On June 14, 2019, the state of New York passed the Housing Stability and Tenant Protection Act of 2019. The Act substantially alters nearly every aspect of building management in New York, from the deregulation of rent-stabilized units (which no longer exist) to the notices in eviction proceedings.
While the industry scrambles to interpret these rules, particularly deregulation, some practical aspects have been overlooked. One of these aspects are the changes to the General Obligations Law, which affects security deposits. As of June 15th, 2019, whether the apartment is subject to rent stabilization or the free market, the landlord cannot take a security deposit in excess of one month of rent.
General Obligations Law 7-107 specifically uses the language “deposit or advance,” indicating that a payment of more than one month to be applied to the future rent is also improper and in violation of the law.
The amendment also requires the landlord to offer the tenant the opportunity to inspect the premises before the commencement of the tenancy, and if the tenant inspects the premises, the parties must execute an agreement acknowledging the condition of the premises after the inspection. That agreement is evidence in any litigation about the deposit.
Even prior to the passage of the Act, New York City began the process of modifying its’ laws to limit security deposits to one month’s rent. Additionally, as of June 20th, 2019, Administrative Code Section 26-2302 requires a landlord to return the security deposit within 14 days of the end of the lease.
The state legislation goes beyond that. The state legislation not only requires the return of the security deposit after 14 days, but the state also requires it to be returned after 14 days of vacatur, and it requires a written statement including an itemization of any amount that would be withheld, to be sent to the tenant before those 14 days elapse. The form of delivery of the statement is unspecified. Email is likely sufficient, and it’s advisable that landlords acquire current tenants’ email addresses if they have not already for this purpose. If the landlord fails to provide this report, the landlord will forfeit the right to retain any amounts of the security.
If the court finds that a landlord has violated the General Obligations Law willfully, the court can award the tenant an amount of equal to two times the amount of deposit that was made as punitive damages.
Building owners should start to immediately adjust their practices to be in compliance with the new law, including acquiring the additional contact information from tenants, including email addresses, forwarding addresses when they move, and a system to properly send the notice and the security deposit within those 14 days.
Jordi Fernandez Law, P.C.
420 Lexington Avenue, Suite 2920
New York, NY 10170
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