Royal's other argument with respect to out-of-state branches is more complicated to resolve. To be sure, Royal does not cite any case to suggest that the separate entity rule only applies to international branches. Indeed, if section 7-103 (2) was enacted for the purpose of ensuring that a security deposit can be recovered easily in New York, it would be irrational for that statute to permit a deposit to be maintained in a New Jersey branch, as enforcing the judgment would require the tenant to commence proceedings in New Jersey. The point of the statute is for tenants to easily procure and enforce judgments to recover their deposits in New York. The court does not believe the legislature intended section 7-103 to be interpreted to provide for such an easily exploitable loophole that would undermine the benefits of the in-state requirement.
Nonetheless, unlike section 7-103's prohibition on commingling, the parties do not cite any authority that sets forth the consequences of maintaining the security deposit outside of New York. As noted earlier, not all violations of section 7-103 result in forfeiture, such as failure to provide timely notice of the bank account information. Neither the statute nor any case law cited by the parties (or independently reviewed by the court) provides for a remedy. It, therefore, is unclear what damages, if any, are appropriate for this violation committed by Royal.