Security deposit due upon NYC apartment rental application

August 27, 2019 1:40 AM

Some NYC apartment rentals nowadays require payment of the security deposit upfront at the time of application, before lease signing. (1) is this legal? (2) is the deposit refunded if the applicant fails the credit check? (3) is the deposit refunded if the applicant passes the credit check but decides they no longer want the apartment? I'm particularly curious about (3). Thanks!
posted by anonymous to Law & Government (6 answers total)

The short version is: Yes, Yes, No. It's legal. The landlord or broker must give you back an application deposit in the event they decide to not rent you the apartment. However, if you back out of the proceedings, you will lose the deposit.

The deposit is a financial guarantee from you to rent the apartment, given in exchange for the landlords written guarantee to remove the unit from the market while your application is being processed. It's there to limit the landlords exposure to risk from non-serious or non-qualified applications.

In addition, these monies should be paid forward toward the full security deposit for a successful application. Let's say your apartment is $2000 per month, and the terms require first month's rent, last month's rent, and a security deposit equal to one month's of rent. You open an application requiring you to put $650 down. You should only have an outstanding balance of $5,350.
posted by voiceofreason at 2:04 AM on August 27, 2019 [3 favorites]

IANYL, but I would research the new rental laws passed this summer, which appear to limit application fees to $20. Impact of the New NYC Rent Law on Landlords and Tenants
posted by mmtaylor at 3:45 AM on August 27, 2019

Also NAL - but OP is, I think, not referring to something that would qualify as an application fee - which generally include pass-through costs for background checks, credit reporting, and other non-refundable costs.
posted by voiceofreason at 4:53 AM on August 27, 2019 [1 favorite]

I've seen the same thing as OP, brokers asking for a good faith deposit upon application - but from what I've seen it's being paid by credit card or Venmo (!) with nothing in writing about what the deposit is for. I just assumed this was brokers being sketchy.
posted by sunflower16 at 7:50 AM on August 27, 2019

Not sure about #1, but a lot of management companies do require the security deposit paid prior to official approval. I have even seen ones that require all monies AND signed leases before approving an applicant, which seems excessive but desirable on landlord’s end. The deposit is only refundable is applicant is rejected, otherwise the leases are countersigned and the tenant is obligated to take the unit.
posted by nancynickerson at 8:06 AM on August 27, 2019

I was recently in a situation close to your #3 above--had a deposit (50%) due at time of application, with the explicit stipulation that if my application was rejected it was fully refundable. I was approved, but wound up not being able to take the apartment after all, and it was fully refunded to me (minus the application fee). This was about a month before the new rental laws though, so I'm not sure if anything would have changed as a result.
posted by Fuego at 9:05 AM on August 27, 2019