Security-Deposit Compliance in New York State: GOL §§7-103, 7-107, and 7-108

SECTION: Landlord Operator Playbook JURISDICTION: New York State AUDIENCE: Landlord, Property Manager, Leasing Operator

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What the Statutes Require

New York treats money deposited or advanced as security for a real-property lease as the depositor's money held in trust. Under GOL §7-103, it may not be mingled with the recipient's personal money or become that person's asset. A waiver of that protection is void.

GOL §7-107 applies to rent-stabilized dwelling units. GOL §7-108 applies to residential dwelling units not specifically referred to in §7-107. This summary is general information, not legal advice; confirm coverage and any exception with New York landlord-tenant counsel before collecting or retaining money.

Amount collected

For a §7-107 unit, a deposit or advance may not exceed one month's rent. For most §7-108 units, the same one-month limit applies. Section 7-108 identifies exceptions and separate rules for certain regulated care or retirement settings, qualifying seasonal-use dwelling units, and qualifying owner-occupied cooperative apartments. Do not assume an exception applies without a fact-specific legal review.

The statutory limit is written as a limit on a "deposit or advance." A proposed charge should be reviewed against the applicable statute and lease rather than relabeled to avoid the limit.

Custody and interest

If the recipient deposits security money in a bank, §7-103 requires written notice to each depositor of the bank's name and address and the amount deposited. The bank must have a place of business in New York.

For rental property containing six or more family dwelling units, §7-103 requires the security money to be placed in an interest-bearing account at a banking organization in New York. When security money is in an interest-bearing account, the statute permits the recipient to retain an annual administration amount equal to one percent of the security money; the balance of interest remains the depositor's money and must be held in trust, applied for the tenant's use or rent, or paid annually as the statute provides.

Inspection rights

Both §7-107 and §7-108 require the landlord, after initial lease signing and before occupancy, to offer the tenant an opportunity to inspect the premises. If the tenant requests it, the parties execute a written condition agreement before occupancy that notes existing defects or damage. A noted condition, defect, or damage may not later be the basis for retaining any part of the deposit. The agreement is admissible only in a proceeding concerning return or amount of the security deposit.

After either party gives notice of intent to terminate, the landlord generally must notify the tenant in writing of the right to request and attend an inspection before vacating. The exception is when the tenant terminates with less than two weeks' notice. If requested, the inspection must occur no earlier than two weeks and no later than one week before the tenancy ends, and the landlord must give at least 48 hours' written notice of its date and time. The landlord then provides a statement specifying proposed repair or cleaning deductions, and the tenant has an opportunity to cure before the tenancy ends.

Deductions and return

The applicable statutes allow only reasonable, itemized costs for:

• unpaid rent;
• damage caused by the tenant beyond ordinary wear and tear;
• utility charges payable directly to the landlord under the lease or tenancy; and
• moving and storage of the tenant's belongings.

They prohibit retention for ordinary wear and tear or damage caused by a prior tenant. Within 14 days after the tenant vacates, the landlord must provide an itemized statement stating the basis for any retained amount and return the remainder. A landlord who does not provide both the statement and deposit within that period forfeits the right to retain any portion.

In an action or proceeding disputing a retained amount, the landlord has the burden to prove reasonableness. A person who willfully violates the applicable section may be liable for punitive damages of up to twice the deposit or advance, in addition to actual damages. Particular deduction decisions are fact-specific; obtain counsel's advice when a charge is contested or uncertain.

Operating Checklist

1. Determine whether the tenancy falls under §7-107 or §7-108 and obtain counsel's review of any claimed exception.
2. Do not collect a deposit or advance above one month's rent unless a specific statutory exception has been confirmed for the unit and tenancy.
3. Hold security money as trust money and do not commingle it with personal money.
4. If money is deposited in a bank, send the §7-103 bank-and-amount notice; for property with six or more family dwelling units, use the required interest-bearing New York account.
5. Offer the statutory move-in inspection and preserve the resulting condition agreement if the tenant requests it.
6. After termination notice, follow the statutory inspection-right notice, timing, and 48-hour written-notice requirements when they apply.
7. Preserve the documents needed to explain a deduction, including condition records, invoices or estimates, rent records, utility records, and proof of delivery.
8. Within 14 days after vacancy, deliver any required itemization and return the balance.
9. Escalate disputed deductions, exceptions, and coverage questions to New York landlord-tenant counsel.

Botway Operating Rule

Botway is a brokerage, not a property manager. It does not receive or hold a deposit, choose a depository account, perform inspections, decide deductions, or return funds. The owner or property manager remains responsible for statutory compliance.

Verified Sources

Fetched and read August 7, 2026:

• New York General Obligations Law §7-103 - trust custody, banking notice, interest, and waiver
• New York General Obligations Law §7-107 - deposits for rent-stabilized dwelling units
• New York General Obligations Law §7-108 - deposits for non-rent-stabilized dwelling units

Related FAQ

Must every New York security deposit be in an interest-bearing account?

No. The statute requires an interest-bearing account for rental property containing six or more family dwelling units. Separately, every covered security deposit remains trust money and may not be mingled with the recipient's personal money.

What is the deadline after vacancy?

Within 14 days after the tenant vacates, the landlord must provide the itemized statement for any retained amount and return the remainder. Missing both forfeits the right to retain a portion of the deposit.

What can be deducted?

The statutes list reasonable, itemized costs for unpaid rent, tenant-caused damage beyond ordinary wear and tear, lease-authorized utility charges payable directly to the landlord, and moving and storage of the tenant's belongings. They prohibit retention for ordinary wear and tear or prior-tenant damage.

Work With Botway

Botway may preserve available brokerage transaction documents. Deposit custody, inspection notices, deductions, and refunds remain the owner or property manager's responsibility.