Security Deposit Law to Apply to Rent-Stabilized Landlords

State law requires most landlords to return the security deposit to a former tenant within 14 days of their exit, or explain why they won’t. That law hasn’t applied to rent-stabilized landlords, but the governor is looking to rectify that.

Gov. Kathy Hochul vowed to close the loophole which spares the landlords of roughly 1 million apartments in New York City from the law, Gothamist reported. Hochul included the proposal in a list of policy goals released this week, saying rent-stabilized tenants were “erroneously” omitted from the 2019 state law.

Tenants typically cough up one month’s rent when moving into a unit. Landlords are allowed to withhold those deposits when a renter moves out if the tenant exacts more damage than the typical wear-and-tear, or fails to pay the last month’s rent.

Keeping that money is justifiable on occasion. If landlords need to make repairs to a unit after a tenant moves out, and those repairs are more costly than the security deposit, property owners often end up eating the costs, further squeezing their bottom lines.

But landlords are also disincentivized from returning deposits, as the burden falls upon tenants to go to housing court, win a judgment and collect when they complain of withheld deposits. It’s an uphill battle for renters, one drawing further scrutiny and potential regulation by lawmakers.

Assemblymember Linda Rosenthal told Gothamist that more rules are needed to ensure compliance from landlords, threatening to penalize those who don’t return security deposits promptly.

Rosenthal is sponsoring a bill that would allow tenants to pay security deposits in installments. She is also weighing legislation that would fine landlords for either failing to return a security deposit in a timely manner or neglecting to provide rationale for withholding the deposit.

Owners of rent-regulated landlords are already facing fresh fines for a different reason. Last year, Gov. Hochul signed a law to create stiffer penalties for landlords who fail to register their rent-regulated units with the state, starting at $500 per month per apartment for those who missed a July 31 deadline last year.

Close to 1 million apartments were registered by the time the deadline came around, exceeding the total from prior years by close to 200,000.

— Holden Walter-Warner