New Jersey - 201-488-7211
New York - 212-279-5979
Kates Nussman Rapone Ellis & Farhi, LLP

How Do Landlords Keep Security Deposits?

contract.jpg

Renting property usually means putting down a security deposit. It is meant to be returned at the end of the rental period, with deductions taken out for any damage caused. Security deposits are so common that they usually never cause a problem when a property is first rented. The trouble happens at the end of a lease. Whether a tenant moves out early or there is damage to the property, the security deposit can quickly become an issue.

New Jersey has a law focused on security deposits called the Security Deposit Act, which details the rights of landlords and tenants, such as how much a landlord is allowed to charge. The "SDA" was central to a recent case, Hooper v. Parkwood Place Apartments. In this case, the tenant signed a lease for one-year at $1,300.00 per month. The lease was subsidized through the Newark Housing Authority's Housing Choice Voucher Program, which covered $28.00 per month of the monthly rent.

After some noise complaints, the tenant decided to leave the property before the end of the lease and gave 2 month's notice in a letter to the landlord. The landlord did not return any of the security deposit immediately. The tenant brought a small claims lawsuit and the landlord returned $283.00 of the $1,300.00, claiming that the tenant owed late fees and unpaid rent, damage to the apartment and unspecified legal and repair costs. Other than the $78.00 in late fees, the tenant believed she was entitled to the rest of the deposit.

According to the SDA, a landlord must return a security deposit and any interest accrued within 30 days of the end of the lease. Any deductions from that security deposit must be explained to the tenant in an itemized list, with notice that the landlord will be retaining some of the security deposit. A landlord must also try to minimize the financial impact of a tenant vacating early. Also, the law provides that a tenant who does not get this treatment from the landlord will be awarded double the amount of money he or she is entitled to - with legal costs as the court may deem appropriate. Even if a tenant defaults, he or she may still be entitled to these benefits. But if a tenant has violated an obligation of the lease, such as by willfully withholding the rent, the SDA will not benefit the tenant.

The SDA walks a fine line between tenant and landlord rights. Because landlords are often in a stronger financial position, courts require that they prove that the tenant is not entitled to the benefits of the SDA, rather than the other way around. The court in this case found that the tenant gave enough notice that she was vacating the premises - and landlord did not provide an itemized list of deductions - or make any attempt to minimize the costs of the vacancy. The tnant was therefore entitled to double the security deposit less the appropriate fees.

Landlords have a lot of discretion concerning the terms of a lease. The SDA puts some boundaries on landlords and carves out certain rights for the tenants.

Angela Yu is a New Jersey and New York attorney with a multifaceted practice area focusing in corporate, real estate and general contract law. She uses her interest in real life application of the law to author articles and other scholarship on a broad range of cutting-edge legal and business topics. Ms. Yu is a published legal author and holds a J.D. and M.B.A. from Rutgers School of Law and Rutgers Business School. Neither she nor Mike Farhi provides legal advice on this website. This blog post and any blog posts do not constitute legal advice.

No Comments

Leave a comment
Comment Information