For Rent in 10003>Question Details

Kwind11, Home Buyer in

NYC landlord asking for last 5 months rent up front NOT in escrow. Legal? What can he legally do with this money?

Asked by Kwind11, Wed May 29, 2013

I applied for a condo with a roommate in NYC, we both have guarantors. It is in a co-op building, but a landlord owns a few units in the building to rent out. In addition to security deposit and first month rent, he wants last 5 months rent bc we are from out of state and we don't have credit longevity, as we are both a year out of college (NJ a half hour away). He admits he is not putting this money in an escrow account. What if for some reason we have to leave the apt 6 months into the lease or the building burns down god forbid but hypothetically...would we lose our almost $20K we paid up front? What is he legally obligated to include in the lease to solidify I wouldn't lose my money down the road?

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Since you mention condo, and co-op--which is it, and have you verified ownership....keep in mind that not all co-ops allow renting; for necessary legal advise regarding the lease and security deposit, it's really in your best interest to consult with an attorney who specializes in real estate....
1 vote Thank Flag Link Thu May 30, 2013
A security deposit MUST be in an escrow account, period. A landlord is allowed to ask for pre-paid rent, up to the entire year, which does not have to go into the same account as security. The only exception is a rent stabilized apartment, which legally can only ask 1 moth rent and 1 month security. Just make sure the lease states that the last 5 months are pre-paid. That way, if something happens to the apartment or building, you get your rent back. As far as breaking the lease. the moment you sign it (and it's countersigned by the owner) you are legally responsible for the entire lease, so unless you get a new tenant to take over, or get a new lease (which most landlords will do) you're responsible until you do.
Disclaimer: I'm not an attorney, but my knowledge comes from 22 years experience doing Manhattan sales and rentals, as well as 18 years of being a landlord in Manhattan and Long Island.
0 votes Thank Flag Link Wed Jun 19, 2013
Interesting that you mention breaking the lease as one of the possibilities. Sound like the landlord knows what he is doing…

Jim Simms
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Financing Kentucky One Home at a Time
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0 votes Thank Flag Link Fri May 31, 2013
breaking the lease is not my intent by any means, but as a business professional, i think it would be safe to understand that things go wrong. $20,000 is not pocket change to me, so if something went awry, I would like to know what would happen to my money. That is all.
Flag Fri May 31, 2013
Like Don said, this is not a legal advice but, before you go and spend money on a lawyer, we can help answer a few items that does not require a lawyer.
You said Condo, then said Co-op. Some condos do need board approval. And if it is a co-op, you do need board approval unless your potential landlord owns unsold shares.
Based on what you said, asking for 5 months' rent is not illegal. At that point, you should get a good lawyer who specializes in landlord-tenant matters. Good luck!
0 votes Thank Flag Link Fri May 31, 2013
Right, my apologies for the confusion. It is a co-op building that has a few condo's owned by a landlord who rents them out. Applying to rent these condo's does not need board approval. However, because my guarantors are out of state, and is only putting my roommate and myself on the lease, he would like the last 5 months up front. My question is - is he legally obligated to put a condition in the leasing agreement stating if for some reason he evicted us (which shouldnt happen) or the buliding becomes uninhabitable or he goes bankrupt or leaves the country (the hypothetical possibilities are endless) we would get our money back? I would just like to know this before putting up this much money.
Flag Fri May 31, 2013
I'm not a lawyer, so this isn't legal advice. And I'm not licensed in New York, so I don't know all the rules and regulations that the city and state might impose. Still....

Often there are limits on the amount of a security deposit that can be requested (often 1-2 times the monthly rent), and there are sometimes requirements that the security deposit be kept in a separate account. Again, I don't know specifically about New York.

However, that's not what the landlord is asking for. He's asking for the last 5 months of RENT. In many areas of the country, that's perfectly permissible. I could ask for an entire year's worth of rent up-front on a rental property I have.

A security deposit has to be returned if conditions are met--thus, the logic behind an escrow account. Rent isn't returned; it goes straight into the owner's pocket. Thus, few if any localities (none I'm aware of) require an escrow account for pre-paid rent.

What if you have to leave the apartment 6 months into the lease? Fine. You've paid for the last 5 months, so it's your decision whether you leave or not.

What if the building burns down? Read your lease. There should be provisions in there about what happens if the unit becomes uninhabitable. And that could include refund of rent for the period the property is uninhabitable. If there aren't any such provisions, you can ask that he include them.

As another answer correctly notes, there's a big difference between a condo and a coop. It may or may not be important in relation to your concerns, but you should know the difference and you should know which type of building (legal structure) you'll be living in.

For more information, see a lawyer.

Hope that helps.
0 votes Thank Flag Link Thu May 30, 2013
Don Tepper, Real Estate Pro in Burke, VA
MVP'08
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This is the result of going direct with a private owner renting his own property. You need to talk with an Attorney for the legal response. You're from another state. Although it's close, if you fail to pay your rent, he still has to go after someone not local and as per your own words, "we don't have credit longevity," Hence, the additional up front rent. You're of legal age, signing a lease and it's a contract. If you want to break your lease, be prepared to give up at least a portion of that money. Your security is in an escrow account, not the rent paid for living there. If you don't want to lose, stay put.
0 votes Thank Flag Link Thu May 30, 2013
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