Landlord Ordered to Pay $122,000 in Security Deposit Dispute

by Chris on April 13, 2015

A court in Chapel Hill, North Carolina has ordered a landlord there to return $14,935 in former tenant deposits and to pay another $107,000 in fines and court costs. In addition, the landlord is permanently barred from accepting security deposits in the future.

The case was prosecuted by the local Attorney General’s office after receiving multiple complaints from former tenants, mostly students.

tenant screeningGiven the number of claims and the relative inexperience of most of the renters, prosecutors charged that the landlord violated the state’s deceptive consumer practices statutes.

The landlord did not keep security deposit funds in a trust account separate from other personal or business accounts in violation of local law. At the end of each lease, the landlord withheld the funds and failed to provide any record of how the money had been allocated.

Once the investigation had began, the landlord then failed to turn over records so that prosecutors could determine if other tenants were affected by the failed security deposit policy. The judgment is payable to 37 tenants  with individual payments ranging from $350 to $1,410.

Local prosecutors are soliciting more former tenants to come forward.

The landlord currently is in bankruptcy, and attempts to collect the deposits and fines will have to go through the bankruptcy court. Prosecutors have vowed to assist the tenants in collecting the deposit funds.

The Attorney General is advising all tenants to participate in a move-out inspection and to provide their landlords with a forwarding address in order to minimize the risk of a security deposit dispute.

Landlords must take the time to come up to speed on local laws regarding the handling of security deposits to avoid these harsh penalties.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

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Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

{ 1 comment… read it below or add one }

RAY April 14, 2015 at 6:13 am

In California, do we need to allocate tenant deposit, investment, mutual funds.etc….?

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