BILL NUMBER:A2500

TITLE OF BILL:  An act to amend the general obligations law, in relation
to money deposited as security in certain cases and enforcement of trust
provisions by attorney general

PURPOSE:

This bill would clarify the Attorney General's authority to take proof
and issue subpoenas, and would further authorize the Attorney General to
obtain costs, in connection with an action or a proceeding to compel
compliance with the General Obligations Law regarding the collection of
rent security deposits.

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.