How New York Landlords Should Properly Handle Security Deposits
Maintain a Separate Bank AccountLandlords may not combine security deposit funds with their personal accounts. Combining or commingling of a security deposit with a landlord's personal funds is considered a form of theft or conversion that requires the landlord to immediately return the funds to the tenant. The security deposit plus interest earned are the tenant's property and must be held in trust by the landlord. The tenant must report on his individual income tax return the gross amount of interest earned on his security deposit during the calendar year even though he may not actually receive the interest. An interest-bearing account must be used if there are six or more units. The landlord may
retain one per cent interest as an administrative fee.
Name and Address of the BankThe landlord must provide the tenant with a separate written notice of the name and address of the bank, account number and the deposit amount.
Account HistoryLandlords must respond when tenants seek information regarding the status of their security deposits, eg. account history.
Itemization of DeductionsWhen the tenant moves out, the landlord should provide the tenant with an itemization of all deductions that are made from the security deposit.