rental-property new-york-state
Allowable deductions for security deposit on rental property
<p>Consider the scenario where the owner of a summer rental property learns that the county occupancy tax has increased between the time when a tenant signed a rental contract and paid the agreed upon fee (which included the lower tax rate) but before the tenant occupied the rental.  Further, the landowner only realizes the change in tax rate after the renters have completed their stay at the property, but before the security deposit has been returned.</p>
<p>Under what conditions is the landlord entitled to deduct the difference in taxes from the security deposit?  Additionally, should the difference in taxes exceed the security deposit, can the landlord bill the (now former) tenants the amount in excess?</p>
<p><strong>Additional information added in response to comments</strong></p>
<p>The 2-page rental agreement contains the following two items under a section <em>Payment Terms</em>.  (Identifying information removed.)</p>
<ul>
<li><strong>Security Deposit</strong> Your security deposit will be returned to you no later than 4 weeks after your stay to allow for property inspection, damage assessment and receipt of any TV or overseas telephone charges.</li>
<li><strong>Rental Fee</strong> to be made out to ___ in the amount of ___ and to be received no later than 4 weeks prior to your arrival.  The county has imposed a 3% occupancy tax on rentals, payable by renters and forwarded by owners to the County Treasurer.</li>
</ul>
<p>No other information is provided in the Payment Terms section.  The issue revolves around the incorrect value of the occupancy tax.  Because this item is part of the rental fee, is it an allowable deduction from the security deposit.  Based upon the text, I interpret the document to indicate that only four items (property inspection, damage, TV and phone charges) can be deducted from the security deposit.</p>

<p>An increase in occupancy tax would only be recoverable from the security deposit if the charge is authorized under the lease. The excerpt of the lease provided is not clear enough to determine if that is the case.</p>
<p>There is also an argument that the Security Deposit does not cover unpaid rent or occupancy tax, although that would probably not be the strongest argument.</p>

<blockquote>
<p>Under what conditions is the landlord entitled to deduct the difference in taxes from the security deposit?</p>
</blockquote>
<p>These would have to be specified in the contract as in the tax escalation clause in <a href="https://www.leagle.com/decision/19851260766f2d49411156" rel="nofollow noreferrer"><em>Gateway Center Corp. v. U.S.</em>, 766 F.2d 494 (1985)</a> and in terms that supersede &quot;<em>the usual meaning</em>&quot; [and purpose] of the term as outlined in <a href="https://www.leagle.com/decision/194523361fsupp1721202" rel="nofollow noreferrer"><em>Bowles v. Westbrook Defense Homes</em>, 61 F.Supp. 172, 173 (1945)</a> (&quot;<em>to protect the lessor against violation of the rental or other provisions of the lease</em>&quot;). An inaccuracy or outdated detail in the lease does not mean that the tenant violated the rental or other provisions of that lease.</p>
<p>Related news suggest that the tax increase might not apply to the scenario you describe, though. For instance, in Essex county the law apparently <a href="https://www.adirondackdailyenterprise.com/news/local-news/2020/04/essex-co-changes-timeline-for-bed-tax-hike/" rel="nofollow noreferrer">was to be amended</a> to so that &quot;<em>the tax goes with the date of the booking rather than the date of the stay</em>&quot;, and impliedly regardless of the deadline for reimbursement of security deposit. There might be a similar provision in your county, and your description indicates that the tax increase happened after &quot;<em>the tenant signed [the] rental contract</em>&quot;.</p>
<p>If it turns out that the tax increase is applicable in your scenario, the <a href="http://www.oneclubofjusticides.com/p/restatement-second-contracts.html" rel="nofollow noreferrer">Restatement (Second) of Contracts</a> at §§ 151-153 suggests that --absent a lease provision to the contrary-- the landlord is not allowed to deduct from the security deposit the difference anyway. That is because the landlord as the <em>adversely affected party</em> from the mistake (i.e., the &quot;<em>belief that is not in accord with the facts</em>&quot;) declined or failed to exercise his entitlement to void the lease. At this point there is nothing to void because &quot;<em>the renters have completed their stay at the property</em>&quot;.</p>
