Security Deposits and the HSTPA
In 2019, New York State passed sweeping reforms to various landlord/tenant laws, the Housing Stability and Tenant Protection Act (“HSTPA”). Among the lesser discussed changes was an amendment to the General Obligations Law governing security deposits for residential premises throughout the state.
The standard governing security deposits has been that the landlord may retain the portion of the security deposit to cover costs related to unpaid rent or utility charges payable directly to the landlord and for damages to the premises outside of normal wear and tear.
Under the HSTPA amendments to § 7-108 of the General Obligations Law, after the tenant notifies the landlord of their intention to leave the landlord must give the tenant notice of their right to request an inspection. The inspection must take place no earlier than two weeks and no later than one week before the end of the tenancy. After the inspection, the landlord must provide a written and itemized statement to the tenant specifying repairs or cleaning that could be deductions from the security deposit. The tenant then has the opportunity to cure the deficiencies prior to vacating. In addition, within 14 days of the tenant vacating the premises the landlord has to provide the tenant with an itemized statement indicating why they’re retaining a portion of the deposit and return the remaining portion of the deposit, if any. If the landlord does not provide this statement, the landlord forfeits the right to retain any portion of the deposit.
Recently, a ruling was issued that gives this section broader implications. In Diaz v Cunningham, the court held that because the landlord didn’t provide the tenant with opportunity to conduct a pre-moveout inspection or provide notice, within 14 days of the tenant moving out, of the items that could be deductions from the security deposit that the landlord is barred from suing for damages. Diaz v. Cunningham, 2020 NY Slip Op 20101 (County Ct. 2020). The court stated that the New York State Legislature effectively made strict compliance of the provisions of § 7-108 of the General Obligations Law as prerequisites to bringing an action for damages when tenant vacates an apartment and provides the landlord timely notice of their intent to move out.
I believe this court’s interpretation of the statute goes beyond its plain language and is ripe for a challenge. The only portion of the statute that implies a landlord will not be able to retain the deposit for non-compliance is section (e) which states in full: “Within fourteen days after the tenant has vacated the premises, the landlord shall provide the tenant with an itemized statement indicating the basis for the amount of the deposit retained, if any, and shall return any remaining portion of the deposit to the tenant. If a landlord fails to provide the tenant with the statement and deposit within fourteen days, the landlord shall forfeit any right to retain any portion of the deposit (emphasis added). General Obligations Law § 7-108(e). The remainder of the statute does not contain any language stating the landlord’s failure to comply will result in the forfeiture of their right to retain the deposit which makes this court’s ruling even that more puzzling.
My reading of the statute is that if the landlord doesn’t comply with section (e) they must return the security deposit and would have to resort to a lawsuit to be made whole for damage outside of normal wear and tear. This ruling indicates otherwise.
In order to protect themselves, landlords should comply with the requirements enumerated in the statute. If they do not, they may find themselves on the wrong side of a ruling and have to decide whether a costly appeal is worth it.