Strict Laws Govern Rental Security Deposits. What If a Landlord Ignores Them?

In 2020, Keegan McCall briefly rented a tiny room in a Burlington boardinghouse. For the three years since, he’s been trying to recover his security deposit.

McCall, 28, has become his own amateur debt collector, navigating the city’s housing board and the state’s small claims court to secure judgments in his favor. In the process, he said, he’s forked over another $500 in fees — and encountered the limits of a system that’s supposed to stick up for the little guy.

“I think the majority of people would have given up a long time ago,” he said.

Tussles over deposits, the refundable payment most landlords require in case of damage to a unit, can often seem like games of dirty pool. Many renters carry a tale of some perceived slight, which is why the state created laws spelling out when landlords can withhold a deposit and how quickly they must return it.

McCall’s case presents an unusual, but not unprecedented, question: What happens if the landlord ignores the law? The answer, prior to our reporting on it: nothing.

Back in August 2020, McCall agreed to pay $995 in monthly rent, plus a $995 deposit, to live at 565 Main Street, a white-clapboard house across from the University of Vermont’s Dudley H. Davis Center. The home had small, furnished bedrooms across four floors, with common bathrooms and one shared kitchen. It wasn’t his preferred living arrangement, but, McCall said, he “desperately needed” a place.

The building, according to property records, is owned by Michael Shea Jr. and Michael Shea Sr. The elder Shea runs the Spirit of Ethan Allen waterfront cruise company. He and his wife also own a rental company, Diamond Apartments, that manages properties throughout Burlington.

The Main Street house appears to be a distinct commercial enterprise. The younger Shea lived on-site, McCall said, and managed the property himself.

McCall quickly became wary of his live-in landlord. Shea Jr. responded to move-in questions with condescension and cussing, McCall claimed. The lease, he said, allowed either party to terminate tenancy with 60 days’ notice. After just two days in his new place, McCall gave notice.

McCall said the landlord didn’t do a walk-through when he moved out. By law, a landlord has 14 days to return the deposit once a unit is vacated, less any deductions for damage, which must be itemized. Once the deadline passed, McCall began inquiring by text message. He never received a response.

Burlington, unlike most Vermont cities and towns, has a citizen Housing Board of Review to efficiently resolve disputes over security deposits and hear appeals of alleged housing code violations. McCall requested a hearing before the five-person panel. The Sheas did not show up. The panel reviewed McCall’s evidence and, in a written order, said he was entitled to the $995 deposit. It also imposed a $995 penalty, the maximum allowed, because the board concluded that the landlord had “willfully” withheld the tenant’s money.

The Sheas “are experienced landlords and should be well aware of their responsibilities with respect to the return of a security deposit,” the board wrote.

McCall was awarded about $2,000, plus interest. He called his girlfriend to tell her the good news. She responded with bigger news: She was pregnant. McCall, who works at GlobalFoundries, was going to need that money to support a family and pay for childcare.

Yet McCall quickly learned that the city has no way to enforce the housing board’s orders regarding security deposits. Nor does it impose penalties for noncompliance, despite maintaining a rental registration and inspection program. Instead, the city encourages tenants to take their cases to small claims court.

For renters, the process can be intimidating — and expensive. Vermont Legal Aid typically doesn’t intervene in one-off security deposit cases because of staffing limitations, Jean Murray, director of its Housing for Everyone Law Project, said.

“Getting your security deposit back is not the same thing as losing your housing,” she said. “We have to prioritize.”

McCall decided to go it alone, reading explainers on vtlawhelp.org, a tenant resource hosted by Vermont Legal Aid and Vermont Legal Services, and consulting with court clerks. He sued Shea Jr. and Shea Sr. in July 2021.

The defendants didn’t file a response, nor did they attend a hearing. In December 2021, Superior Court Judge Samuel Hoar issued a $2,189 judgment in McCall’s favor, including nearly $200 in fees and court costs.

A month passed, and McCall didn’t receive a check. He asked the court to hold a hearing on the Sheas’ ability to pay, which was scheduled months later — and the defendants didn’t show again. McCall still had to pay filing fees, and he had to pay the sheriff’s office a fee, plus mileage, to serve more court papers on his landlord.

A judge cannot haul a debtor into court or prison, so collecting a small claims judgment requires some finesse. Often the creditor is a business or even a professional debt collection agency, represented by a skilled attorney. “Attorneys know how to collect,” said Chittenden County Sheriff Dan Gamelin, whose office serves civil court papers on defendants.

As McCall’s case languished, another former tenant of 565 Main Street was beginning the same process. Liam Bell, who lived there between December 2020 and March 2022, sought to recover nearly $500 of his deposit that had been withheld without explanation. Bell also obtained an order awarding him the deposit, plus damages, from the city’s Housing Board of Review, then went to small claims court when the bill went unpaid.

In a sworn affidavit, Sheriff Gamelin detailed his attempts to serve the Sheas in Bell’s case. Noting that the younger Shea has been “very difficult” to serve in the past, Gamelin went directly to the Spirit of Ethan Allen corporate office. There, he served Shea Sr., who said his son was “avoiding” the sheriff. He gave Gamelin his son’s phone number, but when Gamelin called, “Michael answered the phone and advised me I had the wrong number after I identified myself” and hung up.

“Mr. Shea Jr. is definitely avoiding service,” Gamelin wrote.

McCall and Bell had a few options. A judge can take the money owed out of a defendant’s wages, but it can be difficult if the debtor is self-employed or a real estate entity. Plaintiffs can also ask the judge to hold the defendant in civil contempt, which can subject them to further penalties or fines. A third approach involves putting a lien on their property, which the owner must resolve before completing most future real estate transactions.

McCall chose the latter route. A lien, he thought, was the most surefire mechanism, something the former landlord couldn’t avoid. He shuttled between the courthouse and the city land records office, paid more fees and, in February, had a property lien entered against both Sheas.

“I’m tired of these types of people getting away with things all the time,” McCall said.

Murray, the Vermont Legal Aid attorney, said the situation with the Sheas suggests a need for a better way to adjudicate and enforce security deposit disputes, one that recognizes that tenants are distinct from typical creditors.

“There should be a practical way of being able to handle situations,” she said.

McCall appears to have been more persistent than the professionals. Burlington officials have not inspected 565 Main Street for compliance with rental housing codes since 2015, before the Sheas bought it, according to city records. The property’s certificate of compliance expired on December 16, 2020.

In February 2023, Shea Sr.’s wife, Elmira, told inquiring city officials that Shea Jr. owned the building separately from Diamond Apartments, according to records provided to Seven Days upon request. She provided the Department of Permitting and Inspections with Shea Jr.’s email address.

The department’s director, Bill Ward, emailed Shea Jr. in June, asking him to confirm whether the building is still used as a rental property. The city was “preparing to issue liens in July” for properties whose rental registration fees have not been paid, Ward wrote.

Ward never heard back, and no lien was recorded in the land records.

But on Tuesday, Seven Days finally got in touch with the Sheas. Each man sent a statement from his respective attorney, saying they had just paid the city the $3,326 they owed and intended to cut checks for the tenants.

The statements included different explanations for what had gone wrong. The younger Shea’s attorney said there had been “confusion surrounding the service of notice of these proceedings on my client.” Shea Sr.’s attorney blamed an unnamed property manager for failing to perform the required duties.

Nonetheless, as the property owner, Shea Sr. “takes full responsibility for these oversights,” the statement read, adding that the situation doesn’t reflect how he has managed his other rental properties.

Meantime, rents at 565 Main Street have continued to go up since McCall and Bell lived there: Rooms start at $1,495 per month — security deposit required.

This article appears in Aug 30 – Sep 5, 2023.

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