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High court rules on landlord-tenant dispute

January 22, 2009

Landlords must refund a security deposit and can't get money back for property damage if they don't adequately or timely notify tenants about those claims, but landlords can still recover unpaid rent and other losses, the Indiana Supreme Court ruled today.

In a landlord-tenant dispute involving Indiana's statutes on back-rent payment and return of a security deposit, justices ruled 4-1 in favor of the landlord in Stan Klotz v. Sarah Hoyt and Chrissy Kornmann, No. 18S02-0807-CV-391.

Tenants Sarah Hoyt and Chrissy Kornmann had entered a yearlong rental agreement in July 2006, paying Stan Klotz a $600 security deposit and rent for July and half of August but made no other payments. The court shows they stopped living there sometime in August or September 2006, and the landlord sent a letter about the intent to start eviction proceedings that November because of their non-payment of rent. They didn't respond, and he filed a small claim in January 2007. Klotz presented evidence that the total amount was almost $11,919 in unpaid rent, late fees, damages, and attorney fees, but he asked the court for a judgment of $6,000 - the small claims' statutory limit.

Delaware Circuit Judge John Feick dismissed Klotz's breach-of-lease complaint in 2007, but early last year an Indiana Court of Appeals panel reversed that decision in Klotz v. Hoyt, 880 N.E.2d 1234, 1235 (Ind. Ct. App. 2008)  and remanded with instructions to enter judgment in favor of the landlord for $6,000.

Justices took the case to resolve conflicting precedent on the issue, four agreeing with the conclusion the Court of Appeals had reached. Writing for the majority, Justice Brent Dickson wrote that the court is harmonizing conflicting provisions of Indiana Code 32-31-3-12 to 16 relating to deposits and notice of damage claims.

Chief Justice Randall T. Shepard concurred in result but penned his own response offering thoughts on an additional legal question about small claims procedures.

"Because we do not receive very many appeals from the 300,000 small claims cases litigated each year in Indiana, I would go a bit further and answer a question posed by this appeal but not answered in the Court's opinion," he wrote, noting that a legitimate claim of a landlord or tenant shouldn't always be dictated by a required 45-day mailing deadline before a hearing.

"Our state (and most others) has always believed that such informal approaches to small claims disputes make for substantial justice to litigants on both sides of the 'versus,'" he wrote.

In his dissent, Justice Frank Sullivan wrote that the majority misreads part of the state statute.

"Simply put, if occupancy ends with a tenant owing a landlord more than the amount of the security deposit in damages ... subsection (c) expressly authorized the landlord to recover the additional amount - but only so long as the landlord has complied with [other sections]," he wrote.

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