Chapel Hill News

AG sues local landlord over students’ security deposits

Roy Cooper
Roy Cooper

State Attorney General Roy Cooper has accused an Orange County landlord of failing to maintain and return security deposits to college student tenants.

A lawsuit filed July 22 says manager James Ware Kelly of Ware Investments LLC has rented residential properties to college students in Chapel Hill and Durham since 2007.

It alleges under the state’s Unfair and Deceptive Trade Practices Act that Kelly placed security deposits in personal or regular business accounts, instead of a separate trust account required by law.

When leases ended, the suit says, Kelly withheld the security deposits and provided no written record of any charges.

Since tenants began challenging Ware Investments, Kelly’s “regular practice has been to contrive damage claims against the tenants and cite those supposed damage claims as the basis for refusing to make a refund,” the suit says.

Many of Kelly’s tenants have successfully sued Ware Investments in small claims courts, according to the lawsuit. But they have not recovered money awarded to them, and in 2010, “Kelly filed for Chapter 11 bankruptcy ... thereby thwarting, temporarily, his tenants’ efforts to recover their deposits through the courts of Orange County,” according to the lawsuit.

Cooper asks that state courts require Kelly to return tenants’ security deposits and pay civil damages to the state.

“Some landlords need to be taught a lesson,” Cooper said in a statement. “The law on security deposits is clear, and they must follow it.”

In an interview, Kelly said he thought his business practices complied with North Carolina law.

“I made an honest mistake not having a security deposit account, and I corrected it before anyone even knew,” Kelly said Thursday. “Many states allow you to put deposits in your (personal) bank account. There’s no money missing, and I’m fully in compliance now.”

“It’s extreme selective prosecution,” Kelly continued. “I’m looking forward to shining a light on some of the work I’ve been doing the past five years that I think is why they’re doing this selective prosecution. This is ridiculous, some of the events leading up to this. I’m looking forward to getting my name cleared.”

Aaron Bachenheimer, director of the Office of Fraternity and Sorority Life and Community Involvement at UNC, says there are several resources available to help students navigate contracts and lease agreements if they decide to move off-campus.

“When we do off-campus outreach, we stress that it’s important that students know and understand their rights,” Bachenheimer said. “Even with good landlords – and we believe the majority of landlords are good landlords – it’s critical knowing what you’re signing, knowing your rights and responsibilities as a tenant and what you’re getting into when you sign an off-campus contract.”

Bachenheimer encourages students to take their leases to Student Legal Services, a student-run body that offers free legal counsel to UNC students, before they sign.

“They will read through your lease and highlight problematic things, or caution you to negotiate things into or out of your lease,” Bachenheimer said. “We’d like it to be more common for students to come and take advantage.”