I checked out an apartment for rent and the agent says I need to provide a $500 "good faith" deposit when I submit my application. What is this? Is this a red flag?
If a New York City landlord or broker asks for a good faith deposit before or when you submit an application for a rental, it’s because they want to know that you’re serious about the apartment. However, it’s not a common request, and unless you are being reimbursed or it is being applied to your security deposit, it is illegal.
That’s because the Housing Stability and Tenant Protection Act passed in 2019 capped the amount of rent and fees a landlord can ask for upfront. Now the most that landlords are allowed to ask for is the first month’s rent, a security deposit that cannot exceed one month’s rent, and a $20 application fee.
[Editor's Note: Realty Bites tackles your NYC rental questions. A previous version of the article ran in April 2021. We are presenting it again in case you missed it.]
But requests for a good faith deposit still happen from time to time, mostly with smaller mom-and-pop landlords, says Bianca Colasuonno, a broker at Compass.
“It’s usually because they don’t know the most recent laws so it’s a good time to educate them on what they can no longer do,” she says. In most cases, they aren’t trying to scam you and just want to make sure you’re committed, since there are so many available apartments, she says.
If you’re being asked for a good faith deposit in addition to a security deposit, then it would be an unlawful request, says Steven Kirkpatrick, a partner at the law firm Romer Debbas. However, if the good faith deposit is going towards your security deposit or will be fully reimbursed, it would be acceptable, he says. Still, he says that these requests are rare.
Sometimes a landlord or broker might say they’ll take the listing off the market and will hold it for you while you get your application together, Colasuonno says. But for all you know, another broker could continue to show the apartment, she says. So, it can be risky.
Looking for a rental agent you can trust—and a landlord with a good reputation? Put your search in the hands of Triplemint, a tech-savvy real estate brokerage and Brick Underground partner. Founded by a pair of Yale grads in response to the frustrating apartment-search experiences of classmates and colleagues, Triplemint will charge a broker's fee of 10 percent of a year's rent instead of the usual 12 to 15 percent if the apartment is an "open" listing and you sign up here. Bonus: The agents at Triplemint are a delight to deal with.
Kirkpatrick says he would consider the request a red flag and says you might want to look elsewhere. If you do decide to go through with it, make sure to have the agreement in writing, especially if you’re paying cash. Be sure to research your landlord as well and find out if other renters have had complaints about them. There are several websites that post reviews of buildings, such as Apartment Ratings, Openigloo, RentCity, bitResi, and GoHomeNY.
And, if you’re trying to land a new apartment quickly, your best bet is to have all of the required documents, including your credit report, printed and ready so you can apply immediately, Colasuonno says. It will show you’re serious about the apartment and get the application process started faster.
You Might Also Like