In 1935 section 233 of the Real Property Law (now General Obligations Law, art. 7) was enacted, which provides among other things that a security deposit is the property of tenant and shall be a trust fund to be kept separate and apart from landlord’s funds. It was further amended to provide that the person receiving the same shall hold such moneys in trust (L. 1943, ch. 584) (Mallory Assoc. v. Barving Realty Co., 300 N. Y. 297).
Prior to September 1, 1970, the effective date of the amendment of the General Obligations Law, section 7-103 provided that the security deposit remained the property of the tenants; that a landlord could not commingle the tenant’s deposit with his own funds; that whenever a landlord deposited funds in a bank, he must too notify the tenant, giving the name of the bank and the amount of the deposit; that these same obligations, respecting the landlord, apply both to the deposit and interest accruing thereon, if any; and that no waiver of any provision of the section was permitted.
The 1970 amendment to section 7-103 required that the security money be deposited in interest-bearing bank accounts.
It is abundantly clear that the security money is the property of the depositing tenant. It remains the property of tenant until there has been a default or breach of a covenant of the lease and at which time landlord may appropriate the deposit in accordance with the terms of the lease.
The court takes judicial notice of the fact that hundreds of thousands of apartments in the City of New York are under rent control. It is evident that the Legislature, in the enactment of the 1970 amendment, was aware of rent control in New York City, the acute shortage of apartments, and the low turnover rate of apartments.