Establishing a Breach of Security Deposit Obligations
As can be discerned from case law, three factors emerge which bear upon a determination of a landlord's breach of statutory obligations concerning maintenance of a security deposit: (1) whether the deposit was held in a segregated account and in the name of the actual landlord; (2) whether the landlord has responded to demands for information regarding the maintenance of the security account, either prior to or during litigation; and (3) whether the landlord complied with the independent duty to give the tenant notice of any depository bank and its address (General Obligations Law § 7-103 [2]). It significantly eases analysis to address each factor separately.
First, the title of the security deposit account clearly is of utmost significance. In Ferguson v Vaughan Imported Cars (9 Misc 2d 188 [App Term, 1st Dept 1957]), addressing section 233 of the Real Property Law, from which General Obligations Law § 7-103 was derived, the court observed (at 189):
"The requirement is not only that the person shall not mingle the money with his own but he shall hold on to it actually or constructively. Placing the money received by the landlord as security in the name of another living person is not a holding within the requirements of this section."