NY is unfriendly to Landlords

New York has a maximum security deposit allowed of one month. You cannot accept even the last month rent in advance. If there is a pet fee, it has to be paid monthly as the upfront cost cannot exceed one month rent and one month security.

Can you give a "rebate" for 12 months of on-time payment or something?

Is this the law in your area? "A tenant who refuses to pay the final month's rent, expecting the landlord to use the security deposit instead, faces the risk of eviction for nonpayment and legal consequences." Explaining to them Sec Dep is NOT rent. An inspection must be done to determine how much of the Sec Dep will be returned Your actions could set up a precedent the other tenants would use to have their Sec Dep substitute for rent. If you do this a couple of times it could be considered part of your operating procedure and you possibly would have to allow it. It could snow ball with all your tenants using the security deposit for their last months rent.

What Ken said... on "principle" you could send them the pay or quit notice but not until AFTER the 5th (as long as they don't owe any rent money from prior month(s)).

That gives them until the 20th AT BEST depending on how quickly they get served the 14 day notice. That doesn't even show up on anything (court related) until you serve them with court papers AFTER the 14days has expired.

By the time you get a court date, it's the following month and they most likely already left... so now your only recourse is to go after them for any damages ... that's when you have to determine if it's "worth it" or does the SD actually cover the majority of your pain and suffering?

Most tenants most likely think "yeah, use that SD as my last month because I need the money I have to get my next apartment". They don't care. AND - since they are in that mode of just not paying you and the SD isn't going to be returned to them... they will just leave you with whatever they don't want or can't bring with them.

After screening them properly, offer to work with them offering less security deposit if thy elect to pay 10% more rent monthly.

How does the math work out?

Let say rent is $1,000 and deposit is normally $1,000. You have a solid candidate that is fully qualified in all manners. Instead of getting $2,000 at move in, you get only $1,500 at move in but you get $1,100 monthly. After six months, you get more money. The difference is the money you're getting is not refundable at move out.

This does require you to have a screening process in place and be wise enough to determine how long they will be staying there. Is there a risk? There always is. Realistically, if there were specific parts that put property managers in hot water is the move out. Solid processes produce superior results.