As a residential landlord, you should know the law concerning security deposits. No doubt you think of the money you hold onto as quasi-insurance on your property. However, what happens when there is a dispute about the return of a security deposit?

In case you didn’t realize it, your failure to properly refund a security deposit could cost you. The Rent Security Deposit Act starts at NJSA 46:8-19 and provides the law regarding escrow deposits. However, there’s something you might not realize.

If you wrongfully fail to return your tenants’ security deposit, the court may order you to pay double damages.

When it comes down to it, you have certain obligations as far as refunding your tenants’ security deposit. If you’re withholding money because of damages to your premises, you need to make a list of the issues. You have up to thirty days of the lease ending or your repossession of the property to advise your tenants why you are not returning their security money.

In the meantime, your tenants may fail to pay rent as they prepare to leave your property. If you are applying the security deposit to cover outstanding payments, you should also provide written notification of your intentions.

Your tenants have the right to sue you if they disagree with your decision to hold onto any portion of their security deposit. In fact, the New Jersey Appellate Division just reversed a case where the trial court awarded the tenants double damages.

Landlord Failed to Return Security Deposit

The New Jersey Appellate Division submitted its written opinion in Valdivia v. DeRaffele on February 28, 2019. The case notes indicate that the matter is unpublished. This means that the ruling does not represent new law and applies to the named parties.

According to the facts of the case, John DeRaffele owns a one-family home in Bergen County, which he rented to Ingrid and Dino Valdivia. The rental agreement started on April 1, 2015, and included at least the following provisions:

• Month-to-month tenancy
• Rental fees of $1500 monthly (payable on the first of the month)
• $1500 security deposit
• Tenants to pay utilities
• 30 days lease termination notice
• $1500 re-rent levy if tenants vacated before natural expiration of the lease

In early January 2016, the Valdivias informed DeRaffele of their desire to terminate the lease because they could not afford to pay for utilities. However, the tenants did not provide notice terminating the lease and did not vacate the premises.

Truth be told, the tenants didn’t make the January 1,2016 rent payment on time. Ultimately, the landlord served them with legal notices, and they made the payment.

The circumstances repeated when the Valdivias failed to pay the February 1, 2016 rent. On February 12, 2016, DeRaffele served the tenants with a notice to cure and a three-day rent demand. Meanwhile, two days later, something happened with the home’s heating system.

As a result of the problems with the heating system, a gas leak started. The police instructed the tenants to leave the premises and the local municipality paid for them to stay in a hotel.

Even though the heating unit was replaced the following day, the Valdivias elected to stay in the hotel provided to them for two weeks. During court proceedings, the landlord testified that he was unaware the tenants did not return. DeRaffele initiated eviction proceedings for non-payment of rent on February 19, 2016.

Demand for Security Deposit

On the same day that the landlord filed for eviction, Mrs. Valdivia texted him and demanded the return of the security deposit. She told him during a telephone conversation of the couple’s intent to vacate the house.

Although she didn’t provide evidence, Mrs. Valdivia testified that she and her husband paid for another hotel after they left the one provided by the municipality. She also said they only returned to the house one time after February 14, 2016, to retrieve her clothing.

In the meantime, the landlord disagreed. DeRaffele claimed the tenants did not vacate the property until March 22 or 23, 2016.  That said, the tenants ultimately paid February rent, but did not make the March 2016 payment.

Fast forward to August 2016. The tenants filed legal papers claiming they were constructively evicted when the problems occurred with the gas leak. They requested relocation damages and double damages for the security deposit that was never returned.

When the trial court ruled, the judge concluded that the tenants were not entitled to relocation damages. There was no proof that the property was uninhabitable. Meanwhile., the tenants received a $500 award for expenses associated with their temporary move to the hotel paid for by the municipality.

As far as the security deposit, the court only allowed the landlord to claim $225 for general cleanup. The court awarded the tenants $2550, which represented double damages of the remainder of the security deposit.  The tenants also received attorneys’ fees.

On Appeal

The landlord appealed the trial court decision. Notably, there were issues with the trial transcript that made it difficult for the Appellate Court to review the matter.

In the meantime, the Appellate Court noted that the trial judge made no findings as to when the tenants actually left the premises. If the tenants had belongings in the house after March 1, 2016., the landlord would be entitled to March rent.

Additionally, the lease required that the tenants provide notice of their intention to vacate the property. Otherwise, they would owe the landlord damages. Therefore, the possibility existed that DeRaffele rightfully held the security deposit.

Based on the circumstances, the Appellate Court reversed and remanded the matter for further proceedings in the lower court.

Contact Us

Have questions regarding the return of a security deposit? Contact the Law Offices of Lawrence M. Centanni to ensure your interests are protected.