New York Security Deposit Laws: The One-Month Cap, 14-Day Return, and Penalties

New York security deposit law is set by two statutes that work together — General Obligations Law section 7-108, which governs the amount, the return deadline, deductions, and inspections, and General Obligations Law section 7-103, which makes the deposit trust money and adds the interest rule. The framework changed dramatically in June 2019, when the Housing Stability and Tenant Protection Act capped most deposits at one month’s rent, imposed a hard fourteen-day return deadline, and created move-in and move-out inspection rights. This guide walks the whole New York framework end to end: how much you may collect now, what you can and cannot deduct, the fourteen-day return-and-itemize deadline, the trust-account and interest rules, the ban on non-refundable fees, and the punitive damages a court can impose when a landlord willfully keeps a deposit it should have returned.

Whether you own one co-op unit or a small portfolio of walk-ups, the core rules below apply the same way, because the General Obligations Law governs statewide. What varies is the layer that turns on building size — the interest and separate-account duty attaches to buildings with six or more units — and the narrow categories that sit outside the cap, such as rent-regulated apartments and certain seasonal or senior housing. Where a distinction matters, this guide flags it. Everything here is general information, not legal advice; confirm the current figures and consult a licensed New York attorney before acting on a specific dispute.

Below, a short overview video summarizes the New York deposit rules; the sections that follow break down each piece in detail — the one-month cap and its exceptions, deductions versus normal wear and tear, the fourteen-day return timeline, the inspection rights, interest and the trust account, penalties, the move-out walkthrough, and the small-claims path if a dispute cannot be resolved.

The single most important thing to know is that New York’s deposit ceiling dropped, and the change is recent. Before June 2019, New York had no statewide dollar cap on residential deposits, and two or more months’ rent was common. The Housing Stability and Tenant Protection Act of 2019 changed that. Under General Obligations Law section 7-108, for most residential units a landlord may not demand or receive a deposit or advance that exceeds one month’s rent. The cap counts every advance together, so a landlord cannot combine a security deposit with prepaid rent to get past the one-month line. If your lease template, your management software, or an older guide still allows two or three months, it is out of date — and collecting more than the cap is now a live legal error.

Units That Sit Outside the Cap

The one-month cap covers most ordinary residential rentals, but a handful of categories fall outside it. Rent-regulated units — rent-controlled and rent-stabilized apartments — are governed by their own regulatory regimes rather than the section 7-108 cap. Certain seasonal-use dwellings, owner-occupied cooperative apartments, and some senior, assisted-living, or continuing-care communities are also excluded. If your unit falls into one of these buckets, the general one-month rule may not apply the same way, so confirm the specific rule for that category before setting a deposit.

General Obligations Law section 7-108 limits the purposes a New York landlord may deduct from a security deposit, and it places the burden of proving each deduction is reasonable squarely on the landlord. Anything not clearly on the list is presumed to be the landlord’s cost to absorb. The permitted list is shorter than many landlords assume, and what falls off it defaults to ordinary wear and tear.

Properly Deductible

• Unpaid rent. Rent that remains owed for the final month or any earlier period.
• Damage beyond ordinary wear and tear. Holes in walls, broken fixtures, missing items, and similar damage the tenant or their guests caused.
• Cleaning, moving, and storage costs the tenancy caused. The reasonable cost of cleaning beyond routine turnover — smoke damage, pet contamination, unusual filth — and any moving or storage costs, where they are not ordinary wear and tear.
• Unpaid utilities and lease-specified charges. Utilities the landlord had to cover and specific unpaid charges the lease spells out, such as certain key or late-fee amounts.

Not Deductible — Ordinary Wear and Tear

Ordinary wear and tear is the natural deterioration that comes from living in a unit normally, and the landlord must absorb it. New York treats these as non-deductible:

• Routine paint touch-ups for minor scuffs and marks, and small nail holes from hanging pictures.
• Carpet cleaning for ordinary soiling, with no stains, pet damage, or unusual odors.
• Faded paint, carpet, or fixtures worn from age and normal use.
• Worn but still-functioning appliances, and caulk that has aged around tubs and sinks.
• Maintenance issues the landlord failed to address during the tenancy.

The deadline New York landlords miss most often is the fourteen-day return rule the HSTPA created. Under General Obligations Law section 7-108, within fourteen days after the tenant vacates the premises, the landlord must deliver two things: any remaining portion of the deposit, and a written itemized statement indicating the basis for each amount retained. The clock runs from the day the tenant actually surrenders the unit — keys returned, belongings out — not from the date the lease says it ends.

What the Itemized Statement Must Include

The statement must indicate the basis for the amount of the deposit retained — in practice, a specific description and a dollar figure for each charge. A line that reads only “cleaning” with a number is not an itemization; “professional pet-odor remediation, invoice attached” is. Because the landlord carries the burden of proving each deduction is reasonable, the safer practice is to attach the invoice, estimate, or documented in-house cost for every charge, not just describe it.

No Forwarding Address Is Not a Loophole

A common myth is that the fourteen-day clock only starts once the tenant hands over a forwarding address. That is not what New York law says. The statute ties the deadline to the day the tenant vacates the premises, not to any forwarding address, so a landlord cannot sit on the deposit waiting for an address to arrive. If the tenant leaves none, mail the deposit and itemized statement to the last known address — commonly the rental unit itself — and keep proof of mailing. A forwarding address makes delivery smoother, but it is not a legal condition of the landlord’s duty.

One of the most useful features the 2019 HSTPA added is a pair of inspection rights under General Obligations Law section 7-108. Handled correctly, they protect both sides — the tenant gets a chance to earn back the deposit, and the landlord builds the documentation that decides every later deduction.

The Move-In Inspection

After the lease is signed but before the tenant takes occupancy, the landlord must offer the tenant the opportunity to inspect the unit together to record its condition. If the tenant accepts, the two sides jointly execute a written agreement attesting to the condition of the unit and specifying any existing defects or damage. That signed record becomes the baseline for any move-out deduction: the landlord cannot later charge for a condition that was already documented at move-in.

The Move-Out Inspection

When either party gives notice to end the tenancy, the landlord must, within a reasonable time, notify the tenant in writing of the tenant’s right to request an inspection before vacating. If the tenant requests it, the inspection must occur no earlier than two weeks and no later than one week before the end of the tenancy, and the landlord must give at least forty-eight hours written notice of the date and time. After the walkthrough, the landlord provides the tenant with an itemized statement of the repairs or cleaning that would otherwise be deducted, giving the tenant a genuine chance to cure them before move-out. The landlord may still deduct for damage that occurred after the inspection, but not for items the tenant remedied.

New York treats the deposit as the tenant’s money, not the landlord’s, and General Obligations Law section 7-103 spells out how it must be held. The obligations scale with the size of the building, but the core trust duty applies to every residential deposit.

The Six-or-More-Unit Interest Rule

When a deposit is for a building that contains six or more family dwelling units, the landlord must place it in an interest-bearing account in a New York banking organization. The interest belongs to the tenant, except that the landlord may keep, as an administrative expense, a sum equal to one percent per year of the deposit; the balance of the interest is paid to the tenant. For a building with fewer than six units, interest is not mandatory — but if the landlord chooses to place the deposit in an interest-bearing account anyway, the tenant is still entitled to that interest, less the same one-percent fee.

The Trust-Account and No-Commingling Duty

Regardless of building size, the deposit continues to be the tenant’s money, held in trust, and may not be mingled with the landlord’s personal funds or treated as the landlord’s asset. For a six-or-more-unit building, that means a separate interest-bearing New York account. For a smaller building, a separate interest-bearing account is not required, but the no-commingling duty still applies, so the deposit must be kept segregated from operating money. Commingling is itself a violation and can cost a landlord the right to any offset at move-out.

New York backs the deposit rules with real teeth. Under General Obligations Law section 7-108, a landlord found to have willfully violated the deposit rules is liable for punitive damages of up to twice the amount of the deposit or advance. That multiplier is on top of returning whatever was wrongfully withheld. Separately, under General Obligations Law section 7-103, a landlord who commingles the deposit can lose the right to any offset entirely and be ordered to return the full deposit, independent of any actual damage the tenant caused.

A willful violation is more than being wrong about a deduction. It generally means the landlord acted in bad faith — ignoring the fourteen-day deadline, inventing charges, refusing to itemize, or commingling and keeping the deposit with no legitimate basis. A landlord who returns the deposit and a clear itemized statement on time, with documentation for each charge, is well protected even if a specific deduction is later disputed. As for attorney fees, the deposit statutes themselves do not provide them; a prevailing tenant can recover fees only where the lease contains a fee clause, which Real Property Law section 234 then makes reciprocal — so fee recovery depends on the lease, not on the deposit statutes alone.

Put the rules together and the New York move-out becomes a repeatable checklist rather than a judgment call. Follow this sequence and penalty exposure all but disappears.

A thorough move-out record starts at move-in. When you do withhold, a clean New York security deposit itemization form keeps the statement organized and defensible, and a New York security deposit return letter documents the refund itself. If a dispute over the deposit does arise, our guide on how to handle a security deposit dispute walks through the next steps.

Most deposit disputes never reach a courtroom, but when they do in New York, they usually land in small claims court — a forum designed to be used without a lawyer. The jurisdictional limit depends on the court: the New York City Civil Court small claims part hears claims up to ten thousand dollars, city courts outside New York City up to five thousand dollars, and town and village justice courts up to three thousand dollars. Those limits comfortably cover a deposit dispute and the punitive multiplier in most cases. Verify the current limit for the court where the property sits, as the Legislature adjusts these figures over time.

The pattern is consistent: New York deposit cases are won on paper. The landlord who documents condition at both ends, offers the inspections, itemizes clearly, attaches supporting costs, and mails on time rarely loses — and the tenant who keeps their own photos and a copy of the written statement is equally well positioned to recover a wrongful withholding.

Rules are easier to apply against real situations than in the abstract. These are the fact patterns that most often test New York deposit law at move-out.

New York tenants have specific, enforceable rights under General Obligations Law sections 7-108 and 7-103. These are not abstract — they translate directly into small-claims recoveries when a landlord breaks the rules, because the burden of proof rests on the landlord and the penalties can be material.

• The right to prompt return. Fourteen days is a hard deadline once the tenant has vacated; missing it forfeits the landlord’s right to keep any part of the deposit.
• The right to itemization. Any deduction requires a written statement of the basis for the amount kept. “Cleaning — four hundred dollars” is not itemization; “professional pet-odor remediation, invoice attached” is.
• The right to challenge deductions. A tenant may dispute every deduction, and the landlord must prove each charge was for damage beyond ordinary wear and tear.
• The right to sue without a lawyer. New York small claims courts handle deposit disputes in a process designed to be accessible without an attorney.
• The right to punitive damages. Where a willful violation is shown, the tenant can recover punitive damages of up to twice the deposit under General Obligations Law section 7-108.

Every rule above ultimately turns on proof. New York places the burden on the landlord to justify each deduction, which means the landlord who cannot document a charge loses it — regardless of whether the damage was real. Build the evidence file across the whole tenancy, not at the end.

At Move-In

• The signed move-in inspection record, room by room, dated and attesting to existing defects.
• Timestamped photos or video of every wall, floor, fixture, and appliance, stored where the date cannot be doubted.
• A written receipt identifying the money as a “security deposit,” collected separately from the first month’s rent.

During the Tenancy

• A dated log of every maintenance request and the landlord’s response, which also rebuts a habitability defense — see New York habitability laws.
• Records of any lawful entry to inspect or repair, made with proper notice under New York entry rules — see New York landlord entry laws.

At Move-Out

• The written move-out inspection list, if the tenant requested the pre-move-out walkthrough.
• A second set of timestamped photos taken at surrender, to compare against move-in.
• Invoices, estimates, or a documented in-house cost for every charge on the itemized statement.
• Proof that the itemized statement and refund were mailed within fourteen days of surrender.

The cheapest deposit dispute is the one that never happens. A few disciplined habits protect a New York landlord across an entire portfolio.

• Document move-in exhaustively. The signed inspection record and dated photos create the baseline that decides every future deduction.
• Set the deposit at the one-month cap, and no higher. For a covered unit, the deposit and any advance together may not exceed one month’s rent.
• Hold the deposit correctly. Keep it as trust money, never commingled; place it in an interest-bearing New York account for a six-or-more-unit building, and pay the tenant the interest less the one-percent fee.
• Call it a deposit, and treat it as refundable. Never label a fee non-refundable; every dollar you collect as a deposit is refundable except for a lawful deduction.
• Offer both inspections every time. They reduce disputes and demonstrate good faith.
• Calendar the fourteen-day deadline at surrender and mail the statement with proof, well before it expires.
• Screen carefully before you ever hand over keys. The tenants most likely to leave a unit in disputed condition are often the ones a thorough screening would have flagged.

That last point is where most disputes are actually won — before the lease is ever signed. A prior eviction, a pattern of damage, or unstable finances rarely appears out of nowhere; it usually leaves a trail an applicant’s history reveals. Screening for it is the single highest-leverage habit a New York landlord can build. For the state’s screening rules, see our New York tenant screening laws guide.

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