New York One-Month Security Deposit Cap — Statewide Limit & Compliance Requirements (2026)

What Is New York's One-Month Security Deposit Cap?

Under General Obligations Law §7-108, New York State imposes a hard ceiling on security deposits: landlords can collect no more than one month's rent as a security deposit from residential tenants. This statute, enacted as part of the Housing Stability and Tenant Protection Act (HSTPA) of 2019, represents one of the strictest deposit limitations in the nation and applies uniformly across all 62 counties in New York.

A security deposit is any money—whether called a "deposit," "security," "damage deposit," or any other name—that a landlord collects from a tenant as security for performance of lease obligations. Under New York law, this includes:

• Deposits held against lease violations or damages
• Deposits to cover unpaid rent or utilities
• Key deposits, pet deposits, or any refundable money collected upfront

The one-month limit is calculated on the monthly rent amount at the time of lease signing. If a tenant's monthly rent is $2,000, you cannot collect more than $2,000 as a security deposit. If rent is $1,200, the maximum deposit is $1,200.

Critical point: This cap is absolute. There are no exceptions for luxury apartments, buildings in expensive neighborhoods, tenants with poor credit, or properties in high-risk areas. The statute does not permit "additional" or "higher" security deposits regardless of circumstances.

Historical Context: The HSTPA of 2019 and Subsequent Changes

Before 2019, New York landlords could collect up to one-and-a-half months' rent as a security deposit, with some municipalities allowing even higher amounts. The HSTPA fundamentally changed this landscape, reducing the maximum to one month statewide effective June 14, 2019.

The rationale behind this change was to reduce barriers to housing access for working-class and low-income tenants, many of whom struggled to accumulate upfront capital for deposits, first month's rent, and last month's rent simultaneously. Policymakers determined that the reduced deposit level still provided landlords adequate recourse for tenant-caused damages while improving tenant affordability.

Since 2019, no subsequent amendments have raised the cap. It remains at one month's rent for all residential tenancies covered by the HSTPA. While the City of New York and some municipalities have proposed additional tenant protections (such as third-party deposit custodians), the state-level one-month cap has not changed and currently applies as of October 2026.

What Counts as a "Month's Rent" for Deposit Calculation?

Determining your maximum allowable deposit requires precise understanding of what constitutes "rent" under New York law. The statute uses the term "rent," which courts interpret as the base monthly rental payment agreed to in the lease.

Included in rent for deposit cap purposes:

• The base monthly lease payment
• Prorated rent for partial months at lease commencement or termination

NOT included in rent for deposit cap purposes:

• Utilities (electricity, gas, water, sewer)
• Parking fees or garage rental
• Pet fees or pet rent (ongoing monthly pet charges)
• Building amenity fees (gym, pool, concierge)
• Broker fees or application fees
• Move-in fees, cleaning fees, or administrative charges
• Lease signing bonuses paid by landlord to tenant

This distinction matters significantly in mixed-use or high-amenity buildings. A tenant paying $2,500 base rent plus $300/month for parking may sign a lease stating "$2,800 total monthly housing cost." For deposit calculation purposes, the rent is $2,500, and your maximum deposit is $2,500—not $2,800.

If a lease specifies variable rent (e.g., rent increases annually), use the rent amount at the time of lease signing or move-in for deposit calculation. If rent increases mid-lease, you cannot collect an additional deposit to align with the new rent amount.

Furnished Apartments and Special Lease Arrangements

New York law does not create a separate, higher deposit limit for furnished apartments or units with furniture included. Some older leases or rental advertisements reference "furnished apartment deposits" as potentially higher; this reflects pre-HSTPA practice and is no longer compliant.

Under current law, whether the unit is furnished, partially furnished, or unfurnished, the deposit cap is one month's rent. Furnishings do not increase the maximum deposit allowed.

Similarly, if a lease includes "lease-provided" items (linens, kitchenware, appliances), these remain part of the unit's rental arrangement and do not justify an elevated deposit. The deposit still caps at one month's rent.

Statutory Requirements Beyond the Deposit Cap

Complying with GOL §7-108 involves more than simply limiting deposit amounts. The statute and related New York housing laws impose mandatory procedures that, if violated, expose you to significant penalties.

Deposit Escrow and Interest-Bearing Accounts

Under GOL §7-103, all residential security deposits in New York must be held in an interest-bearing account separate from the landlord's operating account. The account must be:

• In a bank, savings bank, trust company, or credit union licensed in New York State
• Titled or held in the landlord's name in trust for the tenant
• Earning the prevailing rate of interest for money on deposit in the account at the time of receipt (or at lease execution)

Interest accrual begins on the date the deposit is received, not on the lease start date. All accrued interest, minus ordinary banking fees and deductions for damages, must be paid to the tenant when the deposit is returned or credited against final rent due.

Failure to place deposits in interest-bearing accounts violates GOL §7-103 and can expose landlords to statutory damages independent of the deposit amount violation.

Receipts and Written Disclosure

GOL §7-103 requires that you provide the tenant a written receipt for the security deposit. This receipt must include:

• The amount of the deposit
• The address of the property being rented
• The name and address of the bank or financial institution where the deposit is held
• The account number or reference number
• Interest rate information (if applicable)

Many landlords combine the deposit receipt with the lease signature page or a separate document. Whatever format you use, ensure the tenant receives a copy before move-in. Digital delivery (email) is compliant if the tenant consents to electronic communication.

Return Deadlines and Itemized Deductions

Upon lease termination and tenant vacation, you must return the deposit plus accrued interest (minus lawful deductions) within 30 days. GOL §7-103 requires you to provide an itemized statement of any deductions, including:

• Specific damages with repair costs or invoices
• Unpaid rent or utilities
• Lease violation charges
• Cleaning costs (if the unit is left in filthy condition beyond normal wear and tear)

Vague deduction statements ("general wear and tear," "apartment damage," "cleaning") without specificity violate the statute. You must provide actual costs, estimates, or invoices supporting each deduction. Deductions cannot exceed the actual cost of repairs or replacement.

If you retain any portion of the deposit, the 30-day return deadline still applies. You must provide the itemized statement with the partial return.

Failure to return deposits and accrued interest within 30 days creates a presumption that you acted in bad faith, potentially exposing you to treble damages (three times the deposit amount) plus attorney's fees under GOL §7-108(5).

Penalties and Legal Consequences for Violations

New York's security deposit statutes carry substantial penalties designed to deter landlord violations. Understanding your exposure is critical for compliance planning.

Liability for Excess Deposits

If you collect a deposit exceeding one month's rent, the tenant can sue to recover:

• The full excess amount collected
• Interest at 9% per annum from the date the excess was collected until judgment
• Court costs and attorney's fees if the tenant prevails

Example: You collect a $2,500 deposit in January 2024 for a $2,000/month apartment. You illegally retained the extra $500. By October 2026 (nearly 3 years later), the tenant's claim includes:

• $500 (excess amount)
• ~$135 (9% annual interest over 34 months)
• Statutory costs and potentially $3,000–$5,000+ in attorney's fees

Even if the deposit excess was unintentional, the statute imposes strict liability. There is no "good faith" exception.

Treble Damages for Non-Return or Late Return

If you fail to return the full deposit (plus interest and minus lawful deductions) within 30 days of lease termination, GOL §7-108(5) imposes treble damages:

• Three times the deposit amount plus interest
• Court costs and attorney's fees

This applies even if you eventually return the deposit late. The 30-day deadline is strict.

Example: You fail to return a $1,500 deposit (with $45 accrued interest) until day 45. Tenant's treble damages claim:

• $4,500 (3 × $1,500)
• $135 (3 × $45 interest)
• Court costs and attorney's fees

Even if only $200 in actual damages occurred, the treble damage calculation is based on the full deposit, not damages incurred.

Bad Faith Presumption

Failure to return the deposit within 30 days creates a rebuttable presumption of bad faith. You then bear the burden of proving that the delay was justified by legitimate deductions. Courts interpret this narrowly; most routine repairs or cleaning do not justify 30-day delays.

Additional Violations: Interest-Bearing Account Requirements

Failure to place deposits in interest-bearing accounts exposes you to liability for:

• The actual interest the tenant would have earned (typically 0.5%–2.0% annually, depending on account type)
• Court costs and attorney's fees

While this penalty is smaller than treble damages, it is easier for tenants to prove (bank statements and interest rate history are public) and compounds over longer tenancies.

Compliance Checklist for New York Landlords

Use this step-by-step checklist to ensure compliance with GOL §7-108 and related deposit statutes:

Compliance Step	Timeline	What You Need
1. Calculate maximum deposit	Before lease signing	Monthly rent amount from lease; verify one-month cap applies
2. Open escrow account	Before collecting deposit	Bank account titled in landlord's name in trust for tenant; interest-bearing requirement verified with bank
3. Collect deposit	At or before lease execution	Confirm amount does not exceed one month's rent; document payment method
4. Deposit into escrow	Within 3 business days of receipt	Deposit clearing in bank account; keep bank receipt/confirmation
5. Issue written receipt	Before move-in	Bank name, account number, interest rate, amount; signed and dated
6. Maintain account	Throughout tenancy	No withdrawals except for lease-end return; track interest accrual on annual statements
7. Conduct move-out inspection	Within 48 hours of vacancy	Photos, written inspection notes, repair estimates/invoices for any damages
8. Calculate deductions	Within 14 days of vacancy	Itemize each deduction with cost; distinguish from normal wear and tear; gather supporting invoices
9. Return deposit	Within 30 days of lease end	Full remaining balance plus accrued interest minus lawful deductions; via check, ACH, or agreed method
10. Provide itemization	With or before deposit return	Detailed deduction statement with supporting documents (invoices, photos, receipts); signed and dated

Common Mistakes That Expose Landlords to Liability

Mistake #1: Collecting Non-Refundable Fees Instead of Deposits

Some landlords attempt to avoid the one-month cap by labeling fees as "non-refundable" rather than deposits. New York courts look to substance over form. If money is held against potential lease violations or damages, it is a security deposit regardless of the label. A "$500 non-refundable administrative fee" held as security is a deposit and counts toward the one-month cap.

True non-refundable fees that do not count as deposits include application fees, broker commissions, or lease-signing bonuses paid by the landlord to the tenant. However, any money retained by the landlord for contingent liability (damage coverage, rent guarantee, etc.) is a deposit.

Mistake #2: Requiring Last Month's Rent in Addition to the Maximum Deposit

A common pre-HSTPA practice was collecting "first month's rent," "last month's rent," and "one-and-a-half months' security deposit" upfront. Under current law, you can collect:

• First month's rent (not a deposit)
• Security deposit (maximum one month's rent)

Many leases still include "last month's rent" language. This is legally distinct from a security deposit and is not applied against damages. Last month's rent is held as advance rent payment and must be applied to the final month of the tenancy. However, be cautious: if your lease requires "last month's rent" plus a full security deposit, the total upfront money collected might exceed what the lease stated, creating disputes.

Best practice: Clarify in the lease whether any funds are held as "last month's rent" (non-deposit, applied to final month only) or as a "security deposit" (refundable, subject to deductions for damages). Do not conflate the two.

Mistake #3: Failing to Deposit into Interest-Bearing Accounts

A surprising number of landlords hold security deposits in personal savings accounts or money market accounts that do not formally qualify as interest-bearing under New York banking regulations. GOL §7-103 specifically requires deposits in accounts that earn "the prevailing rate of interest."

Verify with your bank that your account type qualifies. Standard savings accounts or money market accounts at established banks (Chase, Bank of America, etc.) typically meet this requirement. Personal checking accounts, investment accounts, or deposits held in non-bank entities do not.

Mistake #4: Deducting Costs Beyond Actual Repair or Replacement

You can only deduct actual, documented costs for repairs or replacement. Deductions must not exceed the fair market cost of the repair or item replaced. Inflated invoices, padded labor charges, or "assumed" costs not actually incurred violate the statute.

Example: You claim a $400 deduction for "carpet cleaning" but obtain only a $120 receipt from the cleaner. The lawful deduction is $120. The tenant can recover the $280 overage plus interest and potentially attorney's fees.

Photography of damages before tenant move-out and after the repair is completed is strong evidence supporting deductions and helps defend against tenant disputes.

Mistake #5: Returning Deposits Late Without Itemization

Returning a deposit on day 31 instead of day 30 triggers the treble damages presumption. Similarly, returning the deposit without an itemized statement of deductions violates GOL §7-103 and prevents the tenant from understanding what charges were assessed.

Do not treat deposit returns as a low-priority administrative task. Calendar the 30-day deadline, prepare the itemized statement early, and process the return with documentation of delivery (tracking number, email read receipt, or bank ACH confirmation).

How Technology Can Help Ensure Compliance

Managing security deposits manually—tracking escrow accounts, calculating interest, managing move-out documentation, and meeting 30-day return deadlines—creates substantial compliance risk for self-managing landlords.

Property management platforms built for compliance can automate critical deposit workflows:

• Deposit amount validation: Automatically cap deposits at one month's rent based on lease terms
• Escrow tracking: Maintain records of deposit placement, interest accrual, and account statements
• Return deadline alerts: Calendar 30-day deadlines and notify landlords of upcoming return obligations
• Deduction documentation: Capture photos, invoices, and repair receipts in a centralized record for move-out processing
• Itemized statements: Generate compliant deduction summaries with supporting documentation automatically organized

LeaseBase's compliance engine includes deposit tracking and return management tools designed specifically for New York security deposit law. The platform maintains escrow records, calculates interest, and generates itemized deduction statements, reducing the administrative burden of manual tracking and the human error that creates liability.

Frequently Asked Questions

Q1: Can I collect a higher deposit if the tenant has bad credit or a history of evictions?

A: No. GOL §7-108 provides no exceptions for tenant credit profile, employment history, or prior landlord complaints. The one-month cap applies uniformly regardless of tenant risk profile. If a tenant presents higher risk, you can mitigate through other means: higher rent, shorter lease term, additional co-signer requirements, or requiring renters insurance. But you cannot increase the security deposit above one month's rent.

Q2: Does the one-month cap apply to commercial tenants or co-working spaces?

A: No. GOL §7-108 applies only to residential tenancies. Commercial, industrial, or co-working leases may have different deposit rules or no deposit limitations at all, depending on the terms negotiated. However, if a unit is marketed as residential (even if used for occasional home-office work), it falls under residential law and the one-month cap applies.

Q3: What if the tenant's rent increases mid-lease? Can I require an additional deposit increase?

A: No. The deposit is determined at lease signing based on the rent amount at that time. If rent increases during the lease term (typically allowed only with 30–60 days' notice under NY law), you cannot collect an additional deposit. The original deposit remains the maximum, even if the rent increases. If you want to increase the deposit in connection with a rent increase, you must negotiate a new lease or rider and document it separately; however, the deposit can never exceed one month's rent under the current lease terms.

Q4: What happens if I commingled the security deposit with my operating account but did eventually return it on time?

A: Commingling security deposits in your operating account violates GOL §7-103, which requires deposits be held in separate, interest-bearing accounts. Even if you returned the deposit timely, the tenant can recover the interest the account would have earned (typically 0.5%–2.0% annually). Additionally, commingling creates a technical violation that courts view seriously; combined with other deposit issues, it strengthens a tenant's case for additional penalties. Correct this immediately by moving all deposits to a compliant escrow account.

Q5: What is the difference between "normal wear and tear" and damage I can deduct?

A: New York courts distinguish wear and tear (expected deterioration from normal use) from damage (excessive wear or destruction beyond normal use). Wear and tear is the landlord's responsibility; damage is the tenant's. Examples:

• Normal wear and tear (no deduction): Faded paint, minor scuffs on walls, worn carpet, small nail holes
• Damage (deductible): Broken windows, large holes in drywall, stains from spills, missing fixtures, broken appliances due to tenant misuse

The line is fact-specific. Courts generally ask: Would a reasonable tenant expect to pay for this damage, or is it a cost the landlord accepts for renting the unit? When in doubt, document your standard move-in condition with photos, and photograph move-out damage with measurements and context. This evidence protects your deduction decision against tenant disputes.

State-Specific Considerations and Recent Developments (2024–2026)

As of October 2026, the one-month security deposit cap under GOL §7-108 remains unchanged. However, several related developments affect New York landlord-tenant law:

• Third-party custodian proposals: The City of New York has periodically proposed requiring security deposits be held by third-party custodians rather than landlords directly. As of 2026, this requirement applies only to some local jurisdictions and has not been enacted statewide. Monitor local rules if you operate in New York City, where additional regulations frequently exceed state minimums.
• Interest rate compliance: Banks have reduced deposit interest rates significantly in the current economic environment. Ensure your escrow account still meets the "prevailing interest rate" requirement even if the rate is negligible. Courts may challenge accounts paying 0% or accounts with terms that disqualify them as "interest-bearing."
• Eviction moratorium legislation: While not directly about deposits, New York's recent eviction restrictions affect your ability to recover unpaid rent via deposit offset. Always pursue rent claims separately from deposit disputes; do not self-help by retaining a deposit for unpaid rent without court process.

Consult with a New York-licensed attorney if your portfolio spans multiple jurisdictions or if you encounter unusual deposit scenarios (co-tenants, guarantors, lease modifications during tenancy).

Conclusion: Deposit Compliance as a Core Landlord Responsibility

The one-month security deposit cap under GOL §7-108 is unambiguous and strictly enforced. Violations expose self-managing landlords to treble damages, attorney's fees, and court costs that far exceed any benefit of illegally collecting an oversized deposit.

Complying requires discipline across five key areas:

1. Deposit amount: Cap at one month's rent; no exceptions.
2. Escrow placement: Deposit into interest-bearing trust accounts within three business days of receipt.
3. Documentation: Issue written receipts and maintain bank statements proving compliance.
4. Return: Return within 30 days with an itemized deduction statement supported by invoices and photos.
5. Record-keeping: Archive all deposit records (bank statements, receipts, move-out documentation, return proof) for at least three years.

Whether you manage 2 units or 75, treating deposit compliance as a system—not an afterthought—protects your business and your reputation. Tenants who know their deposits are handled lawfully are less likely to dispute returns or pursue litigation.

This article is for informational purposes only and does not constitute legal advice. Consult a qualified New York-licensed attorney for guidance specific to your situation.

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