Once the security deposit is collected, it should be stored in its own account by the landlord at a bank. As a landlord, you should provide notice to the tenant about the financial institution in which the deposit is held. Annually, the landlord is also responsible for paying interest on that deposit if the unit is not regulated and if the unit is in a building with six or more total units.
In the majority of conflicts, the security deposit becomes a problem when a tenant moves out. Under the state laws, a landlord is responsible for returning the security deposit in a reasonable timeframe. This is typically within 45 days maximum.
As a general guideline, a landlord should conduct a final walkthrough and make note of any issues that appear to extend beyond normal wear and tear. This written list can give the tenants notice about uses of the security deposit and may also come in handy later in the event that you need to go to court. If this happens, photos can also help support your case that serious damage has occurred, You should also keep copies of all receipts used for repairs related to damage causes by the tenants.
It’s a good idea to have your lease reviewed by an experienced New York landlord/tenant attorney and to contact your lawyer as soon as possible if you think you’ll be involved in a dispute over the security deposit.