Rents in New York City are higher than anywhere else in the country, and that means security deposits are higher as well. For new landlords, that may be stressful. How much should you be charging tenants for security deposits, and what are those deposits for anyway?
Don't panic. Security deposits are simpler than you think. We're here to explain the basics.
Read on to learn all about what New York landlords need to know about security deposits.
What Are Security Deposits?
A security deposit is a sum of money that new tenants give their landlords upon signing the lease for a rental agreement. In other words, it's kind of like a deposit for a lease. The deposit secures the property for the new tenant.
Security deposits are beneficial for both landlords and tenants, even if it doesn't always seem that way on the surface.
On the tenant's end, a security deposit secures space for them. They no longer have to search for a place to live, and there's no chance for someone else to swoop in and get the rental before they're able to move in. A security deposit also covers any potential accidental damage, and it's refundable, so tenants can use it later on when they're ready to move into a new place.
For the landlord, the deposit secures them against damage because the deposit will cover it. This means that less money will come out of their pocket.
It's important to note that New York landlords must keep deposits in an interest-bearing New York State bank, and the landlord should pay the interest back to the tenant (aside from administrative costs).
How Much Should Landlords Charge?
Many landlords may be unsure what to charge tenants for security deposits. In New York, this is simple. A security deposit in New York City should not be more than one month's rent.
In some cases, landlords may choose to lower deposits or waive them altogether. However, in a competitive rental market, this isn't usually the case. Most landlords are not struggling with vacancies, so charging the rent amount is reasonable.
Are All Security Deposits Refundable?
Landlords must either return security deposits or give former tenants an itemized receipt for how they're using the deposits to fix any damage at the end of the lease. This must happen within 14 days.
Deposits are refundable so long as the tenant leaves the property in good condition. Reasonable wear and tear does not count as damage in this case. Landlords who try to keep deposits may find themselves in legal hot water.
If you choose to retain some or all of the deposit, you must show the tenant what you're using it for.
Security Deposits Are Simple
Security deposits may seem confusing at first, but rest assured that your tenants are already used to them. They understand that they're mutually beneficial as long as landlords are operating legally.
Protect yourself, your property, and your tenants with a reasonable security deposit.
Are you a landlord who needs some extra help? PMI Properties is here to help you out with our property management services. Schedule a consult with our experienced property managers today.