Lawsuit against landlord might stall

A lawsuit against a Chapel Hill landlord accused of defrauding several student renters might hit a snag after the man filed for bankruptcy in Colorado last week.

Earlier this year, N.C. Attorney General Roy Cooper sued James Ware Kelley, alleging that he failed to return security deposits to his student renters on Isley Street.

Kelley filed for Chapter 11 bankruptcy on Nov. 13 in Colorado. He previously filed for bankruptcy in North Carolina in August 2010.

Ware Investments LLC, Kelley’s holding company for his rental properties in Orange and Durham counties, has been defunct since April 2012, according to the N.C. Secretary of State.

According to the lawsuit, Kelley regularly mixed the renters’ security deposits with his own personal operating funds, and would fail to return the deposits at the end of the tenants’ leases.

When students went to ask Kelley for their deposits, he cited supposed damage claims as the reason for not refunding the money, the lawsuit said.

“The case is in the ‘discovery’ phase at the moment,” said Noelle Talley, spokeswoman for Cooper.

“We took the depositions of three former tenants of Kelley last Wednesday at the offices of UNC Student Legal Services, and we plan to depose others after Thanksgiving.”

Talley said because Kelley filed bankruptcy the case may slow down.

At a round table at UNC Monday, Cooper said his office will stay vigilant about Kelley’s dealings with student renters.

“We have had a few more victims come forward since we filed our case, and we would encourage any other student tenants who had problems with Mr. Kelley to please contact us,” Talley said.

According to the lawsuit, Cooper is seeking to return all the missing security deposits to tenants, and is asking for Kelley to be forced to pay $5,000 for every violation of the Tenant Security Deposit Act, which requires landlords to hold tenants’ security deposits in a trust account.

In total, Kelley could stand to lose about $45,000.

In an interview with The Daily Tar Heel in August, Kelley said he was not aware of the law requiring separate bank accounts for security deposits.

Kelley did not return multiple phone calls and emails this week.

Durham attorney Bill Mills and UNC Student Legal Services are also bringing separate cases against Kelley.

Dottie Bernholz, director of Student Legal Services, cautions students to be wary when looking for an apartment.

“We advise renters to carefully look over everything they are given to sign. We also welcome anyone to come by our office to go over their leases with us.”

Bernholz also said students should do an inspection of the apartment before they move in.

If a problem is found, they should consult their landlord so that they will not be held responsible for any damages.

Barring any setbacks, the attorney general’s office will continue to take depositions from students claiming to be victims of Kelley’s “deceptive trade practices.” Once they have heard from a sufficient number of tenants, then they will schedule a court hearing.

city@dailytarheel.com