Owning a rental property is a fantastic investment, with New York prices on the rise. But what happens if the tenant leaves that property damaged and dirty, and you face a hefty cleaning bill?
That's why a security deposit is crucial to the landlord-tenant relationship. In this guide, we'll explain what you need to know about security deposits when owning a property in Long Island.
Deposit Limits: New York Security Deposit Laws
Long Island falls under New York State's laws regarding security deposits-these specify a maximum you can demand from a new tenant as a deposit.
Currently, that stands at one month's rent. You can't charge any higher than this, though you can charge lower if you prefer. This cap protects tenants and ensures they get a fair deal from landlords.
It's likely to stay in place in the future, but always check the most up-to-date legislation before setting new security deposit amounts.
How to Collect Security Deposits
There are several ways to collect security deposits. That includes online payment systems, banking transfers, and cash. Most landlords use bank transfers.
When you receive a security deposit, you'll need to keep that in a bank account. But you must separate these funds from other money.
That's because this deposit is the tenant's money, and you must return it at some point.
Keeping it in your account could mean you mistakingly spend it, causing problems later. So always keep deposits in a separate bank account and be transparent with the tenant.
Tell them how you are holding the deposit, including the bank's name. It will help create trust between you and your tenant.
Always Explain Your Deductions
If you need to deduct money from the deposit before returning it, explain why. Be as straightforward as possible and itemize all deductions with relevant costs. Add photographic support if you need it.
That clarity will help smooth the relationship with the tenant and avoid disputes.
By law, you'll need to return the money within 14 days of the tenant moving out, so do this swiftly. Communicate that to the tenant, too, so they know they'll get it in two weeks, not necessarily on the day they move.
You Need a Strategy to Handle Disputes
Occasionally a dispute will arise over security deposits. It's worth considering how you'll handle this before the issues crop up. You could use third-party mediation to help resolve the situation.
A similar option is to hire a property management company to oversee your rental.
Always keep communications open with the tenant and make sure you are up to date with the law. That will prevent disputes from turning into legal action.
Security Deposits: Protecting Your Property Investment
Security deposits are a vital insurance plan if there are issues with a tenant, like non-payment or damage. Always use one, but be sure to follow New York State law.
For more support handling deposits and other tenant issues, contact our team. Our property management services in Long Island could provide the help you need.