N.Y. General Obligations Law § 7-103

Money Held in Trust: N.Y. General Obligations Law § 7-103

Security deposits remain tenant money held in trust and cannot be mingled. Landlords of six or more family units must use interest-bearing accounts.

Official text N.Y. General Obligations Law § 7-103 — New York

§ 7-103. Money deposited or advanced for use or rental of real property; waiver void; administration expenses. 1. 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.

  • 2. 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. 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.

2-a. 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.

2-b. 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.

  • 3. 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.
  • 4. The term "real property" as used in this section is co-extensive in meaning with lands, tenements and hereditaments.

Text as published in the 2026 snapshot of the code.

Source: Vaquill Open US Law, compiled from official state publishers (huggingface.co), reproduced under license CC BY 4.0.

Read this provision at the official source →

What it actually says

The idea in this section is ownership. Money deposited or advanced as security under a contract or license for the use or rental of real property "shall continue to be the money of the person making such deposit or advance" and "shall be held in trust" by the person receiving it. It shall not be mingled with that person's personal money, and shall not become an asset of that person. A deposit is therefore not part of the landlord's cash: it is the tenant's money in the landlord's hands, and everything else in the section follows from that.

Subdivision 2 makes it traceable. If the landlord places the deposit in a banking organization, the landlord must notify each tenant in writing of the name and address of the bank and the amount deposited, and the bank must have a place of business in New York. Where the account bears interest, the landlord may take one per cent per annum as administration expenses "in lieu of all other administrative and custodial expenses" - a fixed figure, not a starting point - and the balance of the interest is the tenant's, either held in trust or paid over annually. Subdivision 2-a makes an interest-bearing account compulsory, at the prevailing local rate, where the building contains six or more family dwelling units. Subdivision 2-b deals with a lease that ends off the bank's interest cycle.

Subdivision 3 removes the possibility of contracting out: any provision by which the depositor waives any provision of this section is absolutely void. The section is about custody rather than return - it says whose money it is and where it must sit, not when it comes back or what may be deducted, which are questions for §§ 7-105 and 7-108.

When it applies

  • The deposit was spent by the landlord and there is nothing to return at the end of the tenancy.
  • The tenant was never told which bank holds the deposit or how much is in the account.
  • A building with six or more units holds deposits in a non-interest-bearing account.
  • The landlord keeps all the interest earned on the deposit rather than one per cent.
  • A landlord becomes insolvent and the deposit is treated as though it were part of the business's assets.

What this section does not say

  • It does not say when the deposit comes back or what may be deducted. Those are in § 7-108 for most units and § 7-107 for the rent-regulated ones it names.
  • It does not cap the deposit. The one-month limit is in § 7-108, not here.
  • The one per cent is a maximum for administration, not a fee the landlord is entitled to charge on top of anything else - the text says it is in lieu of all other administrative and custodial expenses.
  • It does not apply to deposits on personal property. This section is about real property; deposits for the use or rental of personal property are § 7-101.

Worked examples

Invented situations, written to show how the wording bites. They are not real cases, not judgments and not precedent, and nothing here predicts what would happen in yours.

Illustrative example

At the end of a tenancy the landlord admits he used the deposit for building expenses during a bad winter, and says he will return it when things improve.

How the wording applies

The deposit continues to be the money of the person who made it and is held in trust by the person receiving it; it may not be mingled with that person's personal money and does not become an asset of theirs. So the fact that decides this is not whether the landlord can now afford to repay, but that the money was never his to spend.

How the parties settled it

The landlord repays the deposit in three instalments with the first due at once, and agrees to open a separate account for the incoming tenant's money before the next lease is signed.

Illustrative example

A tenant in a small walk-up has never been told where their deposit is held. Two years in, they ask for the bank details and for whatever interest has built up.

How the wording applies

Where the landlord places a deposit in a banking organization, subdivision 2 requires written notice to the tenant of the bank's name and address and the amount deposited, and the bank must have a place of business in New York. Where the account bears interest the landlord may take one per cent per annum in lieu of all other administrative and custodial expenses, and the balance is the tenant's. What decides the interest question here is the size of the building: an interest-bearing account is compulsory only where there are six or more family dwelling units.

How the parties settled it

The landlord sends the account details in writing and, from now on, pays over any interest above the one per cent once a year instead of holding it to the end of the tenancy.

Illustrative example

A lease contains a clause agreeing that the deposit may sit in the landlord's general account and that the tenant gives up any claim to interest on it. The tenant signed the lease without reading that paragraph.

How the wording applies

Subdivision 3 makes absolutely void any provision by which the depositor waives any provision of this section, so the clause has no effect whatever was signed. That leaves the real question, which is a different one: what this section actually requires of this landlord, and that depends on whether the money went into a bank at all and how many units the building holds.

How the parties settled it

Both treat the clause as dead, the landlord moves the money into a separate account and confirms the details in writing, and neither side treats the signature as having decided anything.

How courts have read it

Decisions construing this provision. The question and the summary are ours; the quoted sentence is the court's own words, taken from the published opinion. These are the decisions in our corpus, not every decision there is, and nothing here predicts any other case. Reported 2003 to 2017.

Harlem Capital Center, LLC v. Rosen & Gordon, LLC, 145 A.D.3d 579 (2016)

Appellate Division

What the court had to decide

Whether a landlord's failure to respond to a tenant's notice of commingling creates an irrebuttable inference of a violation of General Obligations Law § 7-103.

What it held

The inference of commingling from a landlord's failure to respond is rebuttable, and the landlord may present evidence to show that the security deposit was not commingled with personal funds.

In the court's words
While defendants’ failure to respond to plaintiff’s notice, which alleged commingling and requested the name and address of the bank where the deposit was placed, permits the court to infer that landlord violated the statute by commingling the deposit with personal funds (Dan Klores Assoc. v Abramoff, 288 AD2d 121 [1st Dept 2001]; see also Paterno v Carroll, 75 AD3d 625, 628 [2d Dept 2010]; LeRoy v Sayers, 217 AD2d 63, 68 [1st Dept 1995]), this inference is rebuttable (see Dan Klores, 288 AD2d at 121).

Hamilton v. Bosko, 54 Misc. 3d 386 (2016)

trial courts

What the court had to decide

What are the elements and burdens of proof for a tenant to recover a security deposit under General Obligations Law § 7-103(1)?

What it held

The court held that a tenant must prove four elements: (1) the tenant paid a security deposit to the landlord, (2) the tenant caused no damage to the apartment beyond ordinary wear and tear, (3) the tenant made a demand for the return of the security deposit, and (4) the landlord refused to return the security deposit; then the burden shifts to the landlord to prove the cost of remediating extraordinary damage.

In the court's words
The court holds that in a security deposit case, a tenant must prove the following elements: (1) the tenant paid a security deposit to the landlord, (2) the tenant caused no damage to the apartment beyond ordinary wear and tear, (3) the tenant made a demand for the return of the security deposit, and (4) the landlord refused to return the security deposit.

Gihon, LLC v. 501 Second Street, LLC, 103 A.D.3d 840 (2013)

Appellate Division

What the court had to decide

Does General Obligations Law § 7-103 (2-a) apply to a lease for a mixed commercial/residential building?

What it held

The court held that General Obligations Law § 7-103 (2-a) applies to a mixed commercial/residential building because the statute's applicability is conditioned on the nature of the building, not on the nature of any particular lease, and that failure to provide written notice of the banking institution where the security deposit was held permits an inference of commingling, forfeiting the landlord's right to retain the deposit and entitling the tenant to immediate return.

In the court's words
The statute makes no exception for a mixed commercial/residential building, such as the subject property.

Paterno v. Carroll, 75 A.D.3d 625 (2010)

Appellate Division

What the court had to decide

Does a landlord's failure to give written notice of the banking institution holding the security deposit, in violation of General Obligations Law § 7-103, entitle the tenant to immediate return of the deposit despite a breach of the lease?

What it held

The landlord's violation of General Obligations Law § 7-103 by commingling security deposit funds forfeits his right to use the deposit, and the tenant has an immediate right to return of the funds even if they breached the lease.

In the court's words
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 (see Tappan Golf Dr. Range, Inc. v Tappan Prop., Inc., 68 AD3d 440 [2009]; Dan Klores Assoc. v Abramoff, 288 AD2d at 122; LeRoy v Sayers, 217 AD2d at 68-69).

Eujoy Realty Corp. v. Van Wagner Communications, LLC, 73 A.D.3d 546 (2010)

Appellate Division

What the court had to decide

Does General Obligations Law § 7-103 (1) bar a landlord from recovering the full year's rent that was due in advance on January 1, even though the lease was terminated later in January?

What it held

The court held that General Obligations Law § 7-103 (1) does not bar such recovery because the situation of commingling funds deposited as security or prepaid rent is not present; the rent was due as a lump sum in advance, not a deposit held in trust.

In the court's words
Nor does our holding run afoul of General Obligations Law § 7-103 (1), which prohibits the commingling by a landlord of funds deposited by a tenant as security or prepaid rent, since that situation is not present here.

Tappan Golf Drive Range, Inc. v. Tappan Property, Inc., 68 A.D.3d 440 (2009)

Appellate Division

What the court had to decide

What is the effect of a landlord's commingling of a security deposit in violation of General Obligations Law § 7-103?

What it held

The landlord forfeits any right to use the security deposit and becomes liable for statutory interest from the moment of commingling, and any lease provision purporting to allow commingling is void.

In the court's words
General Obligations Law § 7-103 (3) provides that the anticommingling protections of General Obligations Law § 7-103 (1) cannot be waived and that the provision of the lease purporting to grant defendant the right to commingle the security deposit was “absolutely void” under the statute.

Source: Caselaw Access Project, CC0 1.0 Universal (public domain dedication).

The same problem elsewhere

The other legal systems in this collection answer the same everyday problem with their own provisions.

The comparison and these one-line summaries are in English.

The landlord kept the deposit: how five legal systems decide who was right

Read the full comparison →

Related sections

N.Y. General Obligations Law § 7-108 GOL § 7-108: one month's security, itemized in fourteen days N.Y. General Obligations Law § 7-105 Turn over deposit within five days:N.Y. Gen. Oblig.§ 7-105 N.Y. Real Property Law § 238-a Twenty Dollar Fee Cap: N.Y. Real Property Law § 238-a

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We copy this text from the official publisher and re-check it against that source on every page load, but we cannot guarantee it is complete, current or free of error, and we accept no liability for any reliance on it. An amendment can take effect before a consolidation catches up. The publisher's own copy is linked below; where the two differ, it is the official one that counts.

This page reproduces the text of N.Y. General Obligations Law § 7-103 in force at the date shown and explains it in general terms. It is not legal advice and takes no account of the circumstances of your case, which can change the answer completely. For a live dispute, for limitation periods, and before taking any step in court, consult a qualified lawyer in New York.

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