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Ware v. Sweeney

2005 WL 3242356 (N.J. Super. App. Div. 2005) (Unpublished)

LEASES; SECURITY DEPOSIT—Payment of the first month’s rent in advance is not treated as posting of a security deposit under New Jersey’s law applicable to residential security deposits.

A couple signed a one year apartment lease. The lease required an initial payment of $875 on account of the first month’s rent and $50 as a processing fee for signing of the lease. Those sums were paid when the lease was signed. The lease also required that the last month’s rent be paid by a given date and that a security deposit be paid on or before occupancy. In addition, the tenants were required to provide verification of their eligibility for the Section 8 voucher program on or before a given date. The tenants never paid the “last month’s rent” by the given date and the landlord terminated the lease on account of that default. The tenants sued, alleging that they were entitled to return of the money they had already paid because that money should have been treated as the security deposit. The lower court concluded that as a matter of law the “first month’s rental payment constituted a security deposit within the meaning” of New Jersey’s security deposit law. The Appellate Division disagreed. It recognized that N.J.S.A. 46:A-19 defines the security deposit as “money ... deposited or advanced on a ... lease ... for the use or rental of real property as security for performance of the ... lease ... or to be applied to payments upon such ... lease. ...” Based on that, it felt compelled to point out that “it is only ‘until repaid or so applied,’ that the monies are to be held in trust for the person who made the deposit or advance.” The Court recognized that the initial payment was applied to the first month’s rent and to the processing fee. It also took special note that the requested security deposit was evident from “the separate provision in the lease agreement for such a deposit.”

As to the claim that requesting proof of eligibility for the Section 8 program violated provisions of the New Jersey law that prohibit discrimination based on the source of rental monies, both the lower court and the Appellate Division agreed that no such discrimination existed. The lower court was satisfied that “the reference to Section 8 [was] something that [was] initiated by [the tenants]” and one could not treat the landlord’s inclusion of the provision in the lease as involving discrimination. The Appellate Division agreed, adding that “[i]f anything, [the tenants] were encouraging such payment and simply wanted verification thereof.”

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