If a predecessor landlord fails to transfer the security deposit to a successor landlord, in contravention of the statutory provisions, liability for its return to the tenant differs according to the type of property involved. Generally, subject to certain exceptions, if a property conveyed contains dwelling units, especially those with rent regulatory status, a grantee of that property is liable for security deposits for those units whether or not the security deposit was transferred to the grantee. (GOL §§ 7-107 & 7-108.)
Under New York common law, however, the return of a security deposit is viewed as a collateral agreement that does not run with the land and transferees of the land would not be liable for the security deposit unless they actually received the money or otherwise covenanted to pay it. (Longley-Jones Associates, Inc v Ircon Realty Co, 67 NY2d 346, supra; Fallert Brewing Co. v Blass, 119 App Div 53 [2d Dept 1907]; Donnelly v Rosoff, 164 Misc 384 [App Term 1st Dept 1937]; [*4]Coyne v Hermitage Co 165 Misc 624 [Sup Ct NY County [1937]. ) Thus, if the security deposit is not transferred to the receiver or to the foreclosure sale purchaser, neither they nor any subsequent owner/lessor has liability to the tenant for its return. (Central Sav Bank v Fashoda, Inc, 94 AD2d 927 [3rd Dept 1983] aff'd 62 NY2d 721 [1984].)
In contrast to New York common law, other jurisdictions, as well as the Restatement of Property, take the view that the promise to repay the security deposit does in fact obligate the transferee of the landlord to repay the tenant regardless of whether or not he has been compensated for this amount by the landlord. (Restatement [Second] of Property: Landlord & Tenant, § 16.1)