Landlord Placed Cash Deposit in Sealed Envelope

Tenant sued landlord for return of the security deposit. In response, landlord claimed that tenant had damaged the apartment. The town court allowed landlord to keep the security deposit, and tenant appealed. Among other things, tenant claimed that landlord had unlawfully commingled his security deposit with landlord's own funds. The court ruled against tenant on this issue. By law, landlord was required to hold tenant's security deposit in trust. Landlord did so by placing tenant's cash security deposit in a sealed envelope that also contained a letter signed by landlord before a witness stating that the cash was tenant's security deposit. Landlord held this envelope with its personal possessions. This was acceptable since the building tenant had lived in contained fewer than six apartments. The court also reduced the amount of the damage award to landlord and directed landlord to refund a portion of tenant's security deposit.

Finnerty v. Freeman: 673 NYS2d 843 (1998) (App. T. 2 Dept.; DiPaola, PJ, Palella, Levitt, JJ)