Cal. Civ. Code § 7-103
Money deposited or advanced for use or rental of real property; waiver void; administration expenses
Operative Text
§ 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.
N.Y. Gen. Oblig. Law § 7-103 establishes that any money a tenant deposits as security for a rental remains the tenant's own property throughout the tenancy — it does not become the landlord's asset. The party holding the deposit must keep it separate from personal funds, holding it in trust, and must notify the depositor in writing of the banking institution and amount when the funds are placed in a bank. For buildings with six or more residential units, the deposit must be placed in an interest-bearing account earning the prevailing local rate, and any interest earned (minus a one-percent-per-annum administrative allowance the holder may retain) belongs to the tenant. Any lease clause that attempts to waive these protections is declared void by the statute.
Plain English — not legal advice.
Under N.Y. Gen. Oblig. Law § 7-103, compliant operators keep security deposits in a dedicated account that is never commingled with operating or personal funds. When depositing security funds at a banking organization, operators provide each tenant with written notice identifying the institution's name and address and the amount held. Landlords of buildings with six or more dwelling units place deposits in interest-bearing accounts at a New York-based banking organization earning the prevailing area rate, retain no more than one percent per annum as the permitted administration fee, and either hold the remaining interest in trust or pay it to the tenant annually — and upon lease termination, remit whatever interest has accrued and is collectible at that date.
General guidance for property managers — not legal advice for your specific situation. Consult an attorney for advice on your case.
N.Y. Gen. Oblig. Law § 7-103 gives tenants a clear ownership interest in their security deposit from the moment it is paid — the funds are held in trust for the tenant, not absorbed by the landlord. Tenants in buildings with six or more units are entitled to interest on their deposit at the prevailing local rate, less only a one-percent administrative allowance, and any lease clause purporting to strip away these rights is automatically void under the statute. Tenants who believe a landlord has commingled funds, failed to provide written banking notice, or withheld interest may consider raising a violation of § 7-103 as a defense in a security-deposit dispute, filing a complaint with a relevant local housing or consumer-protection agency, or reaching out to a tenant-rights organization for general information about available remedies.
General guidance for tenants — not legal advice for your specific situation. Consult a tenant-rights organization or attorney for advice on your case.
Generated September 13, 2026 — auto-generated, not yet human-reviewed. See /transparency for methodology.
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