Don't Illegally Withhold Tenant's Security Deposit

Three years into a tenant's five-year lease, the tenant and a new business signed a new lease with the owner under which the new business owner was to take over the space, but the tenant would remain responsible for the remaining two years of its original five-year lease.

When the tenant's lease term ended after the two-year period, it contacted the owner to request the return of its security deposit, but the owner did not respond. The tenant contacted it again when the new business's term ended the following year. When the owner again did not respond, the tenant sued, alleging that the owner illegally withheld its security deposit. The tenant prevailed at the trial court and appeals court level.

The owner has the burden of proving that the retention of any portion of a security deposit is reasonable. Here, the owner argued that because the tenant did not properly surrender the premises at the end of its lease term, it was entitled to the use of the security deposit.

The court disagreed. It ruled that when a tenant vacates the premises, the obligation to refund or account for the use of the security deposit is triggered.

• EDG Property Management v. Karim Ratnani, March 2009