(a) The authority shall require tenants to pay a security deposit in advance as a condition of occupancy to insure faithful compliance with the terms of the lease and the rules and regulations. Provided, however, a recipient of public assistance, supplemental security income benefits or additional State payments as defined in section 300 of the Social Services Law, shall not be required to pay such security deposit if the authority is secured against nonpayment of rent or damages by any appropriate agreement executed by a local social services official, pursuant to subdivision 1(a) of section 143-c of the Social Services Law. The authority shall accept such an agreement in lieu of a security deposit if such agreement is offered by a local social services official.

(b) Security deposits shall be placed in separate interest-bearing accounts. Such money, with interest accruing thereon, shall continue to be the money of the tenant making such deposit and shall be held in trust for them by the authority and not mingled with other funds.

(c) The tenant shall be notified in writing of the name and address of the bank in which the security deposit is being held and the amount of the security deposit.

(d) Collection of security deposits may be on an installment basis if the authority adopts such a procedure. Under this arrangement, a reasonable part of the total shall be collected prior to admission, and the remainder in equal monthly sums covering a period not to exceed six months from date of admission.

(e) Security deposits may not be applied against loss or damage while tenant remains in occupancy. Necessary charges are to be collected on a current basis; only upon termination of tenancy are deductions to be applied against security deposits, with the balance, if any, being refunded to tenant. Security deposits are trust funds under New York State law, and must be handled in accordance with such law and the requirements of Subpart 1642-5 of the accounting manual (Subchapter D of this Chapter).