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It is not a good idea to mix a tenant's security deposit with your other money or spend it as you wish. Legally speaking, it is not your money: A security deposit belongs to the tenant until it is later refunded or applied to cover unpaid rent or damage beyond normal wear and tear.

And living in the Big Apple, you are skating on particularly thin ice. New York rules are some of the strictest in the country. They require you to hold a security deposit in trust for the tenant. That means keeping the money safe and separate from your other funds. It is cleanest to open a special segregated New York bank account for your tenants' security deposits. Only one account is necessary; you will not need to open a separate account for each tenant.

Landlords who commingle or mix tenant security deposit funds with their personal or business funds risk forfeiting the security deposits. Borrowing from your tenant's security deposit or pledging the funds as an asset to get a loan are also off limits.

There are a couple more special rules for NY landlords, depending on the size of the building and whether it is rent regulated.

1. Security deposits for tenants of rent-stabilized and rent-controlled units must be deposited into a New York bank.

2. New York bank accounts are also required for security deposits collected from tenants who live in buildings with six or more units. This rule applies even if you own fewer than six units in the building. It is the building's size, not the number of units you own, that is determinative.

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