Legislature Quietly Puts Out a New Law Limiting Bounced Check Fees
By Dov A Treiman
In a new law that the Legislature passed and the Governor signed without any fanfare, New York now limits landlords to charging only so much for a bounced rent check as the bank charged the landlord. More than that, the landlord cannot, under the new law, charge anything for the bounced check unless the landlord has (1) kept the documentation showing the dishonor fee from the bank and (2) has a provision in the lease authorizing bounced rent check fees. The law became effective immediately when the Governor signed it on October 16, 2025, but nearly none of the media covered the new enactment and what they did report was inaccurate.
The new provisions can be found in Real Property Law §238-a and General Obligations Law §5-328. Because of the title of those sections, the new law is probably limited to residential leases, but there is room in the law for a judge to apply it to commercial tenancies as well. We will be tracking the court decisions on that question.
The new law does not apply to what cooperatives can charge their shareholders, but it does apply to what shareholders can charge their subtenants.
While many commercially available leases omit the supporting language the law requires, Adam Leitman Bailey and Dov A Treiman authored leases have had that language for nearly twenty years. During those same years, we have come across many leases that are not based on pre-printed forms and don’t have the landlord-protecting provisions we have been putting in them over the past two decades.
Our next round of revisions to those leases will strengthen the already existing language so that it more closely tracks the new enactment. This might very well be the perfect moment for our landlord-clients to take a look at their leases and check the copyright date. While anything older than a year probably could use a bit of polish, anything from prior to 2019 is almost guaranteed to have provisions that are now bad for landlords. This is with respect to a wide range of topics, not just bounced check fees.
The full text of the law is at the base of this report.
2025 Session Law News of NY, Chapter 431
Approved and effective October 16, 2025
AN ACT to amend the real property law and the general obligations law, in relation to prohibiting residential landlords from charging tenants a fee for a dishonored rent check in excess of the actual costs or fees incurred by such landlord as a result thereof
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Section 238–a of the real property law is amended by adding a new subdivision 2–a to read as follows:
2–a. (a) No landlord, lessor, sub-lessor or grantor shall demand any payment, fee, or charge from a tenant for the delivery of a check, draft or like instrument that was given in payment for rent and subsequently dishonored by the tenant’s financial institution for insufficient funds except as provided in paragraph (b) of this subdivision.
(b) Notwithstanding any contrary provision herein, a landlord, lessor, sub-lessor or grantor may demand any payment, fee, or charge from a tenant for the delivery of a dishonored check only if such payment, fee, or charge was provided for in the lease or contract between landlord, lessor, sub-lessor or grantor and the tenant; provided, however, that:
(i) such payment, fee, or charge shall not exceed the actual costs, charges or fees incurred by landlord, lessor, sub-lessor or grantor for the return of such dishonored check or the amount set forth in subdivision three of section 5–328 of the general obligations law, whichever is greater; and
(ii) if the payment, fee or charge exceeds the amount set forth in subdivision three of section 5–328 of the general obligations law, the landlord, lessor, sub-lessor or grantor shall provide to the tenant upon request evidence substantiating the equivalence between the payment, fee or charge and the amount of actual costs, charges or fees incurred for the return of the dishonored check.
(c) As used in this subdivision, “dishonored check” shall have the same meaning as such term is defined in section 5–328 of the general obligations law.
(d) The provisions of this subdivision shall not apply to a shareholder of a cooperative housing corporation, provided, however, that the provisions of this subdivision shall apply with respect to any tenant or subtenant of such a shareholder.
§ 2. Subdivision 3 of section 5–328 of the general obligations law, as added by chapter 529 of the laws of 1995, is amended to read as follows:
3. (a) Notwithstanding any other provision of law, any person to whom a check, draft or like instrument, other than a money order, bank cashier’s check or certified check, is tendered for any transaction, other than a consumer transaction, may, if such instrument is dishonored charge or collect from the maker or drawer the amount of twenty dollars for the return of such unpaid or dishonored instrument.
(b) Notwithstanding any other provision of this subdivision, a landlord, lessor, sub-lessor or grantor to whom a check, draft or like instrument, other than a money order, bank cashier’s check or certified check, is tendered for payment of rent, may if such instrument is dishonored charge or collect from the maker or drawer the amount of actual costs, charges or fees incurred by such landlord, lessor, sub-lessor or grantor for the return of such dishonored check or the amount set forth in paragraph (a) of this subdivision, whichever is greater, provided that:
(i) if the payment, fee or charge exceeds the amount set forth in paragraph (a) of this subdivision the landlord, lessor, sub-lessor or grantor shall provide to the tenant upon request evidence substantiating the equivalence between the payment, fee or charge and the amount of actual costs, charges or fees incurred for the return of the dishonored check; and
(ii) such dishonored check charge was contracted for in the lease agreement between the tenant and landlord, lessor, sub-lessor or grantor in accordance with the requirements of subdivision two-a of section two hundred thirty-eight-a of the real property law. The provisions of this paragraph shall not apply to a shareholder of a cooperative housing corporation, provided, however, that the provisions of this paragraph shall apply with respect to any tenant or subtenant of such a shareholder.
§ 3. This act shall take effect immediately and shall apply to actions and proceedings commenced on and after such effective date.