deposit it in a savings account earning 1% annual interest and at the end of the year, send them a statement with the interest earned netted out as per the administrative fee.
You’re required to keep it in an account separate from your funds, earning interest for their benefit.
From the NY State Attorney General’s Landlord/Tenant Guide:
“Landlords, regardless of the number of units in the building, must treat the deposits as trust funds belonging to their tenants and they may not co-mingle deposits with their own money…
Landlords are entitled to annual administrative expenses of 1% of the deposit. All other interest earned on the deposits belongs to the tenants. Tenants must be given the option of having this interest paid to them annually, applied to rent, or paid at the end of the lease term.”
Also, you have to notify the tenant, in writing, the name and address of the bank and the ammount of the deposit.
If you want to be nice to your tenants, just open an account online with someone like HSBC or Orange Direct. They offer something like 5% interest for online savings accounts.