Landlord Must Refund Commingled Security Deposit

Landlord sued tenant for breach of lease. Tenant counterclaimed for return of his security deposit. Landlord and tenant had signed a one-year lease commencing on Aug. 1, 2011, for a house. By letter dated Sept. 4, 2011, tenant advised landlord that he was moving out. Both sides asked the court to rule without a trial. The court ruled that a trial was needed to determine whether tenant had breached the lease but that tenant was entitled to immediate refund of his security deposit because landlord had commingled the security deposit with other funds.

Landlord appealed and lost. Commingling a security deposit with personal funds is a violation of GOL Section 7-103(1) and, by law, tenant is entitled to immediate refund even if he breached the lease. Landlord showed that tenant breached the lease by failing to pay rent for October 2011. But tenant showed that landlord accepted a return of the keys after tenant moved out in September and immediately put the house on the market for sale. Landlord also didn't demand rent payment from tenant until late November 2011. So there was a question of fact as to whether the landlord-tenant relationship ended and the lease was terminated by the time rent became due on Oct. 1, 2011.

Solomon v. Ness: 987 NYS2d 220, 2014 NY Slip Op 04185 (App. Div. 2 Dept.; 6/11/14; Skelos, JP, Lott, Roman, LaSalle, JJ)