In May, New York Governor Andrew Cuomo extended the eviction ban through Aug. 20 and gave tenants the option to cover rent with their security deposits.
The order requires renters to pay back the security deposit within 90 days, or provides the option for a monthly insurance plan to cover damage to the apartment over the remainder of their lease.
Prop tech startups have come up with solutions to some of these problems, including a new way to provide a security deposit. Companies such as Rhino, Obligo, Jetty and LeaseLock offer insurance- or credit-based plans that are different from traditional surety bond model and protect landlords while providing lower upfront costs and freeing up cash for renters.
Rhino works under a traditional insurance model, with renters paying a monthly fee and Rhino reviewing damage claims.
Obligo, founded in 2018 by two brothers, is based on a more unique credit model. After running credit and background checks on prospective renters, the company provides a guarantee to the landlord.
Omri Dor, chief operating officer Obligo, says it’s similar to the hotel check-in process, where the guests give a preauthorization.
“From the renters perspective, it’s a rent holiday,” Dor says. From the landlord’s perspective it’s also beneficial because (the traditional security) deposit is just sitting in escrow and it doesn’t do anything for them.”
Tenants are notified if there’s a charge, and the company reviews landlords’ charge histories.
“If they overcharge compared to the market, we don’t work with them,” Dor says.
There’s a fee of $10 to $15 a month, or between 6% and 12% of the size of the deposit, for using the service, with the percentage determined by type of portfolio the landlord has.
With New York rents on the downward trend, Dor says some landlords have been paying the fees.
Common, a co-living company that’s part of Obligo’s approximately 120,000-unit network, says working with Obligo has been essential to providing its residents with options during a time of economic uncertainty.
“Around the same time Common instituted a rental payment plan, we also gave all of our residents across seven cities the option to get their security deposit back through Obligo,” says Eric Rodriguez, vice president of Operations for Common. “That’s cash instantly on hand. And for so many of the people that live with us, it was really meaningful during a difficult time.”