In this action, plaintiffs seek to recover a security deposit in the amount of $1,600 which they gave to defendant at the time they executed a lease for the rental of an apartment owned by defendant. Eight days after execution of the lease agreement, which was still prior to the commencement of the term of the lease, plaintiffs requested the return of their security deposit. Plaintiffs ultimately refused defendant's tender of a check for $664, which represented the balance of the security deposit after defendant's deduction of her advertising expenses and one-half month's rent (until a new tenant was obtained), and this action ensued. Defendant's response to written interrogatories and a notice to produce indicated that defendant had deposited plaintiffs' check for $1,600 into her personal bank account.
General Obligations Law § 7-103 (1) provides that a security deposit "shall continue to be the money of the person making such deposit . . . and shall be held in trust by the person with whom such deposit . . . shall be made and shall not be mingled with the personal moneys or become an asset of the person receiving the same." While the statute does not provide any specific penalty or sanction for a landlord's commingling of a security deposit with personal funds, it has been held that the commingling of a security deposit with a landlord's personal funds is a conversion, which entitles a tenant to an immediate right of recovery ( see LeRoy v. Sayers, 217 AD2d 63; Sommers v. Timely Toys, 209 F2d 342).
The rule against commingling a security deposit with a landlord's own funds was reaffirmed by this court in Finnerty v. Freeman ( 176 Misc 2d 220 [App Term, 9th 10th Jud Dists 1998]) and Levy v. Taninbaum (NYLJ, Dec. 24, 1997 [App Term, 9th 10th Jud Dists]) wherein it was stated: "A landlord holding a security deposit under a lease covering the rental of real property does so in the capacity of a trustee ( Glass v. Janbach Properties, Inc., 73 AD2d 106, 108). The landlord owes a duty not to commingle the deposit with his own funds, and upon breach of that duty, he forfeits his right to avail himself of the deposit for any purpose ( Matter of Perfection Technical Services Press, 22 AD2d 352, 356, affd 18 NY2d 644)."
A tenant's failure to comply with the terms of a lease is not a defense to a landlord's breach of the duty not to commingle the deposit with personal funds ( LeRoy v. Sayers, 217 AD2d 63, supra). Accordingly, notwithstanding defendant's allegation that plaintiffs repudiated the lease agreement, defendant was not relieved of her obligation to maintain the security deposit in a separate account. Inasmuch as defendant failed to rebut the showing of noncompliance with the statutory requirement, plaintiffs were entitled to partial summary judgment on their second cause of action.