New York Security Deposit Interest Rules

Does New York require interest on security deposits?

Yes, but only for buildings with 6 or more residential units. Under NY Gen. Oblig. Law § 7-103, landlords of these buildings must deposit security deposits in an interest-bearing account and pay the tenant the interest earned at the prevailing bank rate. Buildings with 1 to 5 residential units are not required to pay interest under state law.

How New York deposit interest is calculated

The interest rate is the prevailing rate paid by the bank where the deposit is held. The landlord can retain 1 percent per year as an administrative fee, with the remainder paid to the tenant either annually or at lease termination. The landlord must provide the tenant with the name and address of the bank holding the deposit and the amount deposited. Failing to disclose this information forfeits the right to retain the administrative fee.

Separate account requirement

For 6+ unit buildings, NY requires deposits to be held in a separate interest-bearing account at a New York banking institution. Commingling deposits with operating funds is prohibited. The account must be in the landlord's name as trustee for the tenants. This is one of the strictest deposit-holding rules in the country.

NYC-specific administrative requirements

In New York City, landlords subject to the interest rule must also follow administrative procedures specific to NYC housing court. Annual interest disclosures are required, and tenants have a right to inspect the bank records on request. NYC rent-regulated apartments may have additional layered requirements depending on the specific regulatory framework (Rent Stabilization, Rent Control, or HSTPA-adjusted units).

How to use this calculator

Enter deposit amount and months held. The calculator estimates interest owed at a representative bank rate. Note that actual rates depend on the specific bank holding the deposit. Confirm the current rate with the bank annually.

Frequently asked questions about New York deposit interest

Does New York require landlords to pay interest on security deposits?

Yes, for buildings with 6 or more residential units. NY Gen. Oblig. Law § 7-103 requires landlords of these buildings to hold deposits in interest-bearing accounts and pay the tenant the earned interest, less a 1 percent administrative fee. Smaller buildings (1 to 5 units) are not required to pay interest.

What is the interest rate on New York security deposits?

The prevailing rate paid by the bank holding the deposit. The rate varies by bank and current market conditions. The landlord may retain 1 percent per year as administrative fee; the remainder is paid to the tenant.

Do New York landlords need a separate interest-bearing account?

Yes, for buildings with 6 or more units. The deposit must be held in a separate interest-bearing account at a NY banking institution, in the landlord's name as trustee for the tenant. Commingling with operating funds is prohibited.

How often must New York landlords pay interest to tenants?

Either annually or at lease termination, at the landlord's election. If annually, interest can be credited to the next month's rent or paid out directly. The choice should be documented in the lease.

What happens if a New York landlord doesn't pay required interest?

Forfeits the 1 percent administrative fee for that year, and the tenant can recover the full earned interest. Failing to provide bank account information also forfeits the right to retain any administrative fee. Persistent violations can lead to additional housing court remedies.