New York Real Estate Salesperson ExaminationNew York State Specific Laws and RegulationsMedium
A real estate broker in New York is acting as a property manager for an owner. The broker collects security deposits from tenants. According to New York State law, where must these security deposits be held?
- AIn an interest-bearing escrow account, separate from the broker's funds.
- BIn a non-interest-bearing account if the landlord requests it.
- CIn a separate account, but the interest can be kept by the broker as a fee.
- DIn the broker's general operating account.
Show answer & explanationAnswer & explanation
Correct answer: A. In an interest-bearing escrow account, separate from the broker's funds.
New York General Obligations Law § 7-103 mandates that security deposits for residential properties must be held in an interest-bearing escrow account, separate from the landlord's or agent's personal or operating funds, and the interest belongs to the tenant.
Why the other options are wrong
- B. The account must be interest-bearing, and the interest belongs to the tenant, not the landlord's discretion.
- C. The interest earned on security deposits belongs to the tenant, not the broker.
- D. Commingling security deposits with operating funds is illegal.
NY Security Deposit Handling
In New York, residential security deposits must be held in an interest-bearing escrow account, separate from other funds, with the interest belonging to the tenant.
- Must be interest-bearing
- Must be in a separate escrow account
- Interest belongs to the tenant
Memory trick: Security deposits in NY: Keep them 'Separate, Safe, and Earning' for the tenant, not your pocket!