## Facts

- A tenant paid a $200 damage deposit under a residential rental agreement.
- After the tenant moved out and terminated the tenancy, the landlord neither returned the deposit nor provided an itemized written list of deductions and any remaining balance within 30 days.
- The landlord later filed suit in magistrate court seeking $1,763.05 for alleged property damage.
- The tenant denied liability and sought return of the deposit.

## Issues

1. Whether a landlord’s failure to timely return the deposit or provide the statutory itemized accounting under NMSA 1978, § 47-8-18(C) bars the landlord from bringing an affirmative action for property damages.
2. Whether the forfeitures in § 47-8-18(D) extend beyond the deposit and deposit-related counterclaims to preclude all damage recovery.

## Decision

- The Supreme Court of New Mexico reversed the district court’s judgment and remanded.
- The court held that § 47-8-18(D) does not bar a landlord from filing an affirmative lawsuit for damages.
- The court held that noncompliance triggers the statutory forfeitures: the landlord loses the right to withhold any part of the deposit and loses the right to assert a counterclaim in an action brought to recover the deposit, along with statutory exposure for damages and costs.
- The case was returned to the lower court to apply the statute consistent with this interpretation, including recognition that the landlord could not keep the deposit.

## Legal Principles

- Under NMSA 1978, § 47-8-18(C), upon termination of the tenancy the landlord may apply a damage deposit to qualifying amounts, but must provide the tenant an itemized written list of deductions and any remaining balance within 30 days of termination or departure (whichever is later).
- Under § 47-8-18(D), if the landlord fails to provide the required written statement and any balance within the statutory period, the landlord:
  - forfeits the right to withhold any portion of the deposit; and
  - forfeits the right to assert any counterclaim in an action brought to recover that deposit; and
  - is subject to the statute’s cost- and damage-shifting consequences.
- Statutory forfeitures are construed narrowly; a forfeiture will not be extended beyond the sanction the legislature stated.
- The “counterclaim” forfeiture in § 47-8-18(D) applies only to counterclaims in a tenant’s deposit-recovery action and does not eliminate a landlord’s separate, affirmative cause of action for property damages.

## Conclusion

The court interpreted § 47-8-18(D) as imposing deposit-specific penalties for failing to timely account for and return a damage deposit, while leaving intact the landlord’s ability to sue independently for provable property damages; the judgment was reversed and remanded for proceedings consistent with that limited forfeiture scheme.


Garcia v. Thong, 119 N.M. 704, 895 P.2d 226 (N.M. 1995)