Attorney general sues local landlord

The N.C. Attorney General’s Office is suing a Chapel Hill landlord for failing to return security deposits to his student renters.

State Attorney General Roy Cooper filed a lawsuit last month against James Ware Kelley and his real estate investment firm Ware Investments, LLC after at least five UNC students sued Kelley and his business for “deceptive trade practices.”

Kelley regularly “co-mingled” students’ security deposits with personal operating funds, failed to return the deposits and would “contrive damage claims,” according to the lawsuit. Under North Carolina law, a landlord must keep tenants’ security deposits in a separate trust account.

Kelley said his failure to separate his tenant’s security deposits from the rest of his operating funds was a mistake. He said the only time he didn’t return his tenants’ deposits was when he used them to pay for any damage the tenants’ made to his properties.

Noel Talley, spokeswoman for the state attorney general’s office, said her office has received complaints related to the case from as early as 2006.

Talley said at least a dozen students have contacted her office claiming to be victims of Kelley.

“I made an honest mistake and no money is missing,” Kelley said.

Kelley said he used a mass-produced lease from 2007 that he found on a website for North Carolina realtors. That lease cited the incorrect statutes that define what bank accounts he was supposed to keep his money in, Kelley said.

In the suit, Cooper claims that when tenants challenged Kelley to return the security deposits, Kelley cited “supposed” damage claims as a reason to not refund the students’ money.

Students seeking protection from landlords should visit Student Legal Services, said Dorothy Bernholz, director of UNC Student Legal Services and the attorney representing the five UNC students listed in the lawsuit. Bernholz said documentation is key to ensuring both landlords and tenants are treated fairly.

“We always advise them when they sign up for a premise to go through and do a very careful walk-through inspection, take photographs of the condition,” she said. “If there’s a big hole in the living room when you move in and you can prove it, then that’s not your responsibility when you move out.”

Cooper seeks to return all of the outstanding security deposits to tenants, the lawsuit states. Cooper also asked the court to levy a $5,000 penalty against Kelley for each Tenant Security Deposit Act violation.

Kelley said the total penalties filed against him would amount to about $45,000.

Erin Hawley , who graduated from UNC in May, began renting an apartment on Isley Street from Kelley last August. After her lease ended in July, she and her two roommates expected to see their $1,410 security deposit returned to them in a timely manner.

Instead, Kelley deposited their security deposit into a regular checking account versus the mandated trust account, the lawsuit states.

“I am informed by former tenants of James Kelley that he has a reputation for withholding tenants’ security deposits,” Hawley said in her affidavit. “I am concerned about the security of my funds.”

Hawley said Kelley still has time to return her security deposit, but she filed the affidavit with the attorney general’s lawsuit just in case she had trouble getting her funds back.

“He still has time to get my security deposit back since my lease recently ended, but I decided to ask for legal advice based on hearsay,” Hawley said.

city@dailytarheel.com