A.G. Schneiderman Announces Settlement With Potsdam Landlord For Mishandling Security Deposits

Karl H. Schreyer, Owner Of KHS Rentals, Will Reform Business Practices After Mismanaging Tenant Deposits 

 

Schneiderman: Landlords Who Treat Tenant Deposits Like Personal Funds Will Be Held Accountable

POTSDAM – Attorney General Eric T. Schneiderman today announced a settlement agreement with Karl H. Schreyer, a St. Lawrence County residential landlord to reform his practices in handling tenants’ security deposits to comply with New York State law. Schreyer, doing business as KHS Rentals, owns and operates ten rental properties in Potsdam, renting largely to the student populations of Clarkson University and SUNY Potsdam. The agreement settles an investigation by Attorney General Schneiderman’s office probing whether Mr. Schreyer was improperly commingling tenants’ deposits in his personal bank accounts and failing to return the deposits to tenants after their leases ended.

“Tenants have a right to their own hard-earned money,” Attorney General Eric T. Schneiderman said. “Likewise, landlords have an obligation to follow the law and not treat security deposits like personal funds. Landlords who fail to uphold that obligation will be held accountable.”

Since at least 2012, Mr. Schreyer has failed to maintain rent security deposits in separate interest-bearing accounts, as required by New York State law, and co-mingled deposits with personal funds. In addition, the company failed to return or account for the deposits of over 60 tenants and misappropriated funds to the point where there was a deficit of $30,000 of deposit monies.

The investigation was started after the Attorney General’s office received several complaints from former tenants who did not receive their deposits. Since the initiation of the investigation, Mr. Schreyer has taken several steps to correct his actions, including creating a separate interest bearing account for deposit monies and refunding or accounting for the remainder of outstanding deposits for a total of nearly $25,000.

The settlement agreement requires that Mr. Schreyer fully comply with Article 7 of the General Obligations Law, pay $5,000 in penalties to the State, and execute a confession of judgment for $30,000 whereby the State can place a lien on the properties owned by Mr. Schreyer as security for the tenants’ deposits. In consideration of Schreyer’s cooperation, the Attorney General has agreed to refrain from filing the property lien for a period of 120 days to give him additional time to ensure the company has the funds to properly account for all current deposits.

This case was handled by Assistant Attorney General Alicia M. Lendon and Consumer Frauds Representative Michael Sprague of the Watertown Regional Office. The Watertown Regional Office is led by Assistant Attorney General In-Charge Deanna R. Nelson. The Watertown Regional Office is part of the Division of Regional Offices led by Executive Deputy Attorney General for Regional Affairs Marty Mack.