SECURITY DEPOSIT HELD BY COOP
The plaintiff in the action was a subtenant in a coop corporation who deposited $75,000 to the coop corporation as a security deposit. The plaintiff subtenant asserted that the coop improperly took the money and should have provided interest on the deposit rather than place the funds into the building’s operating account. The defendant coop corporation claimed that the court should not award the plaintiff the money since the plaintiff failed to properly maintain the premises, restore it to a broom clean condition and altered the premises without giving prior notice, the cost of which exceeded the $75,000 security deposit. The corporation also argued that RPLR Section 7-103 which requires security deposits be maintained in a separate escrow account does not apply because the rights appurtenant to a proprietary lease of a coop apartment are not an interest in real property. The court was not swayed by this argument. “The lease that the defendant holds in an assignment from its predecessor-in-interest is a sublease from the holder of a proprietary lease. Such a lease has been consistently interpreted by New York Courts as an interest in real property subject to the provisions of the Real Property Law and the Real Property Actions and Proceedings Law.” In previous cases, the court has held that a security deposit maintained by a coop corporation is subject to the statutory guidelines. “Since the cooperative shareholder is entitled to the protection of the Real Property Law, then the same reasoning should be accorded to the sublessee of that shareholder, although neither of the parties or the court was able to find a reported case on point.” The court further held that when a landlord departs from the statutory guidelines and comingles the funds with its own funds, there is an illegal conversion entitling the tenant to the immediate return of the security deposit, despite any defenses or counterclaims. Since the original lease was dated June 13, 2000, interest should be assigned as of that date. Although the plaintiff requested attorney’s fees, the court determined that he failed to established any agreement, statutory or case law authority to establish an exception to the general rule that each side is responsible for the payment of its own attorney’s fees. As a result, attorney’s fees were denied. Courtesy of Alfred M. Fazio, Esq., Capuder Fazio Giacoia LLP, 90 Broad Street, New York, New York 10004 (212) 509-9595
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