Residential security deposits are governed by complex laws in Massachusetts but it is generally assumed that it is easier for commercial landlords to stay out of trouble in regard to a security deposit held for a non-residential tenant. However in a recent case, the tenant, after waiting 7 months for the return of the security deposit, sued the landlord for return of the security deposit, since the landlord had refused to return $14,000 of it based on tenant damage to the property on move-out.
The security deposit was about $16,000. The case was filed in 2014 and after a jury trial, the Jury awarded the tenant $25,000, the Judge separately considered a claim for unfair and deceptive practices awarded the tenant $14,300 trebled to $44,300 and $60,500 in legal fees. The trial judge found that the landlord had no intention to return the security deposit, and manufactured a reason to keep it.
As with any trial, the losing party thought there were errors made, so the landlord decided to appeal. On appeal to the Appellate division the judgment was affirmed, and the tenant was awarded $30,000 more in legal fees.
The landlord decided to further appeal to the Appeals Court. However the issues they raised were not successful there. On appeal to the Appeals Court, the court found that a 93A award is NOT limited by a contractual limitation of liability in the lease, because the wrongful withholding of the security deposit is tantamount to wrongful conversion of the tenants funds, so sounds in tort. The court also found that failure to make a reasonable offer of settlement by the time the answer was due enabled the Appeals Court to sustain the trial judge’s award of multiple damages. Later settlement offers were not considered timely. The legal fees incurred by the tenant to defend the appeal to the appeals court were also awarded.
We would be happy to advise you in regard to the proper handling of security deposits.