The Legal Basis
The logic in this calculator is based on New York General Obligations Law § 7-103. This statute outlines the responsibilities of a landlord when holding a tenant's security deposit.
The 6-Unit Threshold
The law explicitly states that the requirement to place a security deposit in an interest-bearing account generally applies to landlords of properties with six or more family dwelling units. If your building has fewer than 6 units, the landlord is not legally obligated to pay you interest unless it is specifically written into your lease agreement.
Interest Accrual and the 1% Administrative Fee
If your deposit is required to be in an interest-bearing account, the landlord is allowed to retain an administrative fee equal to 1% per year of the deposit amount. The tenant is entitled to the remainder of the interest generated by the bank.
For the purposes of this calculator, we estimate a prevailing bank interest rate to provide a projection. The final "Net Interest" is calculated as: (Estimated Bank Rate - 1% Statutory Fee) × Initial Deposit × Years of Tenure.
Treble Damages and Commingling
By law, a landlord must provide written notification of the name and address of the bank where your deposit is held. If they fail to provide this notification, New York courts have established that this failure permits an inference that the landlord has "commingled" your deposit with their own personal funds.
Commingling is a breach of fiduciary duty. Under the law, if a landlord commingles funds, the tenant is entitled to an immediate return of the deposit and the landlord forfeits any right to use the deposit for damages. In severe cases, or if the landlord willfully violates the law, a judge may award Treble Damages—a penalty equal to three times the original deposit amount.