The rule against commingling a security deposit with a landlord's own funds was reaffirmed by this court in Finnerty v Freeman (176 Misc 2d 220 [App Term, 9th & 10th Jud Dists 1998]) and Levy v Taninbaum (NYLJ, Dec. 24, 1997 [App Term, 9th & 10th Jud Dists]) wherein it was stated: "A landlord holding a security deposit under a lease covering the rental of real property does so in the capacity of a trustee (Glass v Janbach Properties, Inc., 73 AD2d 106, 108). The landlord owes a duty not to commingle the deposit with his own funds, and upon breach of that duty, he forfeits his right to avail himself of the deposit for any purpose (Matter of Perfection Technical Services Press , 22 AD2d 352, 356, affd 18 NY2d 644)."
A tenant's failure to comply with the terms of a lease is not a defense to a landlord's breach of the duty not to commingle the deposit with personal funds (LeRoy v Sayers, 217 AD2d 63, supra). Accordingly, notwithstanding defendant's allegation that plaintiffs repudiated the lease agreement, defendant was not relieved of her obligation to
maintain the security deposit in a separate account. Inasmuch as defendant failed to rebut the showing of noncompliance with the statutory requirement, plaintiffs were entitled to partial summary judgment on their second cause of action.
Decision Date: March 31, 2004