Permits investigation and recovery of cost thereof by the attorney general in a case of money deposited as security and required to be held in trust in rentals

Summary

The bill amends General Obligations Law, õ7-109, by adding language which: a) gives the Attorney General explicit authority to take proof, make a determination of the relevant facts and issue subpoenas in accordance with the CPLR in connection with the proposed institution of an action or proceeding to compel compliance with the provisions of the General Obligations Law regarding residential rent security deposits; and b) authorizes, in the court's discretion, an allowance for costs not exceeding $2,000 against each respondent found in an action or proceed- ing brought by the Attorney General to compel compliance with those provisions of the General Obligations Law, to have committed a violation.

Justification

õ7-109 of the General Obligations Law was enacted in 1973 (originally as õ7-107) to grant to the Attorney General specific authority to bring an action or proceeding against any person, association or corporation that has violated or is violating any of the provisions of Title 1 of Article 7 of the General Obligations Law which protects a tenant's rent security deposit and requires a landlord to place said deposit in an interest bearing account. The enactment of section 7-109 has enabled the Attorney General to combat violations of the rent security deposits law. For the period January 1, 1988 through December 14, 1992, a total of 3,701 rent securi- ty complaints were received by the Department of Law. While the bulk of these cases were resolved through mediation, the Attorney General found it necessary on some occasions to institute legal proceedings to protect the rights of tenants who gave security deposits to their landlords. The handling of these cases requires a significant expenditure of resources and time in order to ensure that tenants' rent security depos- its are protected. The Attorney General was given important, increased enforcement obli- gations respecting tenant security deposits by Chapter 917 of the Laws of 1984. Two additional sections, 7-107 and 7-108, were added to the General Obligations Law by this chapter to ensure the protection of tenants' security deposits upon the conveyance of a residential build-

ing. These sections cast liability, with appropriate limits, upon the buyers of residential buildings. Existing case law holds that the Attorney General's standing to bring an action or proceeding to compel compliance with section 7-103 is derived solely from section 7-109, and that he may not sue for refunds of rent security deposits under Executive Law, õ63(12). Furthermore, since CPLR 8303 authorizes an allowance for costs in actions or proceedings brought under Executive Law, õ63(12), and not in actions or proceedings brought under General Obligations Law, õ7-109, some courts have held that the Attorney General is not permitted to seek costs in rent security cases. There is no apparent reason to deny the Attorney General a discretionary award of costs in rent security cases while permitting such an award in all other consumer frauds cases. No legislative history exists to indi- cate any desire to exclude such a costs award. This bill would correct the problem. This bill also makes it clear that the A.G. has authority under General Obligations Law õ7-109, to take proof and to issue subpoenas in prepara- tion for the institution of an action or proceeding to compel compliance with the law.

Prior legislative history

This bill was first introduced in 1984 and passed the Assembly that year (A. 10013). It also passed the Assembly in 1985 - A.5756, 1986 - A.5756-A, 1987 - A.5970-A, and in 1990 - A.6338, 1991 (S.6464/A.8557) 1995-96 - A.7639 1997-98 - A.5387-B/S.6134-A

Fiscal implications

None.

Effective date

Immediately, and shall apply only to actions or proceedings commenced on or after its effective date.