Today’s test of your real estate knowledge concerns security deposit.
True or false, program tenants are entitled to the security deposit when they leave the apartment.
Scenario: The Security Deposit
You are a program tenant. The time has come to move from your program apartment. You approach the landlord requesting the security deposit. The owner does not want to give you the deposit. You insist on stating you are entitled to the deposit. True or false the tenant is correct. You decide.
HRA
False, the person who paid the security gets the security. In New York City that person/entity is The Human Resources Administration (HRA)
HRA paid the security. HRA can ask for the security deposit back. Not the tenant. In the past, HRA seldom asked for the money.
Note: If you as a tenant claiming the money you are attempting to steal money from a government entity. A move you should rethink.
A Change In Policy
HRA has changed its policy on security deposits. It no longer pays the deposit at closing. Enter the voucher system.
The Voucher
An owner receives a voucher at closing. The owner files this voucher after the tenant moves out. It is the owner’s claim for damage. The owner must submit proof of damage to the apartment.
HRA in its eminent wisdom makes a determination on the owner’s property. They decide if the apartment is damaged. If approved HRA determines the amount paid out.
Owners take note; that there is no exception to this procedure. As of this writing, all programs under HRA now proceed in this manner.
What A Security Deposit Is For
In the 5 boroughs of New York, we do not collect a holding deposit for an apartment. We have the Security Deposit. It is part of the closing cost.
You pay the security at the closing. The law requires the landlord to place it in an escrow account. A security deposit is the landlord’s protection against damage to the apartment.
Note: In New York, there is a practice called, “Living out the deposit.” This means using the deposit in place of rent. Tenants try to do this when they are behind on the rent. The owner does not have to allow this. An owner who grants this is doing a courtesy. Gone is the security deposit.
The tenant gets nothing. The owner loses the security deposit.
Procedure: Non-Program Tenant Moves Out
The owner inspects the apartment for damage. Normal wear and tear on the apartment are expected.
Based on the condition of the apartment, one of two things happens.
- The owner will use the security deposit to make repairs. If the security deposit is not enough to cover damages the owner may sue the tenant. Any money left over after repairs is returned to the tenant.
- No damage to the apartment means the tenant gets back the security deposit.
Procedure: Program Tenant Move Out
The owner will inspect the apartment for damage.
If damage is found, the owner will submit a claim to HRA.
*HRA will determine if the claim is justified.
*Note: These are two reasons owners dislike dealing with programs. See The Problems with Rental Programs, where to begin.for more on this.
Disclaimer
Disclaimer: I am not a lawyer and nothing stated here is legal advice. This article applies to the five boroughs of New York. All information is deemed accurate but not guaranteed. Always check the real estate laws in your part of the country.
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