Deposit Record Statute-cited public record

Do New York Landlords Have to Pay Interest on Security Deposits?

Sometimes. A property with six or more family dwelling units must keep deposits in an interest-bearing account at a New York bank, a rent-stabilized apartment in New York City needs one whatever the building’s size, and any landlord who chooses one anyway owes the interest too. The tenant gets what the account actually earned, less a fee of 1% a year of the deposit. New York sets no interest rate. Statutes verified October 18, 2026.

When does a New York landlord have to pay interest?

Interest is owed in three situations.

  • The property has six or more family dwelling units. The deposit must go into an interest-bearing account at a bank in New York State (Gen. Oblig. Law § 7-103(2-a)).
  • The apartment is rent-stabilized and in New York City, whatever the size of the building (Rent Stabilization Code, 9 NYCRR § 2525.4). Stabilized apartments elsewhere are covered below.
  • The landlord chose an interest-bearing account. The interest rules have no size limit: once the deposit is in an interest-bearing account, the interest belongs to the tenant, less the 1% fee (§ 7-103(2)).
Whenever the money so deposited or advanced is for the rental of property containing six or more family dwelling units, the person receiving such money shall, subject to the provisions of this section, deposit it in an interest bearing account in a banking organization within the state which account shall earn interest at a rate which shall be the prevailing rate earned by other such deposits made with banking organizations in such area. N.Y. Gen. Oblig. Law § 7-103(2-a)

The statute counts the family dwelling units on the property, not in a single building, and it does not define the term. We have found no authority on how to count a mixed-use building, such as four apartments over two shops, and we have not researched how courts count separate buildings on one parcel. The New York tool asks you rather than guessing.

What if the property has fewer than six units?

You do not have to use an interest-bearing account, unless the apartment is rent-stabilized (see below). Two things still apply. If you put the deposit in an interest-bearing account anyway, the interest is the tenant’s, less the 1% fee. And every landlord, with one unit or a hundred, holds the deposit in trust: it stays the tenant’s money and may not be mixed with your own (§ 7-103(1)).

What interest rate applies?

There isn’t a set one. For a property with six or more family dwelling units, the account has to earn the prevailing rate that similar deposits earn at banks in your area (§ 7-103(2-a)). Whatever the account actually pays is then the tenant’s, less your 1% fee (§ 7-103(2)). New York publishes no annual deposit-interest rate, so a figure presented as the state’s rate is not one. Your bank can tell you what the account earned over the tenancy.

The 1% administration fee

If the deposit sat in an interest-bearing account, you may keep 1% a year of the deposit itself as an administration fee. The rest of the interest belongs to the tenant:

If the person depositing such security money in a banking organization shall deposit same in an interest bearing account, he shall be entitled to receive, as administration expenses, a sum equivalent to one per cent per annum upon the security money so deposited, which shall be in lieu of all other administrative and custodial expenses. The balance of the interest paid by the banking organization shall be the money of the person making the deposit or advance and shall either be held in trust by the person with whom such deposit or advance shall be made, until repaid or applied for the use or rental of the leased premises, or annually paid to the person making the deposit of security money. N.Y. Gen. Oblig. Law § 7-103(2)

Two points matter here. The fee is 1% of the deposit, not 1% of the interest, so on a $3,000 deposit it is $30 a year. And it replaces every other administrative or custodial charge, so you cannot take it and also charge an admin fee. No interest-bearing account means no fee.

When the account earned less than 1% a year, the fee would come out of the tenant’s own deposit. Whether that is allowed is unsettled; we have found no court decision on it. Our reading, and what the New York tool does, is to cap the fee at what the account actually earned, so the tenant’s share never goes below zero.

How and when the interest is paid

The statute allows either of two ways: hold the interest in trust until it is repaid or applied toward rent, or pay it to the tenant every year (§ 7-103(2)). Unlike the rent-stabilization rule below, the statute does not give the tenant the choice. And you do not wait for the bank’s next payment date when the lease ends:

In the event that a lease terminates other than at the time that a banking organization in such area regularly pays interest, the person depositing such security money shall pay over to his tenant such interest as he is able to collect at the date of such lease termination. N.Y. Gen. Oblig. Law § 7-103(2-b)

Rent-stabilized apartments: stricter in New York City

In New York City, the Rent Stabilization Code is stricter than the statute. A rent-stabilized deposit there must go into an interest-bearing account at a New York bank however few units the building has, the landlord may keep the same 1% a year as an administrative fee, and the tenant chooses what happens to the rest of the interest: credited toward rent, held in trust until it is repaid, or paid every year (9 NYCRR § 2525.4).

Stabilized apartments outside the City, under the Emergency Tenant Protection Act in places such as Yonkers, White Plains or Kingston, are governed by a separate regulation that we have not verified, so we do not state its terms. If your stabilized unit is outside New York City, check that regulation; the cautious course meanwhile is an interest-bearing account. Rent-stabilized deposits everywhere also follow their own return rules, covered in our rent-stabilized deposit guide.

Telling the tenant where the money is

If you put the deposit in a bank, you must tell the tenant in writing which bank, its address and the amount, and the bank must have a place of business in New York:

Whenever the person receiving money so deposited or advanced shall deposit such money in a banking organization, such person shall thereupon notify in writing each of the persons making such security deposit or advance, giving the name and address of the banking organization in which the deposit of security money is made, and the amount of such deposit. Deposits in a banking organization pursuant to the provisions of this subdivision shall be made in a banking organization having a place of business within the state. N.Y. Gen. Oblig. Law § 7-103(2)

The account number is not required. Leaving the notice out does not by itself forfeit the deposit; one court has described it as a technical violation. But an appellate court has held that a missing notice permits an inference that you mixed the money with your own, which you then have to rebut, and mixing it does forfeit the deposit.

Keeping the deposit separate

The deposit stays the tenant’s money and has to be held apart from yours, in every building, whatever its size:

Whenever money shall be deposited or advanced on a contract or license agreement for the use or rental of real property as security for performance of the contract or agreement or to be applied to payments upon such contract or agreement when due, such money, with interest accruing thereon, if any, until repaid or so applied, shall continue to be the money of the person making such deposit or advance and shall be held in trust by the person with whom such deposit or advance shall be made and shall not be mingled with the personal moneys or become an asset of the person receiving the same, but may be disposed of as provided in section 7-105 of this chapter. N.Y. Gen. Oblig. Law § 7-103(1)

New York courts have held that a landlord who mixes the deposit with their own money forfeits the right to keep any of it, even where the tenant broke the lease:

As a result of such commingling, Paterno forfeited his right to avail himself of the deposit for any purpose, and the Carrolls have an immediate right to return of the funds notwithstanding that they may have breached the lease Paterno v. Carroll, 75 A.D.3d 625, 626 (2d Dep’t 2010); see also LeRoy v. Sayers, 217 A.D.2d 63 (1st Dep’t 1995)

Those cases came before the 14-day return rule of 2019. On our reading, returning the deposit on time does not cure commingling, because the two are separate duties. Losing the deposit this way does not end your separate claim for unpaid rent: the court in the case quoted above held that the violation did not relieve the tenants of their obligation to pay rent.

No lease can change any of this. A clause letting you hold the deposit in your operating account, or waiving the tenant’s right to interest, is void:

Any provision of such a contract or agreement whereby a person who so deposits or advances money waives any provision of this section is absolutely void. N.Y. Gen. Oblig. Law § 7-103(3)

New York City and Syracuse

New York City sets no deposit interest or account rule of its own, so state law, including the Rent Stabilization Code for stabilized apartments, decides interest there. Syracuse is reported to have its own security deposit ordinance, which we have not been able to read from an official source, so we do not state its terms. Check with the City if you rent there.

Is there a New York security deposit interest calculator?

Not one that runs on a published rate, because New York has none. The free New York deposit tool starts from what your account actually earned: tell it whether the deposit sat in an interest-bearing account and what it earned, and it takes off your 1% fee and works out the tenant’s share. Once you confirm the figure, the letter shows it as interest owed on top of the deposit refund; until you do, it leaves a blank rather than understate what you owe. The statute gives no formula for part of a year, so the tool prorates the fee day by day over a 365-day year; that is our reading, and the tool says so. It runs in your browser and stores nothing.

New York security deposit interest: common questions

How is the 1% administration fee calculated in New York?

It is 1% a year of the deposit itself, not 1% of the interest, and it replaces every other administrative or custodial charge. A landlord who did not use an interest-bearing account gets no fee at all. (N.Y. Gen. Oblig. Law § 7-103(2))

Can a lease waive a New York tenant’s right to deposit interest?

No. Any lease clause by which the tenant waives a provision of the trust and interest statute is absolutely void. (N.Y. Gen. Oblig. Law § 7-103(3))

Sources

About this page

Every quoted passage is read from the same statute-cited rules the New York tool runs on, and the statutory quotes are on our weekly watch of the official New York code. Where a sentence gives our reading rather than the statute’s words, it says so. How we verify the law explains the process. This is general information that cites the statute, not legal advice, and Orygn LLC is not a law firm. For advice about your situation, talk to a licensed New York attorney.