Must I return the security deposit to former tenant who breached the lease and caused damage?

Full question:

I am a landlord in New York State. My tenants have signed a 1 year lease until March, 31, 2011. At the end of December 2010 they informed me they would be breaking the lease and moving out at the end of January 2011. Originally with a verbal agreement between myself and the tenants I would keep their security (1200.00) and last months rent (1225.00) to carry them through. One for February and one for March. Although rent was 1225.00 they would be 25.00 short one month I let that go. Later in January they approached me to get some security back; they had not yet moved out. Verbally again we agreed that I would give some security back after inspecting the place after they moved out. January 29, 2011 they moved out. I inspected the place and found $300 in damages. Their security totaled 1200.00, so I returned 900.00 to them on Feb. 15, 2011. I also did them a favor when they were signing the lease because I wanted a pet deposit as well and they could not afford that, so I let that go knowing I had their security. The dog did most of the $300.00 in damage. They have now found out that I have re-rented the place and want more money back. Do I owe them anymore because my lease indicates that a landlord can keep security or some of it if the tenant breaks the lease, which they signed. They are looking for I guess the last months rent I have (1225.00). Do I owe them that or anymore money? Haven't I been more then generous considering they broke the lease?

• Category: Landlord Tenant
• Subcategory: Security Deposit
• Date: 04/07/2025
• State: New York

Answer:

Virtually all New York leases require tenants to give their landlords a security deposit. The security deposit in New York is usually one month's rent. The landlord must return the security deposit, less any lawful deduction, to the tenant at the end of the lease or within a reasonable time thereafter. A landlord may use the security deposit: (a) as reimbursement for the reasonable cost of repairs beyond normal wear and tear, if the tenant damages the apartment; or (b) as reimbursement for any unpaid rent.

New York Landlords, regardless of the number of units in the building, must treat the deposits as trust funds belonging to their tenants and they may not co-mingle deposits with their own money. Landlords of buildings with six or more apartments must put all security deposits in New York bank accounts earning interest at the prevailing rate.

Each tenant in New York must be informed in writing of the bank's name and address and the amount of the deposit.

The law in New York requires that the security deposit be returned to the tenant "within a reasonable time" after the tenant vacates. No specific deadline is stated in the law.

Landlords are entitled to annual administrative expenses of 1% of the deposit. All other interest earned on the deposits belongs to the tenants. Tenants must be given the option of having this interest paid to them annually, applied to rent, or paid at the end of the lease term.

If the building has fewer than six apartments, a landlord who voluntarily places the security deposits in an interest bearing bank account must also follow these rules. For example: A tenant pays a security deposit of $400. The landlord places the deposit in an interest bearing bank account paying 2.5%. At the end of the year the account will have earned interest of $10.00. The tenant is entitled to $6.00 and the landlord may retain $4.00, 1% of the deposit, as an administrative fee. All figures subject to change.

A landlord is entitled to keep the deposit if there is damage to the apartment. However, you can only keep what is needed to fix the damage and the tenant can ask to see the receipts.

Any disputes over the security deposit would be handled in Small Claims Court.

Unfortunately, generosity may not play into a court's interpretation of the lease agreement. Typically, the terms of the lease and the relevant NY law will be used to determine how much of the deposit would be returned to the tenant.