When your building gets sold and your new landlord claims they don't have your security deposit, or your old landlord says the sale means they're keeping it, you're not just dealing with confusion—you're dealing with potential theft of your money. New York law is crystal clear: a building sale doesn't give anyone the right to pocket your deposit, and specific procedures ensure your deposit follows the property or gets returned to you.
Most tenants assume building sales create some legal gray area where deposits disappear into closing costs or get absorbed by new ownership. That assumption costs tenants millions of dollars collectively. Here's what actually happens to your deposit when buildings change hands, what your landlords are legally required to do, and how to get your money back when they don't follow the rules.
Your security deposit is your money being held in trust. It doesn't belong to your landlord—it belongs to you, held temporarily against potential damages or unpaid rent at move-out. When the building sells, your money doesn't become part of the transaction price, doesn't get absorbed into the sale proceeds, and doesn't vanish just because ownership changed.
New York law treats security deposits as tenant property that must either transfer to the new owner or be returned to tenants. There's no third option where the selling landlord just keeps it. If your landlord tries to claim the sale means they're keeping your deposit, they're either ignorant of the law or deliberately stealing from you.
New York General Obligations Law § 7-105 and related statutes create specific obligations for landlords when buildings are sold. These requirements protect your deposit through the ownership transition.
Your landlord doesn't own your security deposit. Legally, they hold it in trust for you—meaning they're temporarily managing money that belongs to you and must be available for return when your tenancy ends.
This trust relationship means:
Deposits must be kept separate from landlord's operating funds. In buildings with six or more units, security deposits must be held in New York bank accounts separate from the landlord's personal or business accounts. Your landlord can't commingle your deposit with their operating capital and then claim it's unavailable because they spent it.
Interest belongs to you (mostly). Deposits in these separate accounts earn interest. Your landlord can keep 1% annually as an administrative fee, but the rest of the interest belongs to you and must be paid either annually or at tenancy end, depending on local regulations.
The trust doesn't terminate when the building sells. Your landlord's obligation to hold your deposit in trust continues until you move out or until they properly transfer the trust obligation to the new owner. A sale doesn't dissolve the trust relationship—it just changes who holds the trustee role.
This trust framework is why your landlord can't simply pocket your deposit when they sell. Trust property doesn't become the trustee's property just because they're leaving the trustee position.
When a building is sold, the selling landlord (the current owner) has exactly five days from the date of sale to do one of two things with every tenant's security deposit:
Option 1: Transfer all deposits to the new owner. The seller physically transfers the deposit funds to the buyer, who becomes the new trustee holding your deposit. This is the most common approach because it's simpler than returning deposits to all current tenants.
Option 2: Return deposits to all tenants. Less common, but legal—the seller could return all security deposits to current tenants within five days of the sale. This makes sense only when the building is being sold to an owner who won't be maintaining rental tenancies (conversion to condos, demolition, etc.).
The five-day deadline is absolute. Not "as soon as we close escrow," not "once we get the paperwork sorted out," not "when it's convenient." Five days from the sale closing date.
What the seller cannot do:
The five-day rule exists because tenants shouldn't suffer financial limbo because their building changed hands. Your deposit needs to be somewhere definite—either with the new owner or back in your pocket—and it needs to get there fast.
Along with transferring the deposits, the selling landlord must notify all tenants (usually by registered or certified mail, though some jurisdictions accept other forms of written notice) about the transfer. This notice must include:
The new owner's full legal name. Not just "the new landlord" but the specific individual or entity name—"ABC Property Management LLC" or "John Smith."
The new owner's address. A complete mailing address where you can contact the new owner about deposit issues, rent payments, maintenance requests, etc.
Confirmation that your deposit was transferred. A statement that your security deposit of [amount] has been transferred to the new owner and they are now responsible for its return at the end of your tenancy.
When the transfer occurred. The date the deposit was transferred, so you know the timeline was followed.
This notification serves multiple purposes. It tells you who to contact going forward. It creates a paper trail documenting the transfer occurred. It puts both the old and new landlord on record about the deposit amount, preventing future disputes about how much was deposited.
If you don't receive this notification, that's a red flag. It often means the deposit wasn't properly transferred, and you need to investigate immediately rather than waiting until you move out years later only to discover your deposit disappeared.
Here's one of the most powerful tenant protections in the law: the new owner becomes directly responsible for returning your deposit at the end of your tenancy, even if the old landlord never actually passed the money over.
Read that again, because it's critical. You're not caught in the middle of a dispute between your old and new landlord about whether money was transferred. The new owner is legally obligated to return your deposit regardless of what the previous owner did or didn't transfer.
Why this matters: If the old owner pocketed your deposit instead of transferring it, that's a problem between the old owner and new owner—not between you and either of them. The new owner owes you the deposit. If they don't have the money because the old owner stole it, the new owner still owes it to you and has to pursue the old owner separately for reimbursement.
This protection prevents new owners from claiming "we never received any deposits, so we're not responsible." Wrong. They bought a building with tenants who had deposits. Those deposits are their responsibility now, whether they properly collected them from the seller or not.
There are limited exceptions—if the new owner can prove they had absolutely no knowledge that deposits existed (unusual, since lease files and closing documents typically disclose this), or if the sale was involuntary (foreclosure, tax sale), different rules may apply. But in standard building sales, the new owner's responsibility is absolute.
When you eventually move out—whether weeks after the sale or years later—the deposit return process works the same as it always did, with one change: whoever owns the building at the time you move out is responsible for returning your deposit.
Regardless of building sales during your tenancy, when you vacate and surrender possession, your landlord has 14 days to:
Return your full deposit, or
Provide an itemized written statement of any deductions and return the balance
If they miss this 14-day deadline, they forfeit the right to keep any portion of your deposit under GOL § 7-108. The sale of the building doesn't extend this deadline, doesn't create exceptions, and doesn't excuse non-compliance.
If your building has changed hands three times during your tenancy, you don't care about that history when you move out. You care about one thing: does the current owner (whoever that is) return your deposit within 14 days?
The sale doesn't change what deductions are legally permitted from your deposit. Your landlord (new or old) can only deduct for:
Unpaid rent for periods you actually occupied the apartment. Not speculative future rent, not rent your landlord wished they could charge, not penalties for moving out—just actual unpaid rent for time you lived there.
Damage beyond normal wear and tear. Broken fixtures, large holes in walls, damaged appliances, stains or destruction beyond what ordinary living causes. Not paint fading, not minor scuffs, not normal carpet wear—actual damage you caused.
Other charges specifically allowed by law or lease. Late fees if your lease permits them and they're reasonable, costs of replacing lost keys if your lease allows it, unpaid utilities if you were responsible for them. Not made-up fees, not penalties for inconvenience, not charges the lease doesn't authorize.
The building being sold is not a lawful deduction category. Your landlord cannot claim "we needed to keep deposits to cover closing costs" or "the sale meant we had expenses that justified keeping deposits." Those aren't your problem and don't justify keeping your money.
If your new landlord (whoever owns the building when you move out) claims deductions, they must provide the same detailed itemization the law always required:
"Deductions related to building sale" or "expenses from ownership transition" aren't valid itemized deductions. If your landlord's itemization includes anything referencing the sale as justification for keeping money, that's illegal and you can challenge it.
When landlords violate the transfer and return rules, you have options to recover your money. Who you pursue depends on what went wrong and when you discover it.
The building sold while you were living there. The old landlord was supposed to transfer your deposit to the new owner within five days but instead pocketed the money. You don't discover this until you move out years later and the new owner claims they never received your deposit.
Who you can pursue:
The new landlord first. Under New York law, the new owner is responsible for returning your deposit even if they never received it from the old owner. When you move out, demand your deposit from the current owner. If they refuse based on "we never got it," explain that their failure to collect it from the previous owner doesn't eliminate their legal obligation to you.
If the new owner still refuses, sue them in small claims court for the deposit amount. Bring your lease, proof you paid the deposit, proof of when you moved out, and proof you demanded return. The new owner's receipt (or non-receipt) of money from the old owner is irrelevant to their obligation to you.
The old landlord second. If the new owner successfully argues they're not liable (rare, but possible in unusual circumstances), or if you want to pursue both, you can sue the old owner for failing to transfer your deposit as required. You'll need evidence proving the deposit was never transferred—maybe the new owner confirms in writing they never received it, or court proceedings reveal the transfer never happened.
Suing the old owner is often harder because they may have moved, be harder to locate for service, or may be judgment-proof (no assets to collect from). That's why the law makes the new owner primarily responsible—it's easier for you to collect.
Pursuing both. You can file against both landlords, either jointly or in separate actions. Explain to the court that one or both failed to properly handle your deposit, and you're entitled to recovery from whoever is responsible. Let them fight between themselves about who ultimately pays—your concern is getting your money back.
The building sold, deposits were supposedly transferred, but when you move out the new landlord refuses to return your deposit, either claiming they never received it or making up invalid deductions referencing the sale.
Immediate steps:
Send a demand letter within days of the 14-day deadline passing. Cite GOL § 7-108 and demand immediate return of your full deposit. Reference that no valid itemization was provided within 14 days, which means forfeiture of all deduction rights.
If they respond claiming they didn't receive your deposit from the old owner, reply in writing: "Under New York law, you became responsible for my security deposit when you purchased the building, regardless of whether the previous owner transferred funds to you. Your dispute with the previous owner doesn't eliminate your legal obligation to return my deposit. I demand immediate payment of $[amount]."
File in small claims court. If the new landlord doesn't pay within 7-10 days of your demand letter, file a small claims case. Your damages are the full deposit amount (since they forfeited deduction rights by missing the 14-day deadline), plus potentially double the deposit as a penalty under GOL § 7-108 for bad faith retention.
Bring evidence: lease, proof of deposit payment, proof of move-out date, your demand letter, any response from the landlord, and proof the 14-day deadline passed without proper return or itemization.
Join the old landlord if necessary. If the new landlord claims complete ignorance and you have evidence the old landlord never transferred deposits, you can amend your complaint to add the old landlord as a defendant. Many small claims courts allow this, though it complicates service and proceedings.
Maybe you received no notice of transfer after the sale, or the new owner tells you they never received deposits, or you find out somehow that the old owner pocketed deposits instead of transferring them.
Act immediately, don't wait until move-out:
Demand written confirmation from the new owner. Send a letter or email: "I am a current tenant at [address]. My security deposit of $[amount] was paid to [old owner name] on [date]. Please confirm in writing whether my deposit was transferred to you when the building was sold on [date], and provide the name and address where the deposit is currently held as required by law."
Demand accounting from the old owner. Send a similar letter to the old owner if you can locate them: "You were required to transfer all tenant security deposits to the new owner within 5 days of selling the building on [date]. Please confirm in writing that you transferred my deposit of $[amount] and provide proof of transfer."
Consider demanding immediate return. Under the law, if the old owner didn't transfer your deposit to the new owner within 5 days, they should have returned it to you. You can demand: "Since you failed to transfer my deposit to the new owner as required by law, I demand immediate return of the full $[amount] to me at [your address]."
Document everything. Save all communications, certified mail receipts, any responses or non-responses. This paper trail becomes critical if you later sue for your deposit.
File complaints if appropriate. Depending on your jurisdiction, you may be able to file complaints with local housing agencies about security deposit violations. In NYC, you can file with HPD or the Attorney General's office. While these complaints may not directly get your money back, they create official records of violations.
Consider a pre-move-out lawsuit. In some circumstances, you can sue for your deposit even before moving out if there's clear evidence it's not being held properly. This is unusual, but if you have proof the deposit was stolen rather than transferred, you might be able to recover it immediately. Consult with a tenant lawyer about whether this option is viable.
You're still living in the apartment, possibly paying rent to the same management company, and you don't even know the building was sold. You have no idea who owns the building now or whether your deposit was properly transferred.
How to investigate:
Check public property records. In most New York counties, you can search online property records to see current ownership. Search by your building's address to find the current deed holder. This is usually free or low-cost.
Ask your rent collection point. If you pay rent to a management company, ask them directly: "Who is the current owner of this building? Has ownership changed since I moved in? If so, when was the sale, and where is my security deposit being held?"
Request information in writing. Send a formal letter to your last-known landlord or management company requesting this information. They're required to provide it.
Look for notices in common areas. Some jurisdictions require posting of ownership change notices in building lobbies or common areas. Check for any official notices you might have missed.
Once you identify the current owner, demand written confirmation of deposit transfer as described above.
Understanding why deposits get lost or stolen during building sales helps you stay vigilant and catch problems early:
Building sales involve complex closings with dozens of moving parts. Security deposits are often a small line item in a multi-million-dollar transaction, and attorneys, title companies, and landlords sometimes fail to properly account for them.
The seller's closing attorney should have a schedule of all tenant deposits that gets transferred to the buyer's attorney, with corresponding funds transferred through escrow. This doesn't always happen. Sometimes schedules are incomplete, sometimes fund transfers are miscalculated, sometimes paperwork gets lost.
When closings are sloppy, deposits disappear into the chaos. By the time anyone realizes the problem, the seller has been paid and left, and the buyer claims they never received the deposit money.
Some landlords intentionally pocket security deposits before selling. They know they're leaving, they know the new buyer may not notice the missing deposits immediately, and they gamble that by the time tenants move out and demand deposits back, they'll be long gone and hard to pursue.
This is theft, but it's common enough that New York law specifically addresses it by making new owners responsible regardless of what previous owners did. The law recognizes that sellers have strong incentives to steal right before sales.
Some building buyers don't understand they inherit security deposit obligations. They think deposits are the old owner's problem, or they assume if they didn't receive deposit funds at closing, they don't owe anything to tenants.
This ignorance doesn't excuse their legal obligation, but it causes disputes. New owners who don't budget for deposit liabilities resist paying them when tenants move out, creating unnecessary litigation.
When buildings change hands multiple times, deposit tracking becomes especially problematic. Owner A transfers deposits to Owner B, who was supposed to transfer to Owner C, but somewhere in that chain the transfer breaks down.
By the time a tenant who's lived through multiple ownership changes moves out, nobody has clear records of the original deposit amount or where it went. Reconstructing the paper trail requires significant effort.
This is why keeping your own records is critical: your original lease showing deposit amount, proof of payment, any notices you received about ownership changes, any communications about your deposit. When ownership changes multiple times, you may be the only person with complete documentation.
You can't control whether your landlord follows the law during a building sale, but you can take steps to protect your rights and make recovery easier if problems arise:
Demand written notice of the transfer. Even if your landlord is supposed to provide it automatically, proactively request it: "I understand the building was recently sold. Please provide written confirmation of the new owner's name and address, and confirmation that my security deposit was transferred to them as required by law."
Document your deposit amount. Pull your original lease and proof of deposit payment. Make copies. Put them somewhere safe. You may need to prove deposit amount years from now when memories and records have faded.
Open a dialogue with the new owner. Once you know who they are, introduce yourself in writing. Mention you're a current tenant, note your apartment number, and ask them to confirm receipt of your security deposit. This creates a paper trail and puts them on notice that you're paying attention to deposit issues.
Photograph the apartment. Take comprehensive photos of your apartment's condition around the time of the sale. If disputes later arise about damage, you have proof of condition during the ownership transition.
Keep copies of everything. Every lease, lease amendment, rent receipt, repair request, communication with landlord, notice you receive—save copies electronically and physically. You're building the evidence file you'll need if deposit disputes arise at move-out.
Note any suspicious signs. If the new owner seems disorganized about basic information, can't answer questions about deposit amounts, or gives conflicting information about your lease terms, these are red flags that deposits may not have been properly transferred. Investigate early rather than waiting until move-out.
Consider certified mail for important communications. When asking about deposits, requesting repairs, or raising legal issues with the new owner, use certified mail. Create proof of your communications and their receipt.
Request a pre-move-out inspection. Put your request in writing at least 2-3 weeks before your planned move-out. You're entitled to this inspection under the security deposit law, and it protects you from surprise deduction claims.
Clean thoroughly and repair minor damage. Fill nail holes, clean thoroughly, replace any broken fixtures you're responsible for. Make the apartment move-out ready so deductions can't be justified.
Take comprehensive move-out photos and videos. Document every room, every surface, every fixture showing clean, undamaged condition (or at least condition no worse than normal wear and tear). Include photos showing you're removing all personal property and trash.
Get keys return receipt. When you return keys, get written confirmation of the date and time you returned them. This establishes exactly when the 14-day deposit return clock started. If landlord won't provide written receipt, send keys via certified mail with return receipt requested.
Calendar the 14-day deadline. From your move-out and keys return date, count 14 days. Mark it on your calendar. The day after the deadline, if you haven't received your deposit or itemization, send your demand letter.
Send a formal written demand immediately. Don't delay hoping the check is "in the mail." The law creates forfeiture for missing the deadline. Enforce it.
Be prepared to sue. Have your evidence organized. Know your local small claims court filing procedures. Be ready to file within days or weeks of your demand if necessary. The longer you wait, the harder collection becomes.
Security deposit protections around building sales exist because without them, tenants would be financially victimized every time buildings changed hands. Unscrupulous sellers would pocket deposits before selling. Negligent buyers would claim ignorance of deposit obligations. Tenants would lose thousands of dollars not because they damaged apartments or owed rent, but simply because their building was sold.
The five-day transfer rule, the new owner liability, the notification requirements—these aren't bureaucratic technicalities. They're protections ensuring your money stays your money regardless of what real estate transactions happen around you.
When landlords violate these rules and courts enforce them, it's not about being "too technical" or "punishing landlords for honest mistakes." It's about preventing theft of tenant property and ensuring rental housing operates fairly.
Your security deposit represents significant money—often a month or two months' rent. For many tenants, that's thousands of dollars you can't afford to lose. The law recognizes this and provides strong remedies when landlords fail to protect your deposit through ownership transitions.
Use those remedies. Demand compliance. Sue when necessary. Your deposit is your money, and you're entitled to get it back when you move out, regardless of how many times your building changed hands while you lived there.
