THE SECURITY DEPOSIT:  USING IT, ACCOUNTING FOR IT, AND DEFENDING IT IN SMALL CLAIMS COURT

© Copyright  2001-2011  Landlord.com

PART TWO

PREPARING FOR COURT

Thus far, we have considered the foundation necessary for mounting a defense of your use of the deposit.  Because we have isolated each step, it may seem that we have recommended a laborious and time consuming process.  The truth is that these are all things which you should be doing anyway, if not to convince a small claims judge that the money was necessarily spent, but at any rate to convince the IRS.  If done routinely and not allowed to pile up, they will take little time.

But if, despite all efforts to be reasonable and careful, you are served with the small claim, there is no substitute for the devotion of enough time to prepare for the hearing.

Without going into the technical details which vary from state to state, all small claims proceedings share the following characteristics.

The procedures are simplified and the rules of evidence are relaxed.

Attorneys are not permitted to appear at the hearing, although one may be consulted in preparation.

The amount in controversy is limited.

The proceedings are expedited, usually concluded within 60 days of filing the claim.

The time allotted for trial is severely limited.

Opportunities for appeal are limited.

Because attorneys are not permitted at the hearing, you will have to represent yourself and be prepared to present your evidence to a judge in a way he will find convincing.  We will go into the conduct of the hearing later.  Your presentation is made easier by the relaxation of the rules of evidence, and there is a certain informality to the proceeding.  Formal pleadings do not exist.  Where in a normal civil case the claimant must file an initial pleading setting forth all the factual and legal bases of his claim, your copy of your tenant’s demand in small claims court might only say:  “$750, security deposit refund.”  Typically, the claimant may not appeal a judgment in small claims court, but the respondent can request a new trial in a higher court if he is dissatisfied with the result.  This is not usually done, however, and there is a possibility in many jurisdictions that a frivolous appeal can end in a fine.

To the court system, the small claims procedure is a means of disposing of a large number of minor items in a short time.  For this reason, small claims calendars tend to be long and crowded, which has definite implications about how small claims should be presented to the judge.

While the legal formalities are relaxed, they are not entirely absent.  For example, if you have a large claim you intend to bring against the tenant, say, for structural damage to the unit, see a lawyer as soon as you receive your former tenant’s claim.  You may lose your claim for damage if you do not act immediately, and that practically requires that you retain a lawyer.  More usually, your deposit accounting might show the tenant owing a small amount over and above the deposit, perhaps $100 or so, that you did not think it worthwhile to pursue.  If this is the case, go to small claims court immediately and file a counter claim for that amount.  There are two reasons for this.  First, the $100 counter claim will tend to set off anything that the judge may be inclined to award as a refund.  Second, your former tenant will suddenly have “skin in the game,” and may be inclined to suggest that everyone forget the whole thing.

In any event, because of the nature of the proceeding, the small claims trial is everything.  In the ordinary civil case, the judge will have a record before him, painstakingly prepared over months or years, and all contained within his file.  A number of conferences will have occurred in which the parties set out the nature of their claims, and made representations about the evidence which they expect to produce at their trial.  None of this happens in small claims court.  The first that the judge who will decide the case will know of the details of the claim and the evidence supporting it is what he sees and hears when the case is called.  The quantity of the cases presented to the judge on his calendar precludes leisurely exploration of the facts and analysis of each case.  Typically, each case can be allotted an average of 15 minutes on the calendar.  This implies that the landlord must have a good handle on what will happen, and be prepared to make his case within the limits allowed to him.  Organization and coherent presentation is everything.

We recommend that if you have been served with a claim, you go to a small claims calendar and spend an hour or two watching what goes on.  What you will see will go something like this.

The calendar is set up to handle the maximum number of cases in the minimum amount of time.  At the inception of the calendar the clerk will take roll to see who is present and who is not.  In cases where both sides are present, the clerk will usually tell them to go into the hallway and show each other any documents they intend to show to the judge, and try to reach a compromise to settle their dispute before the trial.  After they have left the courtroom, the judge will come out and hear all the matters in which only one side has appeared.  Where the person who has appeared is the claimant, he will typically only ask for a one-sentence explanation of why the claimant wants money and how much of it he wants.  Where the only person appearing is the respondent, the judge normally will enter judgment for the respondent without further discussion.  In rare instances a case may be postponed to another date.

Now comes the interesting part.  The judge will call the cases in which both sides have appeared.  The first group will be those who announce that they have made agreements to resolve their disputes.  Some will say that they have somehow split the difference and a judgment amount will be suggested, which the judge will confirm as a judgment entered on the records of the court.  In a few cases, the agreements may be more elaborate.  All these cases have in common the fact that the parties have decided to compromise.  For one reason or another, they have come to the conclusion that it is in their interest to control the result themselves rather than submit the controversy to a judge, who may or may not, for many reasons having nothing to do with his dedication or competence, understand it and rule against one or the other of them regardless of how meritorious their contentions might be.  This is something that you should keep in mind when your day comes.  Small claims court has rarely anything to do with morality, it is practical and oriented entirely to the bottom line.  A compromise is always something worth making if the option is available.

Now watch the contested cases.  You should notice that they all generally follow a format that is simple and designed to permit the judge to understand what is being presented to him.  In all cases, the judge will call on the claimant and ask him to explain why he should recover money against the respondent.  After the claimant is done, he will ask a few questions on points on which he needs clarification.  Then he will invite the respondent to present his evidence.  Here the respondent will present any evidence on any counterclaim he has brought.  After questioning the respondent he will invite the claimant to present any rebuttal he may have to what respondent said.  Then it is over, usually with a comment from the judge that the decision will be mailed out in a week.  Note well, all this happened in 15 minutes or less.

This has serious implications for your day in court.  The whole case will take about 15 minutes.  You cannot count on being allocated more than five or six of these.  The judge has had practically no previous exposure to the facts or the issues in the case.  With this briefing, the judge will be attempting to perform one of the most difficult tasks known to man, listening to two people explain a dispute thoroughly enough to be understood and to permit a decision which conforms to the law and roughly equals justice.  Obviously, if you are to be justly treated at the small claims hearing, you are going to have to be highly organized, and ready to present your evidence in a way that the judge expects and he can understand.

If you feel intimidated by this task, given the very short time you have to perform it, you should.  Trial lawyers do this sort of thing all the time, but they have thousands of cases to learn on.  You have one case.  You will have to substitute preparation for experience, but it can be done.  For the balance of this article we will analyze what you need to do to prepare adequately for the hearing, how to present the evidence so a judge can understand it, and then provide a few pointers on courtroom demeanor and etiquette which will help you make the judge want to understand your case.

The first step to organizing your case for presentation is to decide what your case is.  What is it that you need to show the judge in order to justify your deductions from the security deposit?  They will probably something like this.

The premises were in good shape when the tenant took possession.

The premises were adequately maintained while the tenant was in possession.

The premises needed to be cleaned, or showed evidence of damage over and above normal wear and tear, or the tenant owed rent or other things when he moved, or all three.

The deductions from the deposit were reasonable and accounted for according to law.

Two things are noteworthy about this list.  The first is that none of it has anything to do with whether the tenant is a nice guy.  From this may be inferred that the judge will not care that the tenant is a nice guy.  Do not budget any part of your five minutes on the tenant’s lack of nice guyism.  The second is that you seem to be proving everything.  Unlike what is often said on TV, the defense often has the burden of proof.  All of the things which we listed as a part of your case are facts that will cause you to prevail if they exist.  They are part of your case, so you have the burden of proving them.  Fortunately, you have followed our advice on documenting the condition of the premises given earlier, so you will have little difficulty doing so.  Also, we did not mention the proof of your counter claim, but this is redundant since you will automatically prove it under list item three.

The next step in the preparation is to list all the evidence which you have on each point.  It is too soon yet to decide whether you will actually present it.  For now we are discussing only what is available.  The following descriptions are illustrations only, the actual evidence you have may be different, but the method is the same.  We also suppose for the purpose of this illustration that the final accounting of the security deposit included deductions for a professional cleaning, painting for which the tenant was charged in part, and a few minor items of damage, together with a couple of late charges that he never paid and three days rent because he moved out on the third of the month.

1.     The premises were in good shape when the tenant took possession.

Under this heading we have the walk through checklist which you and the tenant prepared when you handed him the keys.  Also available is the security deposit accounting to the previous tenant and the underlying invoices.  Witnesses would include the people who did the work, and you, because you inspected their work when they were done.  The tenant is also a witness but we will consistently leave him out of the equation, we must always assume he will be hostile.

2.     The premises were adequately maintained while the tenant was in possession.

In support of this point is your own testimony and your maintenance file on this apartment, including all written maintenance requests, if any, and invoices from the workmen who did the repairs.  Other than you, witnesses would include the workmen.

3.     The premises needed to be cleaned, or showed evidence of damage over and above normal wear and tear, or the tenant owed rent or other things when he moved, or all three.

This is the core of the matter.  Documentation will include the walk through checklist made when the tenant moved out, the security deposit accounting and supporting invoices, photographs of some damage, and the ledger card or sheet for this tenant, showing the two unpaid late charges and three days rent.  Witnesses include the workmen who did the repairs and cleaning.  If canceled checks have been received these also would be helpful as establishing payment for the repairs.

4.     The deductions from the deposit were reasonable and accounted for according to law.

The security deposit accounting fits here, together with any proof of mailing which your local law requires or which you thought prudent.  Also to the point would be your policy on component life expectancy showing that a paint job last three years, carpet eight or nine, and so forth.  You are probably the only obvious witness, although if you took your useful life estimates from a professional journal, the tax code, or some other source, a copy of that would be useful.

Clearly this amount of evidence and number of witnesses is going to be totally unmanageable in the time likely to be allotted to you.  Choices will have to be made.

Note that all of the witnesses suggested are heard from in their written invoices.  Now, if you employed independent contractors whose invoices show that they are independent, these should suffice.  Because the rules of evidence are relaxed in small claims court, these invoices will be received without the elaborate foundation required in a regular civil trial.  If an employee did any of the work, however, you should have that employee standing by.  Let us say you have a handyman who repaired the three or four minor items of damage and who then signed off on a work order for three hours of labor and some materials.

Let us now make the decisions on how we will organize the evidence on each of the four numbered elements of proof.

1.     Under this element we will organize the exhibits into two groups.  Group A (the group designations are for our own use only) will include the walkthrough checklist, which we will present to the judge at an early stage.  Group B will include the previous tenant’s security deposit accounting and supporting invoices.  Group B we will present only if the tenant contends that somehow the walkthrough checklist was a lie, our theory being that we can show that substantial work was done readying the apartment.  We decide to call no third party witnesses, and rely only on your representation that the apartment was repaired, refurbished and in good condition at move-in.

2.     For this item, we will bring along the maintenance file showing any repair orders and work done, or the lack thereof.  We designate this as group C, but will hold it in reserve, like group B, using it only if the tenant contends that a lot of damage occurred because you refused to do routine maintenance.

3.     Under this heading we will include the walkthrough checklist, which we will designate group D, the photographs, which we will designate group E, the security deposit accounting and supporting invoices which we designate group F, and the ledger card, designated group G.  The employed handyman will come to court but stay in the audience.  We will tell the judge he is here and what he will say, but let the judge decide if he needs to hear it.

4.     Under this item will be your policy concerning how much you charge, which we designate group H, and your own testimony.

Once you have decided what evidence to present, you must put it into a presentable form.  By this we do not mean that you should alter any document or other item which you intend to present to the judge, not even to make it look nicer.  Never alter or mark on an original document, or put comments on copies.  By preparing them we mean organizing them.

As far as the documentary evidence is concerned, this means grouping them and having sufficient photocopies.  Nothing is more frustrating than a litigant who comes forward with a stack of 40 papers, well shuffled, with no copies for the other people involved in the trial.  You have already placed your documents in groups A through H.  For each group you will need one copy for the claimant (he is entitled to see this stuff), one copy for yourself so you can follow along if the judge questions you about them after you have handed up the originals, the originals for the judge, and an extra copy just in case.  When the trial is over, the judge may want to keep the exhibits you submitted so he can study them later.  If this is so, offer copies in place of the originals.  This is usually done, but not always.  In any case, it is nice to be ready to do this, as it will save you a trip back to the courthouse to retrieve your originals after the judgment is entered.

In our example you have one witness other than yourself, your handyman.  Witnesses also have to be prepared.  Take your handyman aside for a half of an hour with a cup of coffee.  Explain generally what is going on, and tell him what you need him to say.  Explain to him that you want him to describe the repairs he had to make, and to confirm how much time he spent and the materials he expended to do it.  Show him the work order.  You are not putting words in his mouth, you are refreshing his recollection about what happened and letting him know the scope of what he will be asked so that, in the event he needs to testify, he can do so smoothly without a lot of hesitation or irrelevancies.

Now we come to the final phase of the general preparation for the hearing.  This consists in deciding what you intend to present to the judge and in what order.  It is obvious that your major strength is in your documentary evidence, so that will be the centerpiece of your presentation.  You will concentrate on making your own case, not refuting the claimant’s case.  You will not want simply to dump a pile of documents on the judge’s desk, so you must allot some brief time to explain what he is receiving, but mostly you will let the documents speak for themselves.  Because of the short time you will have to present your case, you decide to concentrate on list items 1 and 3.  The elements of point 2 will not be mentioned at all, unless the tenant them up, and point 4 will be handled with a brief explanation only, documents in group H being held in reserve.  Our witness will be held in reserve as well.

HOW TO PRESENT IT

How should the presentation be made?  This question is answered by the nature of the small claims proceeding itself.  Recall your experience when you sat in on a small claims calendar.  First, we know the judge has only a vague idea what the case is about when the case is called, which implies we must tell him.  Second, the claimant will speak first, which implies we must listen.  Third, you may not get a chance to speak a second time, so everything we think is important should go into our initial presentation.

When the judge calls on the claimant to state his claim, listen carefully and make enough notes so you will remember the major points he made.  Do not interrupt.  Once he is done, the judge may ask you if you have any questions of the claimant.  It is usually not a good policy to ask questions unless you have studied the art of cross examination.  Trying to argue with your tenant by asking questions will only waste time and make you appear ridiculous.  In the absence of a well planned and executed cross examination, the only questions you might consider asking would be those designed to clarify a point you found confusing in his presentation.  On the other hand, if you found it confusing so did the judge, and if the claimant confuses the judge he loses.  In any event, after this you will be invited to present your case.  This is your big five minute chance.

It is a bad idea to try to speak from a script.  You are involved in a hearing, not a reading.  If there is something you want the judge to read, it should be presented as an exhibit.  But from you the judge wants an oral presentation in common language so that he can evaluate your credibility as a witness.  Outlines, however, are a good idea.  By all means outline the major points you want to make (we discussed them above) in advance, and follow the outline so that nothing is left out.

Because one of the hardest things to do is to listen to something for the first time and understand it, it is essential that your presentation have impact.  The best way to have impact on the judge is to tell him, within the first sentence or two of your presentation, exactly what you intend to prove and how, and then to do it, without any digressions.  A good initial comment in our example case might be this:

             “Your honor, when I rented this apartment to Mr. X, it had been completely cleaned and readied for letting.  He only lived there a year, but in that time he did substantial damage to the property, and failed to pay some late charges and left owing rent, which I can prove through my records.  I do not think I owe him anything.”

Whereupon, you will launch into your presentation of the evidence.

What you have done with this ten second statement is to give the judge a roadmap explaining exactly what your theory of the case is, what you intend to prove, and how you intend to do it.  Perhaps a better analogy is that it is a roadway into his brain, over which the evidence you present will travel.  Because he knows what is coming he will grasp instantly how each piece of information you supply, whether by your oral descriptions, or by way of the documentary evidence, will fit into place, and he will understand.  On the other hand, having built this roadway, it is vital you do not stray from it.  Do not digress to other matters until you have completed your presentation of your case.  If you do, the information you supply will not fit and the judge will be confused.  If this happens, you lose.

Rehearse the presentation of your case before you go to court.  Outline it.  Then speak it, timing it with your watch.  You will be amazed how long it takes the first time you do it, which is why you will rehearse it repeatedly.  Pare it down to the point that the most essential elements are the only ones left.  When you have gotten there, find a friend, relative, or some other person who is willing to listen, and inflict the presentation on them.  Ask them to explain what you have just presented.  If they can do so, you are on the right track.  If they seem vague, find out why they do not understand.  The judge is a highly experienced and usually well disciplined legal mind, but he is also human.  Rehearse your presentation until any human can understand it and the judge will understand it.  The judge’s understanding is vital to success in small claims.

If you have planned your presentation well, you should have retained the judge’s interest and impressed him that you are organized, so he will be in the mood to listen to you more.  Once your presentation of your case in chief is over, you may take such time as the judge allows to refute specific points made by the tenant in his presentation.  If you are going to do this, say so, you need to give the judge a new roadmap, or, as we said, build a new roadway into his brain.  Suppose the tenant did contend that most of the damage to the property was really stuff that you refused to repair when he brought it to your attention.  Now you know you have to bring in the evidence from element 2 of your case, which, up to now you have been holding in reserve.  Say something like this:

             “Your honor, I would like to comment on Mr. X’s contention that I refused repairs.  My maintenance records show that he only requested one, which I tended to immediately, and none of the items I charged him for have anything to do with deferred maintenance.”

Then identify the documents in Group C, explaining that all requests must be in writing, and speak your piece.

It is, of course, impossible to foresee every possible permutation of every possible case that might present itself, but there is a general rule to be deduced from all of this.  It is a rule that those who present cases for a living are quite familiar with and apply all the time.  Maximum impact will be achieved only if you prepare the listener for what he is about to hear.  Never assume that the listener can, in the short space allowed to him to hear you comment, classify a given piece of information properly and understand its relationship to your entire presentation.  In other words, say what you intend to say, say it, then say you said it.

Part 1, Part 3