NY:landlord spent deposit?

We rented a private home in New York state for six months and paid a $5,000 deposit. Our landlord is in financial difficulties (we get collection agency calls for him often and we understand he is trying to sell the house). We suspect that he has spent our deposit.

We considered this landlord a friend, so unfortunately did not protect ourselves with the usual photos, etc., on moving out. We did a walk-through with him in which we pointed out some items that we offered to take care off (marks on curtains, broken glassware, etc.). At that time, he said he was satisfied with the state of the house, and we left on very good terms. We also owe for heating oil, as the landlord said he would prefer to measure the tank when we left and take any oil used out of the deposit. We want to do the right thing and pay for the items that are our responsibility

After moving out in June, we made several email inquiries about settling up our deposit, with only one response that there were further damages that he was getting estimates for. Finally, (mid November) we received a list of damages, unitemized, with a total number that is higher than our deposit. The list is outrageous, and we plan to dispute it. We believe that the landlord has spent our money and looking for ways to make us go away.

We plan to ask for an itemized list with estimates and/or receipts and photos, to be supplied within one week, and then address each item, going to small claims court if we can’t come to an agreement. But we have a few questions.

Can we ask the landlord to prove he still has our money? (If he doesn’t, surely it’s a sign of bad faith). Dios the following hold true for landlords of just one property: “New York Landlords, regardless of the number of units in the building, must treat the deposits as trust funds belonging to their tenants and they may not co-mingle deposits with their own money. … Each tenant in New York must be informed in writing of the bank's name and address and the amount of the deposit.”

We understand that in NY,” the landlord must return the security deposit, less any lawful deduction, to the tenant at the end of the lease or within a reasonable time thereafter.” Given that we still do not have an itemized list of repairs almost six months later, can we argue the landlord has forfeited any right to withhold any portion of the deposit? (We actually don’t want to do this, as we do feel some of the items are fair, but it might help the negotiations.)

$5,000 is a lot of money and we are very distressed that our trust has been so misplaced. Any further advice is much appreciated!

A couple of issues.
1. The LL must keep your deposit in a seperate account and pay interest on that account in NY state. (NY General Oblig. Law 7-103 to 7-108). You should be able to get the deposit back if he followed the law. This holds true for all deposits, not just those of a certain size or from a LL who has a certain number of units. Were you informed of the account where it was placed? Have you received credit for any interest paid on this deposit?
2. The LL is supposed to return your deposit within a "reasonable amount of time." Not even getting an accounting for 5 months is not a reasonable amount of time! While there may be no specific return procedures for unregualted units of less than 5 per building, he was to have returned this much, much earlier. Most courts consider 30 days a reasonable amount of time, not 5 months.
3. You are due the entire deposit back and any interest on it. It is nice to see that you want to be fair, so write to him that he did not follow the state law with your deposit and that you will not pursue the matter if he returns what you belive is a fair amount of your deposit. Otherwise, you can take him to court for not depositing the money in a seperate account, not informing you of that account, not returning the deposit statement in a reasonable amount of time, and for any penalties provided by your state law. Some states allow 2-3 x the deposit in penalties. Send this letter to him by certified mail, return receipt requested, and keep a copy. If he fails to respond within a reasonable time, file against him for the maximum amount in small claims court or in civil court for the entire amount.

Thank you so much, especially for the reference to the NY Obligation Laws -- very helpful.

No, we were not informed of the account where the deposit was placed, and no interest has been paid. However our lease said that the deposit would not be placed in an interest-bearing account and I interpret 7 103 to mean that interest has to be paid only IF the deposit is placed in an interest-bearing account (ie. it's not obligatory).

We will follow your advice and hope there is still money to be recovered!

Thanks again.

I just purchased a property. Come to find out the Prior owner AND his property manager worked together to willfully hid the fact that he spent the tenant's deposit (and the deposits on nine other properties as well mind you). It has been 23 days since the close of escrow.

The contract says the tenant deposit must be returned within 21 days if the tenant moves out; but makes no allowance for the sale of the property. The guy is in financial straights (of course) and wants me to wait another month to get the money. I am fighting pretty hard here for my tenant here.

What are the rights and laws regarding this. Where does the liabiltiy fall when the property manager deliberately withheld the fact that she knew he did not have the money.

PROBLEMS: Property manager knows he holds all his tenant deposits, yet he faxed her a letter telling her to "release the deposit, prorated rents and the december rents" to me on the day escrow closed KNOWING that she did not have it. So she again "oopsy" just does not let me in on the secret, pretends "not to realize there's a problem. I beleive she thought I would stay with them as I led them to believe and that they could either sneak the deposit back in or screw my tenant and I in a couple of years.. whatever.

Furthermore, the prior owner then calls her and instructs her to "send my prorated November rent AND the December rent to him." She does! Nexts acts like she is doing me a favor when I tell her she needs to cut me a check for my money that day. No slack mama! Hand it over or I throw a tantrum with the real estate board. Prior own has to then be "convinced" as to why he does not get to keep the prorated Nov and all of Dec rent... uh hello, escrow closed on November 24!!!

So I am livid to say the least. They are playing games. I have a witness to the game along with his own signed statement that the money was to be sent to me. I finally got the rents but the deposit is still amiss.

Ultimately, if this is not quickly resolved, what regulating authorities do I need to approach to get the property manager, her staff that helped hide this lie, the broker and the owner sanctioned. (By the way, he has 8 other tenants who are gonna be screwed here soon too as he is in short sale on all his properties.... go figure).

Let me understand this. You had a statement that rents (prorated) and deposits were to be paid to you at closing? Yet, at closing, you recived no check for these rents or deposits? Did you get an itemized statement of what amounts were due you? Why did you close on this property when the check was not present at the closing? I wouldn't close on a property if all the paperwork and money wasn't in order. File in small claims court now based on the itemized closing statement for these amounts. If the former owner goes belly-up (BK), you will have to pay these out of your own pocket. Lesson learned, always make sure that all paperwork and money is in order at closing, or delay the closing until it is!

You will have to contact the state real estate board or your state's equivalent to find out where to report this. No agent should willfully allow this to happen. I take it you were not represented by your own agent at closing?

As it turns out the Property Manager was working with the prior owner to hide that he had spent all the tenant deposits on all his properties. I sent a nasty letter explaining to the broker (who did not know this arrangement was made).

I explained that they had committed a crime by defrauding my real estate agent and me and failing to perform their feduciary responsibility to me as the new owner. I intended to go to the authorities.

A week later the owner (who had some money in his account with them and just did not want to give it to me). So amazingly enough a week later the money appears. I think the broker got how serious the situation was and immediately went to resolve it.

It was a short sale and the lender will try to claim all the money including tenant deposits and proeprty income if they are disclosed. Or so I was told. I am not certain of the truth of that. I didi not care, I just wanted my tenant deposit back. I was not gogin into Christmas with it having been stolen. That was not somehting I wanted to have to disclose to my tenant.

The broker came through and got the moeny from the guy. Good for him!

Glad this all worked for you.