A landlord deducts $500 out of a security deposit for his legal fees. Is this allowed?

By Virginia K. Smith | May 15, 2014 - 12:59PM

We often receive emails from readers asking for help in navigating their own real estate crises. In this new column, we try to get them answers.

The problem:

When tenants have a legal dispute with their landlords, do they have to pay for the legal fees?

After moving out of his Upper East Side apartment, a reader writes in that he received his security deposit back, "but it was short $500 for 'legal fees' for my landlord." Apparently, while he was living there, his landlord "had refused to let us have a guest for an extended weekend." After denials and radio silence from the landlord, he and his roommate hired a lawyer "to provide notice to the landlord that we were legally allowed an occupant. We felt it was the only route to go."

The landlord's lawyer eventually conceded, but the following month, a legal fee charge appeared on the rent stub. "We never paid it," he adds, "but we continued to pay rent on time until the lease ended."

They also left the apartment "in good condition," he says. And yet their deposit was still $500 short. His question: "I want to contest this, but do I have a leg to stand on?"

The solution:

We don't say this too often when it comes to recouping security deposit deductions, but for once, the tenant's in luck.

While many leases include a clause letting the landlord deduct legal fees from the deposit, the reader's landlord is still squarely in the wrong, says tenant rights attorney Sam Himmelstein.

Himmelstein tells us that your landlord could only withhold legal fees if they had waged a successful case against you and been awarded the money in court. "Here, neither of those things occurred," Himmelstein explains. "The tenant was legally in the right and there was no court case."

And if this type of clause wasn't in your lease to begin with? "That's the end of the inquiry and you are entitled to receive the full deposit," says Himmelstein.

Of course, the moral high ground can be cold comfort when someone's holding your money hostage, and you'll have to do the legwork yourself to get that $500 back. Himmelstein recommends suing the landlord in Small Claims Court or looking into the mediation services offered by the New York State Attorney General's office specifically for tenants looking to recover deposits.

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