What Landlords Need to Know About Security Deposits

By Sadayah Q. DuRant 

The reason for the Security Deposit Act (SDA) or  NJSA 46:8-19 to 26, is to protect tenants from overreaching landlords who seek to defraud them by diverting rent security deposits to their own use.  The SDA, while helpful to tenants, is also designed to provide some protection from loss to landlords. The burden of proof is on the landlord to show it had reason to keep the security deposit or part of it. That is because the landlord is in a “superior position” to give those proofs. Any amount kept by the landlord is limited to actual damages or charges. Any additional amount retained by the landlord is wrongful, entitling the tenant to double recovery under the SDA. 

In the recent case of Paris v. Engel Investments, LLC, a New Jersey Appeals Court decided that if a landlord is found to exaggerate damage and costs of repair as a reason for keeping all or any part of a tenant’s security deposit without adequate evidence to support his/her claims, the landlord will be required to return the respective portions of the tenant’s security deposit plus any incidental costs under the law. After a trial, the tenant was awarded money because it was found that defendant-landlord violated the Security Deposit Act.  The Appellate Court agreed with the lower court’s decision. 

The Defendant was the owner/operator of a new apartment building.  The tenant moved in on July 10, 2015 and paid rent of $1,710 per month. The tenant also paid a security deposit of $2,565 plus a $200 key deposit.  The landlord was notified that the tenant would be vacating on June 30,  2018. On that date, the property manager did a walk through inspection of the apartment  to look at its condition. A Rental Property Checklist was prepared which listed “excessive damage,” “excessive grout,” and “excessive dirtiness,” among other things. Also, pictures were taken by both sides. parties and later found to be unsupportive of the landlord’s claims. 

Shortly after vacating, the former tenant got a letter from the landlord, stating that his security deposit plus $89.44 in interest was being withheld and used towards “damage, cleaning, and repairs” of the apartment. The letter also stated that he owed an additional $1,370.56 for damages that exceeded the security deposit. The former tenant wrote back contesting these charges and requesting a return of the security deposit.  After the landlord refused to return the deposit, the former tenant filed a lawsuit for more than double the amount of the security deposit, plus accrued storage fees for four months.  

At the trial, a licensed builder and contractor testified on behalf of the landlord.  He claimed that the damage to the apartment was beyond normal “wear and tear” and that the landlord needed to hire a subcontractor to replace the flooring and repair other damages.  The tenant, on the other hand, claimed that these repairs were grossly exaggerated and overestimated.  He claimed that he actually disputed the items on the Rental Property Checklist but signed it anyway, because there was no cost to do so and it would have been a waste of both parties’ time to argue about it.  

Like the lower court, the Appellate Court found that, giving deference to the trial court’s findings and witness credibility, because landlord failed to prove it actually incurred damages in the amounts indicated in its letter, the lower court correctly found that, other than $150 for minor damage to the stove (the only item that both parties agreed to), the balance of the security deposit was wrongfully held, entitling plaintiff to double recovery under the SDA.  In this case, the Court’s judgment turned on the weight of the evidence.  The landlord’s pictures were not, in the trial court’s opinion, a true reflection of the damage claimed. Rather, the damage complained of was nothing more than ordinary “wear and tear.”  In short, the landlord overreached, presented false evidence and was penalized for it.

Sadayah Q. DuRant is a recent graduate of Rutgers School of Law, where she was Editor of the Race and The Law Review Journal. We are pleased to introduce her as a new contributor.