Tenant Not Entitled to Security Deposit Hearing

If you can show that your lease damages exceed the amount of the tenant’s original security deposit, depending on your state’s laws, you may be able to keep the tenant’s full deposit without a hearing.

In the case of Service Refrigerated Transport v. Williams Development, Inc. (December 2008), a tenant leased space and signed a ten-year agreement. Less than two years into the lease, the tenant vacated the premises.

Several years after the tenant had abandoned the premises, it came back and attempted to sue the owner for the return of its security deposit. The owner filed a counterclaim for damages caused by the tenant’s breach of the lease. The owner and tenant settled their dispute by agreeing that the owner would return the security deposit in three annual installments as long as the entire amount of the costs involved in re-letting the space did not exceed the security deposit.

Almost six years later, the tenant made another demand for its security deposit. The landlord refused to return the deposit, claiming that the expenses it incurred exceeded the security deposit. The tenant then filed suit and asked the court to force the owner to return the deposit.

The trial court ruled in favor of the owner and said that: (1) the original tenant waited too long to enforce the agreement, and (2) the documentation provided by the owner showed that the offset exceeded the security deposit. The trial court also denied the original tenant’s request for a hearing. The original tenant filed an appeal but the Appellate Division upheld the ruling of the trial court.