DIRA MANAGEMENT et al. v. DAWN BANKS

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2560-04T22560-04T2

DIRA MANAGEMENT and

1116-1120 ANNA REALTY, LLC,

Plaintiffs-Respondents,

v.

DAWN BANKS,

Defendant-Appellant.

__________________________________

 

Submitted October 17, 2005 - Decided

Before Judges Cuff and Parrillo.

On appeal from the Superior Court of New Jersey,

Law Division, Special Civil Part, Union County,

Docket No. LT-6791-04.

Central Jersey Legal Services, Inc., attorneys

for appellant (Janice Chapin on the brief).

Samuel Lachs, attorney for respondent.

PER CURIAM

Defendant, Dawn Banks, appeals from an order of the Special Civil Part denying her motion to reconsider a September 24, 2004 decision holding that she could not apply her security deposit to outstanding rent to rectify plaintiff landlord's failure to provide timely notice required by N.J.S.A. 46:8-19(c)(3). We affirm substantially for the reasons stated by Judge Perfilio in his oral decision of September 24, 2004, and his written decision of December 22, 2004. We add, however, only the following comments.

The facts are not in dispute and may be briefly stated. On October 25, 2000, defendant executed a lease with plaintiff, Dira Management (Dira) to rent an apartment at 14 North Avenue, Elizabeth, effective December 1, 2000. Prior thereto, on November 28, 2000, Dira received defendant's security deposit, which was paid for by the Union County Division of Social Services. The written lease acknowledged receipt of $1,230 for security and advised that this amount was held by Summit Bank. Subsequently, on August 1, 2003, Dira notified all its tenants that their security deposits were transferred to and held by Independence Bank, located at 456 North Broad Street, Elizabeth.

On July 20, 2004, defendant notified the landlord by letter that Dira failed to fulfill its obligation under recently amended N.J.S.A. 46:8-19 to inform her, in writing by January 31, 2004, of the name and address of the bank in which her security deposit was located, the type of account in which it was held, the current interest rate, and the amount of the deposit. Defendant further advised that, as a consequence, she was invoking the statutory remedy and applying her security deposit, along with interest in the amount of 7% per annum, to her rent for August 2004, and part of September 2004. The landlord responded by letter of August 9, 2004, informing defendant of the name and address of the bank in which her security deposit was located, the type of account it was held in, the amount of the deposit, and the current interest rate on the account. Defendant was notified further that her security deposit accrued interest in the amount of $54.34, and a check for that amount was enclosed with the letter.

On August 18, 2004, Dira filed a summary dispossess action against defendant for non-payment of her August 2004 rent. On September 24, 2004, the Special Civil Part judge entered a judgment for possession in favor of Dira, having determined that defendant was provided sufficient notice of the location of her security deposit and that Dira had properly deposited defendant's security deposit within thirty days of receipt. Thus, the court ordered defendant to post her rent, but refused to allow defendant to apply her security deposit to the rent.

On September 29, 2004, defendant deposited her rent with the court, which was paid to Dira on October 6, 2004. Defendant thereafter filed a motion for reconsideration, which was denied by the judge in a December 22, 2004 written decision finding not only that Dira's conduct was in "substantial compliance" with N.J.S.A. 46:8-19, but also that its August 9, 2004 correspondence to defendant cured its technical defect in otherwise failing to send proper notice to defendant by January 31, 2004. This appeal follows.

The Rent Security Deposit Act (Act) became effective in New Jersey on January 1, 1968. N.J.S.A. 46:8-19 to -26. It has been amended several times since. L. 1971, c. 223; L. 1973, c. 195, 1; L. 1979, c. 28, 1; L. 1985, c. 42, 1; L. 1990, c. 100; L. 1997, c. 310. The most recent amendment to N.J.S.A. 46:8-19, L. 2003, c. 188, 1, effective January 1, 2004, provides in pertinent part:

The person investing the security deposit pursuant to subsection a. or b. of this section shall notify in writing each of the persons making such security deposit or advance, giving the name and address of the investment company, State or federally chartered bank, savings bank or savings and loan association in which the deposit or investment of security money is made, the type of account in which the security deposit is deposited or invested, the current rate of interest for that account, and the amount of such deposit or investment, in accordance with the following:

(1) within 30 days of the receipt of the security deposit from the tenant;

(2) within 30 days of moving the deposit from one depository institution or fund to another, except in the case of a merger of institutions or funds, then within 30 days of the date the person investing the security deposit receives notice of that merger, or from one account to another account, if the change in the account or institution occurs more than 60 days prior to the annual interest payment;

(3) within 30 days after the effective date of P.L. 2003, c. 188 (C. 46:8-21.4);

(4) at the time of each annual interest payment; and

(5) within 30 days after the transfer or conveyance of ownership or control of the property pursuant to section 2 of P.L. 1967, c. 265 (C. 46:8-20).

[N.J.S.A. 46:8-19(c).]

If the landlord, after receiving a security deposit, fails to provide the required notice:

[T]he tenant may give written notice to that person that such security money plus an amount representing interest at the rate of seven percent per annum be applied on account of rent payment or payments due or to become due from the tenant, and thereafter the tenant shall be without obligation to make any further security deposit and the person receiving the money so deposited shall not be entitled to make further demand for a security deposit.

[N.J.S.A. 46:8-19(c).]

However, where the annual notice has not been timely provided, the landlord is given the opportunity to "cure" the deficiency before the tenant's security deposit may be applied against her current rent:

[I]n the case of a failure by the person receiving the security deposit to pay the annual interest or to provide the annual notice at the time of the annual interest payment, if the annual notice is not also serving as a notice of change of account or institution, before the tenant may apply the security deposit plus interest on account of the rent payment or payments due or to become due on the part of the tenant, the tenant shall first give that person a written notice of his failure and shall allow that person 30 days from the mailing date or hand delivery of this notice to comply with the annual interest payment or annual notice, or both.

[N.J.S.A. 46:8-19(c).]

Thus, landlords must give their tenants the requisite notice within thirty days of receiving the security deposit, and annually thereafter when they pay interest to the tenant. N.J.S.A. 46:8-19(c)(1), (4). Also landlords must give proper notification within thirty days of buying the property and within thirty days of either transferring the deposit from one bank to another or from one bank account to another. N.J.S.A. 46:8-19 (c)(2), (5). And finally, for purposes here relevant, the amendment requires that landlords notify their tenants of the location of their security deposit, the amount of the deposit, and how much interest it was earning by January 31, 2004. N.J.S.A. 46:8-19(c)(3).

When first enacted, the Act did not provide for a tenant's remedy upon the failure of the landlord to provide the requisite notice. Brownstone Arms v. Asher, 121 N.J. Super. 401, 406 (Cty. Ct. 1972). Evidently, as a result of that decision, the Legislature amended the Act in 1973, L. 1973, c. 195, 1, to allow the tenant in such circumstances to have the deposit applied to his rent and to be without obligation to make any further security deposit during the term of his lease. N.J.S.A. 46:8-19(c). The remedy, however, was not automatic in all instances. Where there has been a failure to provide either annual notice or annual interest payment, the landlord is first given the opportunity to cure the deficiency before the involuntary application of the security deposit to the rent. Ibid.

Defendant claims that Dira's failure to provide notice by January 31, 2004 - thirty days after the effective date of the amendatory statute's requirement - warrants automatic application of the security deposit to her outstanding rent. We disagree

N.J.S.A. 46:8-19 is a remedial statute, designed specifically "to protect tenants from overreaching landlords who seek to [defraud] them by diverting security deposits to their own use." Jarembeck v. Butter Ridge Ap'ts, 166 N.J. Super. 84, 87 (App. Div. 1979); Rogers v. Donovan, 213 N.J. Super. 309, 311 (Law Div. 1986). Thus, the tenant's security deposit is "held by the landlord in trust", Fischer v. Heck, 290 N.J. Super. 162, 169 (Law Div. 1996), and the tenant is thereby entitled to earn interest on his money, to know where his money is, and to be safe from having his money mishandled by the landlord. N.J.S.A. 46:8-19. In enacting the 2004 amendment to the statute, the Legislature's intention was to require "landlords to provide better notification about the location and status of the security deposit." Press Release, New Jersey Office of the Governor, McGreevey Signs Bill to Protect Tenant Rights (Oct. 1, 2003).

By the same token, while the Act's intent is to alleviate certain practices employed by unscrupulous landlords, it is not to punish those landlords who act in good faith. Burstein v. Liberty Bell Village, Inc., 120 N.J. Super. 54, 59 (Cty. Ct. 1972). See Branch Brook Gardens v. Ramirez, 186 N.J. Super. 241, 245 (Dist. Ct. 1982). Thus, even when a landlord's notice is deficient, application of the deposit to rent may be withheld by the court "after examining the relevant circumstances." Princeton Hill Assoc. v. Lynch, 241 N.J. Super. 363, 365 (App. Div. 1990). In that case, the landlord had not opened the bank account until two months after the security was given and, therefore, could not have provided the requisite notice within thirty days of receipt of the deposit. Id. at 364. Instead of directing automatic application of the statutory remedy, we held that the landlord was to be afforded the "opportunity to present any evidence concerning any acceptable excuses for the late deposit, as a basis for an equitable relaxation of the seemingly mandatory language of the statute." Id. at 366. Indeed, the Legislature itself recognized that the tenant's statutory remedy may be withheld where the landlord has "cured" the deficiency in either the annual notice or annual payment of interest. N.J.S.A. 46:8-19(c).

Under the present circumstances, we conclude that Dira's substantial compliance with the statutory mandate, its good faith, and the lack of prejudice to defendant, warrant withholding the tenant's statutory remedy. Here, Dira's notice deficiency was technical in nature and entirely understandable given the newness of the additional statutory requirement. More significantly, defendant suffered no prejudice by this particular notification lapse since she otherwise had at all times ample notice of the whereabouts and status of her security deposit. Indeed, Dira complied with all other statutory requirements, having first notified defendant in the lease itself of the amount of the security and the name and location of the depository bank, and thereafter, on August 4, 2003, of the financial institution to which the security deposit had been transferred. Further, Dira immediately responded when informed of its failure to give additional notice by January 31, 2004, confirming the amount of the security deposit, the name and address of the bank where the deposit was located, the type of account the money was held in, and the interest that had accrued. And to the extent this correspondence and accompanying check constituted the annual notice and interest payment required by N.J.S.A. 46:8-19(c)(4), Dira's August 9, 2004 reply served to cure any defect in that regard as well, vitiating any right of defendant to the application of her security deposit to outstanding rent on that account. Finally, on February 25, 2005, defendant was given the requisite notice upon sale of the building in which she resided.

Based on these facts, we conclude that Dira substantially complied with the statutory notice requirement in issue. Galik v. Clara Maass Med. Ctr., 167 N.J. 341, 352-54 (2001); Mayfield v. Cmty. Med. Assocs., P.A., 335 N.J. Super. 198, 203 (App. Div. 2000). Absent any prejudice to defendant, we discern no violation of the policies of this remedial legislation by Dira's technical lapse. On the contrary, we are satisfied that in promptly curing the singular deficiency, the purposes of the Act have been fully satisfied in this instance. Consequently, defendant is not entitled to direct application of the deposit to rent as she had requested.

 
Affirmed.

After filing her notice of appeal, defendant received notice that Dira had sold the building in which she resided to Anna Realty, LLC and had transferred her security deposit plus accrued interest to the new landlord. Defendant subsequently moved to add the new owner as a respondent in this matter.

(continued)

(continued)

11

A-2560-04T2

November 2, 2005