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Johnston v. Camiolo

A-6165-04T1 (N.J. Super. App. Div. 2006) (Unpublished)

LANDLORD-TENANT; SECURITY DEPOSITS—The penalty for wrongfully withholding a residential security deposit is twice the amount wrongfully withheld and not twice the entire deposit.

A tenant leased property from a landlord with a monthly rental of $1,050 and a security deposit of $1,575. The tenant was to leave the oil tank full upon vacating the property. The tenant held over for a portion of the month following the lease’s termination and did not pay rent for the last month of the lease or for the period of its holdover tenancy. Although the tenant orally authorized the landlord to use the security deposit to pay the rent due, the landlord refused, citing damage to the property. The tenant issued a check for the rent, but placed a stop payment order on it. The bank charged the landlord an $11 surcharge when the tenant’s check did not clear.

The landlord sued for the last month’s rent of $1,050, the $11 surcharge, rent for the period of the holdover tenancy, and for the costs to fill the oil tank. The tenant countered by claiming the landlord violated the security deposit statute by failing to provide the tenant with the number of the account in which the security deposit was held and by failing to provide such information within 30 days of the termination of the lease.

The lower court ruled the landlord was entitled to damages in the amount of $2,111, representing two months’ rent and the bank surcharge. The lower court also ruled that the landlord violated two statutes when it failed to give notice of the location of the security deposit and failed to return or account for the security deposit within 30 days after the lease terminated. The lower court ruled the landlord liable for $3,150, or double the amount of the security deposit. Offsetting the two judgments, the lower court ruled in favor of the tenant in the amount of $1,039.

The landlord appealed, claiming it was improper to assess damages against it in an amount equal to double the security deposit because the tenant was only entitled to twice the net amount owed to it. The Appellate Division agreed, stating non-compliance with the notice provisions of the statute governing security deposits does not automatically require forfeiture of the security deposit. Further, the penalty for failing to comply with the notice provision of the statute governing security deposits is double the net amount wrongfully withheld, not double the amount of the initial security deposit. Additionally, a tenant is not entitled to use the security deposit to pay its rental obligations unless the tenant provides written notice of its intent to do so. Since the tenant, in this case, did not provide written notice of its intent to apply the security deposit toward its rental obligations, the tenant remained liable for the last month’s rent and the rent during its holdover tenancy. Because the landlord retained the entire security deposit without providing any evidence at trial that the security deposit was used to repair damages to the property or to refill the oil tank, the amount of damages due to the landlord (rent for the last month of the lease and for the month of the holdover tenancy) had to be offset by the amount of the security deposit. The Appellate Division reversed the lower court and found for the landlord, but reduced the landlord’s award to $536.

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