Landlord barred from taking deposits

After a preliminary injunction filed by Attorney General Roy Cooper was granted last week, Chapel Hill landlord James Ware Kelley III is now prohibited from receiving or requesting security deposits from tenants.

Cooper filed a complaint against Kelley in July, which said Kelley “failed to maintain and protect security deposits” given to him by tenants.

The complaint also states Kelley did not hold the security deposits in an account separate from his personal and business funds, as is mandated by North Carolina law.

Kelley did not respond to requests for comment.

David Kirkman, assistant attorney general in the Consumer Protection Division of the North Carolina Department of Justice, said Kelley would hold students’ deposits by claiming tenants were responsible for damages that occurred before they moved in. Others said Kelley claimed tenants had not given him the requisite 30 days notice before telling him that they would not be renewing their lease.

“This is a pattern that we’ve noticed,” Kirkman said.

According to the complaint, most of Kelley’s tenants have been UNC students.

Dorothy Bernholz, director of Carolina Student Legal Services, said she is glad the injunction was granted to protect future and current student tenants.

“(The injunction) basically says that he can’t do what he’s been doing all over town,” Bernholz said.

Bernholz said Student Legal Services has been helping students prepare affidavits for the case. She said any students who have been affected by Kelley’s practices should know they can always go to legal services for help.

“My concern is I want to make sure his current student residents understand that they have recourse,” she said.

The preliminary injunction against Kelley was filed March 13. Kirkman led the effort to get the injunction granted.

Kirkman said he thought the matter would have been resolved by now with a settlement or court ruling.

He said the Attorney General’s office began to worry about people moving out of Kelley’s properties or signing leases with him during this time of year when students are beginning to sign new leases for housing for the next academic year.

“We thought this is important to protect the tenants who are going to be moving in,” he said.

Kirkman said since the original complaint was filed, others have come forward reporting similar incidents.

According to the original complaint, Kelley filed for bankruptcy in 2010, but his proceeding was dismissed by the United States Bankruptcy Court for the Middle District of North Carolina in November of 2012. Kelley filed for bankruptcy again in Colorado in November of last year, according to the motion for the injunction.

Kirkman said the attorney general’s office aims to get two forms of monetary compensation from Kelley: restitution for tenants who lost their deposits and civil penalties from Kelley’s violation of the North Carolina Tenant Security Deposit Act. For each violation of the act, Kelley might have to pay $5,000, according to the original complaint.

“This will be the hard part because of the bankruptcy,” Kirkman said.

Kirkman said he believes Kelley is still holding tenants’ security deposits.

“We think he’s got almost two dozen deposits that he’s still holding,” he said. “We still don’t know exactly how much he has.”

Kirkman said the attorney general’s office has been having other difficulties getting Kelley to release information about his tenants.

“We’ve had a terrible time getting him to tell us the tenants he had in the past five or 10 years, despite subpoenas and court procedures,” he said.

Bernholz said she hopes students who lost their deposits will be able to get their money back despite Kelley’s apparent financial problems.

“We’re hoping the courts can find some money and that that money can be set aside,” she said. “That’s not the landlord’s money to keep.”

city@dailytarheel.com