Landlord Must Deposit Security from Three-Family 421-a Building into Interest-Bearing Account

Landlord owned a three-family building that was subject to rent stabilization solely as a result of receiving Real Property Law Section 421-a tax benefits. Landlord asked the DHCR if it was required to place tenants' security deposits into separate interest-bearing bank accounts. In an opinion letter, the DHCR stated that the General Obligation Law doesn't require security deposits to be placed in a bank account if the building has fewer than six apartments. But since the building is rent stabilized under 421-a, the Rent Stabilization Code does require landlord to place the security deposits into a bank account. Landlord doesn't have to open separate bank accounts for each tenant.

DHCR Opin. Ltr. by Charles Goldstein (7/26/02