Under New York General Obligations Law §7-108, a broker holding a tenant's security deposit in escrow must return the deposit within 14 days of lease termination. Which of the following best describes the broker's obligation when disbursing a security deposit refund to a tenant?
Correct Answer
D) The broker must disburse the deposit to the tenant upon lease termination per statutory timelines, independent of landlord instruction, since the funds are held in trust for the tenant
Under NY General Obligations Law §7-108, security deposits are tenant funds held in trust by the landlord or their agent. The broker's obligation runs to the tenant as the beneficial owner of those funds. Upon lease termination, the deposit must be returned within 14 days (for units covered by the Housing Stability and Tenant Protection Act of 2019) unless lawful deductions apply. Because the funds belong to the tenant — not the landlord — the broker cannot withhold disbursement simply because the landlord has not issued separate authorization; the statute itself governs the timing and obligation.
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