Buffalo Landlord Agrees To Reforms In Handling Security Deposits
Attorney General Spitzer today announced an agreement with an Erie County residential property management company to offer to all current tenants the return of their security deposits, and to reform the manner in which it handles tenants' deposits in the future.
ELP Management Company of Western New York, Inc., which manages three properties and nearly 200 rental units in the Buffalo area, settled an investigation by Spitzer's office probing whether it improperly commingled security deposit monies and overcharged tenants for administrative costs.
"Tenants required to provide a security deposit deserve better returns on their hard-earned money," Spitzer said. "To that end, my office will continue to monitor the practices of landlords to ensure that security deposits are appropriately handled and will continue to push for legislative reforms to provide tenants a fairer share of the interest from their accounts."
ELP collected security deposits between $300 and $1,000 from tenants at three different apartment complexes in Buffalo including: Mayflower Apartments on Summer Street, which has 49 tenants who paid security deposits; Elliot Apartments on Linwood Avenue, which has 35 tenants who paid security deposits; and Stoneybrook Apartments on Main Street, which as 18 tenants who paid security deposits.
In total, over $38,000 in security deposits was improperly commingled with funds used for unrelated business activities. ELP also was alleged to have violated two state laws: one that requires security deposits for buildings of six or more dwelling units to be placed in individual interest-bearing bank accounts; and another law that prohibits charging more than one percent per year for administrative costs.
Because ELP Management deposited the funds from its tenants' security deposits into bank accounts that earned only one to two percent interest, no interest was actually realized after administrative costs of two percent were deducted.ELP has agreed to return security deposits to all current tenants or to give tenants the option of using their security deposit to fully cover their last month's rent. Although ELP no longer requires security deposits, the firm also agreed that, in the event it resumes collecting them, it will not deduct illegal amounts of interest, will offer tenants options regarding the manner in which interest will be paid, and will exert its best efforts to identify the bank account which pays the highest prevailing rate.
ELP Management also agreed to pay $6,000 to the Attorney General's office as civil penalties and costs.
Last year, the Attorney General's office proposed legislation to more fairly divide the interest earned on tenants' security deposits. Interest rates on basic savings accounts were about six percent when the current law was passed 30 years ago; however some banks are now paying only 1.1 percent interest on these accounts. This results in tenants receiving only one-tenth of one percent in interest on their money.
Spitzer's proposal would set the landlord's administrative fee at 20 percent of the interest earned on the account (up to a maximum of 1 percent of the total amount on deposit) and would grant the remaining 80 percent of the interest to the tenant. This would give landlords a greater incentive to seek out the highest-interest accounts available.
Individuals with concerns regarding the appropriate handling of security deposits are encouraged to contact the Attorney General's consumer help line at (800) 771-7755.
This case was handled by Assistant Attorney General Dennis Rosen of the Buffalo Regional Office.