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Legal Briefings: Commercial landlord refuses to refund deposit

| Apr 26, 2012 | Business & Commercial Law |

This article first appeared on St. George News under the Snow Jensen & Reece column “Legal Briefings.”

Matthew Ence is an attorney with the law firm of Snow, Jensen & Reece. The content in this column should not be construed as legal advice or as a substitute for counsel on individual matters, in most scenarios it is premised upon Utah law and may not be relevant to issues arising in other states.

Question: I closed my business last year and relinquished the shop space I had leased. I fulfilled my lease and never defaulted in payment of rent. I even left the space in broom clean condition, as the lease requires. It’s been six months and the landlord still hasn’t refunded my deposit. The lease called it last month’s rent, but I paid the last month’s rent in normal course of business. How can I get my deposit money back and are there penalties I can exact for the landlord not refunding me on time (my lease says he has to refund within 30 days)?

Answer: The answer to your question is in the terms of the lease itself. Because the lease is a binding contract, and you have met your obligations under the lease, the landlord must meet its obligations as well, and cannot take advantage of an overpayment of rent to receive a windfall.

If this were a residential lease, specific provisions of Utah law would govern the return of a security deposit and the reasons for which the landlord could retain the deposit. Where this is instead a commercial lease, those specific provisions of Utah law would not apply, and the relationship of the parties in the lease is instead governed by general contract law principles, and the obligation of each party to deal with the other fairly and in good faith.

If the landlord is unresponsive after a firm and reasonable demand for compliance with the lease terms, then you may have to resort to legal action. If the reimbursement you are owed is less than $10,000, you can file a small claims action against the landlord and may not need an attorney’s assistance. If the amount is greater, you will need to consider filing in district court, and an attorney’s help is recommended.

Ultimately, questions regarding whether you can recover attorneys’ fees, costs of court, interest, or other fees is dependent primarily on the terms of the lease itself. If you obtain a judgment, at a minimum you should at least be entitled to post-judgment interest at 10 percent per year from the date the judgment is entered.