TL;DR - Since 2019, HSTPA caps your security deposit at one month's rent. But if a tenant stops paying, you can spend years in housing court. That can cost you six figures. Way more than your rent.
One month's security deposit is not going to cover that.
The good news: you don't have to bend the rule to protect yourself. This piece walks you through four security deposit insurance options NYC landlords use, and what each one actually covers. The strongest setup is partnering with an institutional guarantor like PandaGuarantee. You'll get to know why. For now, all you need to know is there's nothing you pay them.
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Before 2019, a New York landlord renting an unregulated apartment could collect two months' rent or even more as a security deposit. On a $3,500 apartment, that was $7,000 in escrow. Enough to cover missed rent, legal costs, and damage if things went wrong.
The Housing Stability and Tenant Protection Act (HSTPA) ended that. Since June 14, 2019, the law has been blunt: no deposit or advance may exceed one month's rent. Same apartment, same tenant, $3,500.
Here's what $3,500 now stands against.
A Brooklyn landlord with a three-unit home started eviction proceedings after her tenants stopped paying. Four years later, she has collected nothing and still doesn't have the apartment back. "It has completely taken over my life," she said.
That's the shape of it when it goes wrong. The tenant stays and lives rent-free. Not for months. Years.
One month's rent is what you hold against that.
So the real question isn't what HSTPA took away. It's why one month was never going to be enough in the first place.
Why Isn't One Month's Security Deposit Enough for NYC Landlords?
Because the deposit is capped and the loss isn't.
Colleen McMahon, then chief judge of the Southern District of New York, described evicting a residential tenant here as "slow, cumbersome and extremely tenant-favorable" next to how other states do it. That's not a landlord venting. That's the federal bench describing the system.
Here's what that system costs you on a $3,500 apartment when the tenant stops paying in month two.
The Rent You Never Collect
NYC housing court can take more than a year to move a simple nonpayment case. Often much longer. One landlord's tenant stopped paying in 2020, claimed a COVID hardship, then ordered new furniture and bought a car. Years later the tenant was still living there. The landlord gave up and moved out of her own building.
The Months You Wait After You've Already Won
Winning doesn't end it. A Bronx owner won her case, then waited more than a year for a judge to sign the eviction warrant. She's still waiting on a marshal. Meanwhile she pays the bills and the utilities, because if she stops, the tenant can take her to court. Her tenant, she said, is "getting a free pass."
ABC7's investigation found the average NYC eviction runs two years, with landlords reporting six months on top of that just to get a warrant executed.
The Legal Fees You May Never Recover
Budget $3,000 to $8,000 for a lawyer.
Your lease probably says the tenant owes you that money if you have to take them to court. Most NYC leases do. It doesn't matter anymore.
HSTPA rewrote RPAPL § 702 so that only rent can be asked for in an eviction case. No fees. No charges. No penalties. The statute says this applies no matter what your lease says.
So you win the case, and the judge can't order the tenant to cover your lawyer.
Can you at least recover the fees you ran up during the case itself? Nobody's sure. The State Bar flagged it as an open question with no published opinion answering it, and courts have gone both ways. Some lawyers think you'd have to file a second, separate lawsuit just to chase your own legal bill.
That's a second lawyer to recover the first lawyer.
The Damage You Find When You Finally Get the Property Back
One NYC owner spent five years fighting tenants who refused to let her make repairs. By the time they left, the ceiling had fallen through. Her total came to more than $109,000 in unpaid rent, damage, and legal fees. She expects to recover none of it.
The Money You Sometimes Pay a Tenant to Leave
A landlord identified as Mi spent five years trying to remove tenants from her unit. Along the way, they made her an offer: $90,000 to move out. They later came down to at least $50,000.
She refused. By then she had already absorbed more than $109,000 in unpaid rent, damage, and legal fees, and she did not expect to recover any of it. Her tenants eventually left on their own.
Mi said no. Plenty of landlords say yes. When a case can run for years, paying a non-paying tenant to leave is often cheaper than waiting for a court to remove them. The practice has a name in the industry: “cash for keys.”
Read that again. The fastest legal route to your own apartment can be paying the person who owes you.
Now, one thing is for sure: the cap isn't going away. But there are options that got you covered — built specifically for landlords stuck with one month's security and no coverage for the default that follows.
Four Security Deposit Insurance Options for NYC Landlords After HSTPA
The cap changed what you can collect. It didn't change what you can be protected against.
One thing before the list. A tenant can leave you with two holes: the rent they didn't pay, and the apartment they wrecked. Separate risks. Most of the options below cover one or the other. One covers both.
- Institutional Rent Guarantor with Deposit Coverage
- Deposit Replacement Insurance
- Prepaid Rent
- Enhanced personal cosigner requirements
For each, we are covering: who pays, what it covers, how you get paid, and the honest limitation.
1. Institutional Rent Guarantor With Deposit Coverage (PandaGuarantee)
"Rent guarantee covers missed rent. Security deposit covers damage to the property. Two different things." said John Rhodes, President of PandaGuarantee. His advice to landlords is just as short: "A smart landlord will require both."
That's why this one starts the list. It's the only option here that covers both holes and the only one where you pay nothing for either.
PandaGuarantee sells the two products that do it. A rent guarantee covering unpaid rent for the full lease term, and security deposit coverage for damage.
If the distinction still feels blurry, check out PandaGuarantee's detailed piece on why a deposit and a guarantor solve different problems.
Who Pays
The tenant. You pay nothing. No registration fee, no per-unit cost.
What it Covers
Unpaid rent for the lease term, and property damage beyond normal wear and tear.
When Coverage Activates
The moment the lease is signed.
How You Get Paid
- Register your building once. A three-minute form. The legal entity signing the lease, and the property address. That entity is what gets bonded. No cost, no contract.
- Your tenant applies. You don't. They apply directly. You confirm the lease details. That's your whole role.
- They get underwritten. Income, savings, credit, risk scoring. Processed same day.
- The bond is issued to you before signing. You sign with coverage already live.
- Something goes wrong, you file. Online through the dashboard, or by email.
- For a rent claim, send two things: the rent ledger showing what's missing, and proof you notified the tenant of default. No adjuster, no fault investigation. It's pretty much binary.
- You get paid. Approved claims are paid within 3-5 business days. Category standard is 30–60 days, and some providers won't pay until the tenant's out. (Compare provider-by-provider: PandaGuarantee vs. TheGuarantors vs. Insurent vs. Rhino.)
Honest Limitation
Not every tenant gets approved. PandaGuarantee underwrites each applicant against a 20x income standard and a 500+ credit score, and turns down the ones the numbers don't support. So this won't approve every application on your desk.
That screening is the point, though. The bond you're holding is an approval decision, not a rubber stamp. And if your tenant clears it, you're covered on both risks for the whole lease. That's more than two months' deposit ever gave you.
What does PandaGuarantee's deposit replacement coverage actually cover? It covers the normal things that a security deposit covers: property damage beyond normal wear-and-tear, unpaid rent, defaulted utility bills, and moving/storage costs.
2. Deposit Replacement Insurance (Rhino + Jetty)
Rhino and Jetty were the two best-known names in this category. They're now one company, which makes the field smaller than it looks.
It covers only one part of the first option we discussed. Instead of handing you a month's rent in cash, your tenant pays a small fee. You hold a policy instead of escrow. If they damage the apartment, you file a claim.
Who Pays
The tenant. Add-on to the monthly rent or a one-time fee of about X% of the deposit depending on the plan.
What it Covers
Covered losses such as excessive property damage, up to the coverage limit you select.
When Coverage Activates
Once the tenant enrolls, after you've already approved them.
How You Get Paid
- Enroll your property first. No enrollment, no coverage. You can't just accept a policy that shows up with an application.
- You approve the tenant yourself. Rhino doesn't underwrite for qualification. It won't help you approve anyone you'd otherwise turn down.
- You set the coverage limit, then invite the tenant to enroll.
- The tenant enrolls and pays.
- File a claim any time during the policy.
- You get paid. Rhino publishes no payout commitment. So ask before you accept a policy, because it's the only part of the product that matters when you actually need it.
Honest Limitation
Ask what the coverage limit is. Whatever the answer, it's a deposit-sized number.
That's not a legal problem. Rhino lets landlords set a limit higher than a cash deposit. It's a design problem. This product was built to replace one month's rent in escrow, so that's the scale it works at. It'll cover a wrecked kitchen. Deposit replacement won't cover a tenant who stops paying rent.
Then there's the service behind it. One property manager got a check in a week. Others waited two weeks just to reach someone, and a month for an email back.
So this fixes your tenant's cash problem at move-in. It fills units faster. But it was built to replace a deposit, not to survive a default. That gap stays yours.
3. Prepaid Rent Arrangements
You ask the tenant to prepay several months of rent at lease signing, on top of the first month and security deposit.
It's the most natural instinct a landlord has after HSTPA. It's also the one that can cost you the most.
Who pays
The tenant pays upfront.
What it covers
Creates a cash buffer you can draw on if rent stops.
How you get paid
You're already holding it. That's the appeal — no claims process, no provider, no waiting. The money is in your account before the tenant has the keys.
Honest limitation
It's prohibited in New York.
GOL § 7-108 is one sentence: no deposit or advance shall exceed the amount of one month's rent. Prepaid rent is an advance. Nobody has to argue whether it counts as a deposit, because the statute banned both. The New York State Bar Association says the practice of requiring pre-paid rent, typically as "first and last months' rent," is now prohibited. PandaGuarantee's own renter guide answers the reverse question the same way: can I pay more upfront instead of getting a guarantor? Not in New York.
Willful violations expose you to punitive damages of up to twice the amount. Any agreement where the tenant waives this is absolutely void, so "they offered" is not a defense. Renaming it doesn't help either: cleaning deposit, pet deposit, move-in fee, key money —DHCR treats them all the same.
Under New York General Obligations Law § 7-108, a landlord may not collect a deposit or advance exceeding one month's rent for most residential units, which is broadly understood to prohibit prepaid rent beyond the first month (subject to limited exceptions for seasonal, cooperative, and certain senior-housing units, and with the "advance" language still carrying some interpretive dispute). This is not legal advice - if you need specific advice, consult a lawyer.
4. Enhanced personal cosigner requirements
A cosigner is a third person, usually a parent, who signs your lease and pays if your tenant doesn't.
HSTPA capped your deposit. It said nothing about cosigners. Your escrow stops at one month's rent. A signature stops at nothing.
So you require one earning 80x the monthly rent i.e., $280,000 a year on a $3,500 apartment. No coverage limit, no exclusions, no premium. Liable for the rent and the damages, the whole lease term.
On paper, more protection than two months ever gave you.
Who pays
Nobody pays upfront. You absorb the collection risk.
What it covers
Unpaid rent and damages for the lease term.
When coverage activates
It doesn't. Coverage is a product. This is a promise.
How you get paid
- Your tenant finds someone earning 80x. Then you verify them yourself. Pay stubs, tax returns, credit report.
- Tenant defaults. You evict first. A case that can run past 400 days.
- Then you start a second case. A cosigner can't be evicted. It's a money claim, and it's its own proceeding.
- You find them, serve them, and sue them. Then hope they're liquid.
- You win a judgment. A judgment isn't money. Now you collect it.
Honest limitation
Three problems. The last one has teeth.
The math. Only about 1.3% of Americans clear 80x on a median Manhattan lease. So your tenant comes back with a parent who earns $180,000. Good money. Not enough. Now you're bending your own rule or losing an applicant you liked.
The distance. He's in Florida. Your tenant stops paying, and suddenly you're not in Housing Court. You're suing a stranger in his county, under his state's rules, with a lawyer you don't have. The bill can pass what you're chasing.
So: your long-term tenants, the ones on their third lease. Is anyone actually still guaranteeing them?
That's the last of the four. Now the harder part.
How Should NYC Landlords Choose Between These Options?
There's a question that sorts these fast, and it isn't the one most landlords ask.
Forget how much you're allowed to hold. Ask when the money reaches you.
A security deposit is a move-out instrument. It sits in escrow until the tenant is gone. So it pays you in month twenty-six, for a default that started in month two.
Sort the four by that clock.
- Prepaid rent pays you never.
- A cosigner pays after the eviction, a second case, a judgment, and a collection. Four steps, all after the loss.
- Deposit replacement pays after move-out. Same clock as the deposit it replaces.
- A rent guarantee pays while they're still living there. Month three. Month four. Every month.
One of those is not like the others.
HSTPA took away a $3,500 answer to an $84,000 question. The landlords who adapted stopped trying to get the $3,500 back.
If you own or manage property in NYC and want to see what this looks like for your building, a 15-minute call is the fastest way to get specifics.
Register your building at pandaguarantee.com | Or call: 332-290-1800
Disclaimer: This article is for general information only. It is not legal, financial, or insurance advice. Coverage terms, limits, and claims processes vary by provider and change over time. Verify current terms directly with any provider and consult a New York attorney before making decisions about your leases or protection.
Most Frequently Asked Questions
What Is Security Deposit Insurance?
A policy or surety bond your tenant buys instead of handing you a cash deposit. You're the beneficiary. If they damage the apartment, you file a claim instead of drawing on escrow. It's also sold as "deposit replacement" or a "deposit alternative." It covers damage, not unpaid rent — those are two different products solving two different problems.
Does My Tenant Still Owe the Money if a Claim Gets Paid?
Yes. The provider pays you, then bills your former tenant, and can report them to credit bureaus if they don't pay. PandaGuarantee's terms spell it out: the tenant remains responsible for unpaid rent, damages, and utilities even after buying coverage. That's not a loophole. It's the design, and it's why you get paid without chasing anyone.
Can I Still Take a Security Deposit if My Tenant Has a Guarantee?
Yes, and most landlords do. The deposit is your move-out backstop. The guarantee is your during-the-tenancy backstop. Requiring one has never meant giving up the other.