DIRT Development for Monday, August 10, 2009
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Husch Blackwell Sanders
Kansas City, Missouri
SECURITY DEPOSITS; STATUTORY LIMITS; PET DEPOSITS: Landlords cannot collect additional “pet deposits” beyond the statutorily permitted maximum of 1.5 times the rent. Any deposit so collected is deemed wrongfully withheld and must be repaid to the tenant promptly at peril of the “doubled recovery” of the Security Deposit Act even if the landlord can show damages that exceed the amount of the lawfully permitted deposit.
Reilly v. Weiss, 966 A.2d 500 (N.J. Super. Ct. App. Div. 2009).
The landlord and tenant signed a lease at a monthly rent of $1425, and the tenant provided a security deposit of $3562.50. The security deposit was divided between a month and a half of rent plus a pet deposit of an extra month. Under the Security Deposit Act, security deposits cannot exceed one and one-half times the monthly rent. Problems arose between the landlord and tenant, and the tenant moved out of the premises prior to the end of the lease term. After moving out, the tenant never received any of her security deposit back from the landlord.
The tenant sued to collect the security deposit. The trial judge essentially subtracted the amount that landlord could retain for damage to the apartment from the amount of the security deposit in order to determine the amount that was "wrongfully withheld." The tenant was awarded a small amount of damages and appealed.
The Appellate Division held that any portion of the security deposit that exceeds the statutory limit and is not returned to tenant is "wrongfully withheld." In other words, "prior to considering any credits due defendant for damage to the leasehold caused by plaintiffs, the judge was required to give them the benefit of the statutory remedy." Id. at 506. If this were not the case, a landlord who violates the statutory limit and then deducts damages would be able to violate the statute and suffer no consequence. Because the amount "wrongfully withheld" is the amount that exceeds the statutory limit, this amount-irrespective of any deductions by landlord-is the number that is subject to doubling.
In order to determine the amount wrongfully withheld (i.e. the amount that exceeds the statutory limit), the court had to resolve whether a landlord could allocate a tenant's funds into pet deposits and general security deposits. The court held that allocating security deposits in such a way is impermissible if the combined amount of all deposits exceeds the statutory limit. Otherwise, landlords could avoid the mandate of the statute by allocating between general security deposits and pet deposits.
Comment: Virtually all states have some form of multiple recovery residential deposit statute, and many provide for attorney’s fees. Landlords ignore the nuances of these statutes at their peril. If their fixed policy in some way violates the statute, class actions are possible.
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