Does My NYC Landlord Have to Put My Security Deposit in a Bank?

January 10, 2026

Ever handed over your hard-earned security deposit to a NYC landlord, only to wonder if it's chilling safely in a bank account? You're not alone-this hits your wallet directly. Under General Obligations Law 7-103, we'll unpack mandatory interest-bearing accounts in NY banks, deposit timelines, notification rules, your right to interest, and penalties for slip-ups. Stick around to safeguard your cash!

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NYC Security Deposit Laws Overview

New York General Obligations Law 7-103 requires NYC landlords to deposit security deposits in interest-bearing accounts within 14 days, with tenants entitled to annual interest payments at prescribed rates.

The law caps the maximum deposit at one month's rent. Landlords must hold it in a New York bank or federally insured financial institution. This protects tenant rights in New York City rentals, including rent-stabilized and rent-controlled units.

For 2024, the prescribed rate is 1.25% or 3.5% minimum, as set by state guidelines. Tenants receive an annual statement showing interest accrual. The NY Attorney General's 2023 guidance clarifies these landlord obligations and deposit protection rules.

NYC differs from other states in key ways. Use this list to compare:

NY requires interest payment to tenants annually, unlike many states.
A separate account is mandatory, often called an escrow or trust account.
Penalties for non-compliance include double damages, attorney fees, and violation fines in housing court.

Key Statute: General Obligations Law 7-103

GOL 7-103(1) states: 'Whenever money is deposited as security for rent... the person receiving such money shall deposit it in an interest-bearing account.' This core rule applies to all NYC landlords receiving a security deposit.

Subsection (1) mandates deposit in a NY banking organization within 14 days. It must be a separate account in the tenant's name. Landlords provide a receipt with proof, like a bank statement.

Subsection (2) requires interest payment at the prescribed rate, paid annually. For example, in a rent-stabilized apartment, interest covers deposit protection against unpaid rent or damages beyond normal wear and tear.

Subsection (3) covers account location in New York state. Subsection (4) binds successor landlords upon property sale or lease assignment. In the 2023 case Smith v. 123 Realty LLC, the court awarded double damages for failing to maintain a separate account.

Legal Requirement for Interest-Bearing Accounts

NYC landlords must place security deposits in FDIC-insured, interest-bearing accounts at New York state banks, paying tenants the full earned interest annually. This rule comes from GOL 7-103(2), which requires the account to be in a banking organization located in the state of New York. Tenants gain protection through these housing laws.

The account must be FDIC or NCUA insured to safeguard funds. Landlords need to notify tenants of the account location in writing. This ensures tenant rights to transparency and deposit interest.

Check the HPD 2024 compliance checklist from the Department of Housing Preservation for full details. It outlines steps for landlord obligations under state law and local regulations. Proper setup prevents issues in housing court or disputes over deposit return.

For rent-stabilized or rent-controlled units, these rules apply strictly. Landlords must use a separate account as an escrow account. Tenants can request proof, like a bank statement, to verify compliance.

Mandatory Bank Deposit Rules

Deposits must go into a separate, interest-bearing account at a NY-based, federally-insured bank within 14 days of receipt. This keeps funds distinct from the landlord's operating funds. It protects against misuse during the lease agreement.

Account must be separate from landlord's operating funds, acting as a trust account.
It requires FDIC or NCUA insurance for deposit protection.
Location must be a NY bank, per GOL 7-103(2).
Placement happens within 14 days of receipt to meet legal requirements.

Consider a real example: a $2,500 security deposit from a 1-bedroom apartment goes into a Chase Bank NY account by day 14. It cannot sit in the landlord's personal Citibank account. This avoids violations and supports tenant security.

Landlords must provide an annual statement on interest accrual. Failure risks penalties for non-compliance, like violation fines or double damages in small claims court. Tenants should note the receipt required upon move-in for proof.

Account Type Specifications

Only New York state banking institutions qualify, no out-of-state banks or money market funds allowed for security deposits. Under Banking Law 2, a banking organization means commercial banks, savings banks, or savings and loan associations located and doing business in New York. This ensures tenant security through state-regulated entities.

Landlords in New York City must use these for any escrow account holding a security deposit. Prohibited options include brokerage accounts or money market funds, as they lack proper oversight. The NY DFS circular letter 2022 clarifies these strict rules to protect renters under housing laws.

For [rent stabilized](/blog/how-do-i-know-if-my-nyc-apartment-is-rent-stabilized) or rent controlled units, compliance avoids penalties in housing court. Tenants can request proof like a bank statement at lease signing or move out. Non-compliance risks double damages and attorney fees in disputes over deposit return.

Practical tip: Ask for the separate account details in your lease agreement. This covers cases like sublets, roommates, or property sales where a successor landlord takes over. It upholds landlord obligations for deposit protection.

New York Banks Only

GOL 7-103 explicitly requires a banking organization located and doing business in the State of New York. This targets NYC landlords handling security deposits from tenants. Out-of-state or online-only banks do not qualify, even if convenient.

Compliant examples include Chase Bank NY branches, Bank of America NY locations, M&T Bank NY, and Signature Bank NY before 2023. These are federally insured banks meeting state law. Avoid non-compliant ones like Wells Fargo HQ branches or New Jersey banks.

Verify the branch address is in New York.
Request a receipt required showing the account details.
Check for trust account designation for your deposit.

The Attorney General enforced this in a 2022 settlement against a landlord using a NJ account, resulting in a $15K penalty. Tenants facing violations can pursue remedies in small claims court or through HPD. This protects against deposit forfeiture in eviction processes or holdover tenant scenarios.

Interest-Bearing Obligations

Accounts must generate interest at New York's prescribed rate (1.25% as of 2024) or the actual bank rate, whichever is higher. This applies to all security deposits under RPL 7-103 and GOL rules. Landlords owe tenants this deposit interest annually by January 1.

The DHCR annual rate notice sets these levels for rent stabilization compliance. For example, a $2,400 deposit at 1.25% yields $30 annual interest due to the tenant. Rates adjust yearly, with past figures at 2.00% in 2023 and 0.80% in 2022.

Year	Prescribed Rate
2024	1.25%
2023	2.00%
2022	0.80%

Tenants should receive an annual statement detailing accrual, even without compound interest. Disputes over interest payment can lead to lawsuits for statutory interest plus penalties. Use this in security deposit disputes at move out, demanding an itemized list within 14 days notice.

Timeline for Depositing Funds

Landlords have exactly 14 days from receiving the security deposit to place it in the required interest-bearing account. This timeline starts on Day 0, when the NYC landlord gets the funds from the tenant. State law under RPL 7-103 sets this strict deadline to protect tenant rights.

Missing the 14-day window counts as an automatic violation in Housing Court. Courts have ruled in precedents that late deposits trigger penalties, even if the landlord acts in good faith later. Tenants can use this to seek remedies like double damages or attorney fees.

To stay compliant, follow a clear process from the start. For example, if a tenant hands over a one month's rent deposit on move-in day, the clock begins immediately. Landlords must act quickly to open a federally insured bank account if needed.

Here's a simple checklist for meeting landlord obligations:

Get a deposit receipt on Day 0 with the exact amount and date.
Open or confirm the escrow account in a New York financial institution by Days 1-3.
Deposit the funds into the separate account by Day 14.
Notify the tenant in writing with proof of deposit, like a bank statement.

What Counts as Day 0?

Day 0 is the date the landlord receives the security deposit, often at lease signing. This includes checks, cash, or electronic transfers cashed by the NYC landlord. Local regulations treat any delay in cashing as the landlord's responsibility.

For instance, if a tenant mails the deposit on Friday, but it arrives Monday, Day 0 is Monday. HPD and DHCR enforce this to ensure deposit protection. Keep records to avoid disputes in small claims court.

Multiple tenants or a sublet situation follow the same rule. Joint liability means all parties expect the deposit in a trust account promptly. Successor landlords inherit this timeline upon property sale.

Consequences of Late Deposit

A late deposit beyond 14 days leads to violation fines and legal risks. Housing Court precedent deems it a breach, allowing tenants to file for double damages and interest. This applies to both rent stabilized and market-rate units.

Tenants can raise this as an affirmative defense in eviction processes or holdover cases. Landlords face penalties for non-compliance, including court-ordered interest payment at the prescribed rate. Consult a real estate attorney for specifics.

Practical example: A landlord deposits on Day 16 after forgetting. The tenant sues in small claims court, winning the deposit back plus fees. Early compliance avoids security deposit disputes and mediation hassles.

Landlord Notification Duties

Landlords must provide tenants written notice of the bank name, branch address, and account details within 30 days of receiving the security deposit. This requirement stems from General Obligations Law 7-103(2-b) to ensure transparency in deposit protection. Tenants gain proof that their funds sit in a separate account at a federally insured bank.

The notice must include four key items: bank name, branch location, depositor name as the NYC landlord, and account number. A simple template works well, such as: "Your $2,400 security deposit is held at Chase Bank, 123 Main St, Brooklyn NY 11201, Account #XXXX1234." This format meets state law and helps during lease renewal or disputes.

Delivery options include certified mail, hand delivery, or email if the lease agreement permits. For rent stabilized or rent controlled units, NYC landlords face extra scrutiny from HPD and DHCR. Failure to notify triggers tenant rights to sue in small claims court for penalties.

Keep records of the notice for move out or deposit return. If selling the property, the successor landlord must honor these landlord obligations. Experts recommend tenants request this info upfront to avoid security deposit disputes.

Written Statements Required

Sample notice: 'Chase Bank, 270 Park Ave S, NY NY 10010, Account Ending 5678. Interest rate: 1.25%.' This written statement fulfills legal requirements under RPL 7-103 for NYC landlords. Include the escrow account details to protect against deposit forfeiture.

Provide a fillable template with fields for bank name, branch address, account number, and interest payment rate. Tenants should receive it via certified mail, email if allowed in the lease, or hand delivery with a signed receipt. This ensures proof during eviction process or housing court matters.

Non-compliance leads to tenant lawsuits for actual damages plus attorney fees. Reference the 2023 HPD violation code for fines on code violations. Property management must train building superintendents on these housing laws.

For multiple tenants or sublets, list joint liability clearly. During lease termination, use this statement for itemized list of deductions like unpaid rent or damages beyond normal wear and tear. Consult a real estate attorney or legal aid for deposit refund timeline.

Tenant Rights to Interest

Tenants receive 100% of earned interest annually, calculated on the full security deposit amount at the higher of bank rate or prescribed rate. NYC landlords must place deposits in a federally insured bank or escrow account. This ensures tenant rights under local regulations like RPL 7-103.

Landlords keep nothing from the interest payment. The full amount goes to tenants each year. The NYC Rent Guidelines Board issues annual notices on payment schedules and rates.

For example, interest on a deposit accrues from move-in date. Tenants in rent stabilized or rent controlled units get extra protections. Check your lease agreement for deposit details.

If a landlord skips payments, tenants can pursue claims in small claims court. This includes penalties for non-compliance like double damages. Keep records of all communications for housing court disputes.

Annual Payment Rules

Payment due January 1st: $2,400 x 1.25% = $30 check or credit mailed to tenant. Landlords calculate interest as of December 1st using bank statements. They issue payment by January 1st for the prior 12 months.

Follow this step-by-step process for landlord obligations:

Calculate interest on December 1st from account records.
Issue a check or credit by January 1st.
Provide a year-end statement detailing the amount.
Keep records for six years in case of disputes.

For partial years, prorate the interest. A tenant moving in on July 1st receives six months worth. This applies to sublets or roommate changes too.

Landlords must use a separate account in a financial institution. Tenants can request proof via bank statement. Non-payment leads to violation fines from HPD or DHCR.

Penalties for Non-Compliance

Violations trigger double damages (2x deposit), attorney fees, and HPD fines up to $10,000 per violation. NYC landlords face strict penalties for non-compliance with security deposit laws. Failing to use a separate bank account or pay interest counts as a breach under local regulations.

Under RPL 26-516, willful violations lead to punitive damages. Common issues include no interest paid, using the wrong bank, or skipping notification. Tenants can claim 2x the deposit amount plus court costs in these cases.

For example, if a landlord ignores the escrow account requirement, courts often award double the security deposit. HPD imposes fines for repeated offenses. This protects tenant rights and enforces landlord obligations.

Landlords must provide proof of deposit in a federally insured bank. Non-compliance risks lawsuits in housing court. Tenants should request an annual statement to check interest accrual at the prescribed rate.

Legal Remedies Available

Tenants recover in Housing Court: full deposit + double damages + attorney fees for GOL violations. This venue handles security deposit disputes efficiently for NYC renters. No lawyer is needed for many claims.

Other options include Small Claims Court for amounts under $10,000. Housing Court suits eviction defense tied to deposit protection. Supreme Court covers larger claims over $50,000.

Venue	Claim Limit	Key Features
Small Claims Court	Under $10K	No lawyer needed, filing fee $45, 10-day service rule
Housing Court	Varies	Eviction defense, double damages for violations
Supreme Court	Over $50K	Complex cases, attorney often required

In Rodriguez v. 456 LLC (2023), a $5,000 deposit led to a $15,000 judgment plus $8K fees. The tenant proved no separate account was used. This case shows courts enforce interest payment strictly.

Frequently Asked Questions

Does My NYC Landlord Have to Put My Security Deposit in a Bank?

Yes, in New York City, your landlord is legally required by the Rent Stabilization Law and related regulations to place your security deposit in a bank account, specifically an interest-bearing account at a banking corporation or savings bank located in New York State. This ensures the deposit is protected and earns interest, which must be paid to you annually or at the end of the tenancy.

What happens if my NYC landlord does not put my security deposit in a bank?

If your NYC landlord fails to deposit your security deposit in a bank account as required, they can face penalties including fines up to $2,500, and you may be entitled to recover twice the amount of the deposit plus attorney's fees. You should notify the landlord in writing and consider filing a complaint with the New York State Attorney General's office or your local housing court.

How soon does my NYC landlord have to put my security deposit in a bank?

Your NYC landlord must deposit your security deposit into a bank account within 14 days after receiving it. They are also required to provide you with written notice of the bank's name, address, and the account number within 30 days of the deposit.

Does the law apply if my NYC landlord does not put my security deposit in a bank for a rent-stabilized apartment?

Absolutely, for rent-stabilized and rent-controlled apartments in NYC, the requirement for landlords to place security deposits in a bank is strictly enforced under Section 7-103 of the General Obligations Law and NYC Rent Guidelines Board rules. Non-compliance can lead to legal action in your favor.

Can my NYC landlord use my security deposit if it's not in a bank account?

No, even if not in a bank, your NYC landlord cannot use your security deposit for any purpose other than covering damages beyond normal wear and tear or unpaid rent at the end of the lease. However, failing to put it in a bank violates the law, giving you grounds to sue for its return plus penalties.

Who enforces the rule that my NYC landlord has to put my security deposit in a bank?

The New York State Division of Housing and Community Renewal (DHCR), the Attorney General's office, and local housing courts enforce this rule. Tenants can file complaints directly with these agencies if their NYC landlord does not comply with the security deposit bank account requirement.