Deposits due 

When the Apartment Store filed for Chapter 7 bankruptcy protection last March, tenants were left wondering what happened to the $321,000 in rental deposits missing from the company’s trust account. Many tenants thought they would never see their security deposits again.

But Heidi Fanslow, a Missoula attorney with experience handling landlord/tenant legal issues, says tenants shouldn’t worry about their deposits because the owner of the property is obligated to pay it back.

“Here’s the deal, not a single [Apartment Store] tenant—not a single one of them—is responsible for those deposits,” says Fanslow. “Every single owner is going to have to cough up the money.”

According to the Montana Code, “the principal (the landlord) is responsible to third persons (the tenants), including wrongful acts committed by such agent in and as part of the transaction of such businesses.” The Montana Code also holds that any landlord who wrongfully withholds a deposit can be held liable for not only the deposit, but for attorney fees arising from any subsequent legal action.

“This is not some difficult legal concept,” says Fanslow, who adds that it could become very costly for any landlord who refuses to refund a deposit.

In 1994 a Missoula landlord tried to withhold a portion of a tenant’s security deposit and a prorated portion of the last month’s rent totaling $215.17. The three tenants sued and a district court ruled in their favor, awarding the tenant the withheld rent, double damages, damages for an illegal provision in the lease, and attorney fees. The landlord appealed to the Supreme Court, which ruled that the lower court had erred on some points, but ultimately affirmed that the landlord had wrongfully withheld $70.50. In the end, the landlord was forced to pay more than $5,000 in plaintiffs’ attorney fees, in addition to his own legal expenses.

Fanslow’s advice to any former Apartment Store tenant who has trouble getting their deposit back is to contact Montana Legal Services or ASUM Legal Service. Other than that, tenants should expect their deposit back when they move out.

“I think tenants should go along as if nothing happened and nothing is different,” she says.

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