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Is it legal to require a security deposit before running a credit check?

  • I'm looking to rent a new apartment in NYC. For our 3 previous NYC apartments, we’ve filled out an application and paid an application fee and then once our application was approved, paid security deposit / first month’s rent at lease signing. The management company for the apartment that we are looking to rent is requesting the following: we fill out an application, pay an application fee and give them a security deposit equal to one month’s rent. If our credit is approved, then the security deposit is non-refundable and we basically have to sign a lease. Is this legal? It seems to me that they should run the application/credit check after receiving the application fee. To request a one-month security deposit to process the application seems really aggressive. My wife and I have good credit so this isn’t an issue for us, but this process seems to be fairly predatory for renters with borderline credit. If someone applies with borderline credit and their application is ultimately denied, then they may have to wait up to 10 days to receive their deposit back. In the meantime, they may not have enough funds to put a deposit down on another apartment.

  • Answer:

    yes its legal, although I don't know what the rules are on how long it takes to get it back to you if you don't pass the credit check. When I've done this in the past they've accepted a personal check rather than a bank check. Also I've not been asked for a month, more like $500 or $1000 Google "good-faith deposit"

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I don't know if this is how this particular management company works, but the times when I've done something like this they don't actually cash the check until they've run the credit check. I think they're probably hoping to discourage people with borderline credit from applying rather than hoping to hold on to their deposit for a couple of weeks. And also trying to stop people with good credit from applying for other apartments in the interim. No idea whether it's legal or not.

mskyle

The http://www.nycrgb.org/html/resources/attygenguide.html doesn't specifically outlaw this (like it does "key money") so it might well be legal. You could call the Attorney General's office and see what they say about it - I've found them to be very responsive to questions/problems regarding security deposits. I have not run into this particular problem in NYC but I did experience it elsewhere - it seemed like it was one of those foregone conclusion things - like, we'll take the application fee and the security deposit, but the apartment is yours unless you've got something to hide in your credit check....and if you did, why would you hand over the money?

peanut_mcgillicuty

Google the name of the management company. The things that go on with real estate in New York City are absolutely unbelievable in any other context. I know of landlords who pocket security deposits, then refuse to rent the apartment the security was paid to, uh, secure. You should be able to find ample information about your management company, their various owners and antics in a few brief searches. If nothing else, be on the lookout for the ten worst landlords list, while keeping in mind that landlords always operate behind management company screens in New York.

Violet Blue

Don't know if it's legal, but it sounds shady. Never heard of that in 7 years in NYC.

jessca84

You've never heard of someone asking for a check to take an apartment off the market?

JPD

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