Security Deposits
If you own a 3 unit (or less) residence, what are the rules for tenants’ security deposits? Do they need to be maintained in a separate account that bears interest? This is an owner-occupied residence, if that matters.
If you own a 3 unit (or less) residence, what are the rules for tenants’ security deposits? Do they need to be maintained in a separate account that bears interest? This is an owner-occupied residence, if that matters.
nk,
What paperwork would your tenants have to do? If you are opening an account to hold security deposits the tenants should have nothing to do with it. It would defeat the purpose if they had access to it.
What mystifies me is that I told my tenants that I would open up a separate account for it and they refused to do the paperwork! I”m still scratching my head over that one.
It doesn’t matter if you co-mingle the funds as long as you return the deposit – minus witholding funds for legitimate problems. If you return the deposit what would the tenants have to complain about? It’s called standing legally. A tenant would have no standing to challenge a landlord if his deposit was returned because he will have suffered no harm. No harm, case dismissed.
For 3 family it is not required to be in a savings account but as noted above, it cannot be commingled with any other money. So you can keep it under you mattress as long as you don’t have any other money there.
thanks
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 of buildings with six or more apartments must put all security deposits in New York bank accounts earning interest at the prevailing rate. Each tenant must be informed in writing of the bank’s name and address and the amount of the deposit.
Landlords are entitled to collect annual administrative expenses of one percent 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. If the building has fewer than six apartments, a landlord who voluntarily places the security deposits in an interest bearing bank account must also follow these rules.
NY state law states that the security deposits must be kept in a separate account, and that these funds cannot be intermingled with building operating funds.