Your Security Deposit Rights in New Jersey

A New Jersey landlord can charge a security deposit of up to one and a half months' rent, must keep it in a New Jersey bank or money market account that earns interest for you, and must return it with that interest, minus itemized deductions, within 30 days after your lease ends. If a court finds the landlord wrongfully kept any of it, the court awards you double the amount withheld. These rules come from the state's Security Deposit Law, sections 46:8-19 through 46:8-26 of the New Jersey Statutes (N.J.S.A.), which covers most rentals except owner-occupied buildings with two or fewer rental units.

How much can a New Jersey landlord charge?

The cap is one and a half times one month's rent, under N.J.S.A. 46:8-21.2. On $2,000 rent, the most the landlord can hold is $3,000. A pet deposit counts toward that limit, and so does prepaid rent: the Department of Community Affairs (DCA), citing New Jersey court decisions, says any prepaid money held to secure future rent, including last month's rent, is part of the deposit. At lease signing, the landlord can require no more than the first month's rent plus the deposit, or two and a half months' rent in all.

The same section limits increases. Any additional deposit the landlord collects in a year cannot be more than 10% of the deposit it already holds, and the total still cannot pass one and a half months of the current rent.

Example: you paid a $1,800 deposit on $1,800 rent, and the rent rises to $1,900. The cap would allow a deposit of $2,850, but the 10% limit holds this year's increase to $180, for a total of $1,980.

If your landlord lives in the building and it has no more than two rental units, such as an owner-occupied two- or three-family house, the law applies only after you invoke it. Send the landlord written notice that you want the law's protection, at any point in the tenancy, and it applies 30 days later. Can your landlord increase your deposit? covers increases in other states, and state security deposit laws compares the caps.

Where the landlord must keep your deposit and the notices you should get

Your deposit stays your property. The landlord holds it in trust for you and cannot mix it with its own money or treat it as its own asset. Where it must be held depends on how many rental units the landlord has:

• 10 or more units: an insured money market fund run by a New Jersey-based investment company, or a variable-rate account at an insured New Jersey bank or savings and loan.
• Fewer than 10 units: an interest-bearing account at an insured New Jersey bank or savings and loan, at the rate it pays on time or savings deposits.

The landlord must send you a written notice with the name and address of the bank or investment company, the type of account, the current interest rate, and the amount of your deposit. That notice is due:

1. within 30 days after you pay the deposit;
2. within 30 days after the landlord moves the deposit to another account or institution, if the move happens more than 60 days before the annual interest payment (otherwise the annual notice covers it);
3. with each annual interest payment; and
4. within 30 days after a new owner takes over the property, from the new owner.

DCA says the first notice can appear in the lease itself. A seasonal rental of 125 consecutive days or less, to someone with a permanent home elsewhere, is exempt from the bank and investment rules. Security deposit receipts explains which other papers to keep.

What to do if the notice or interest is missing

If the landlord does not put the deposit in a proper account, does not send a required notice, or does not pay the interest, you can tell the landlord in writing to apply the deposit, plus interest at 7% a year, to rent you owe now or later. On a $2,400 deposit, 7% a year is $168. Once you use this remedy, the landlord cannot ask you for another deposit for as long as you live in the unit.

1. Compare your notices with the four due dates above. Note which one is missing.
2. Allow 30 days to fix an annual problem. If the landlord missed an annual interest payment or annual notice, write first and give it 30 days to comply. DCA says you can skip this wait when the landlord never properly deposited your money in the first place.
3. Send the remedy letter. Give the date and amount of your deposit, the requirement the landlord missed, and the rent payments the deposit and interest should cover. DCA's Security Deposit Bulletin includes a sample letter and advises sending it by certified or registered mail, return receipt requested.
4. Track the credit. Apply the deposit and interest to rent as it comes due until the credit is used up, then pay full rent again.

How interest is paid each year

All interest the deposit earns belongs to you. Since a 2003 amendment, landlords may not keep any of it as an administrative fee. The landlord pays it in cash or as a credit toward rent on your lease's renewal or anniversary date, or on January 31 if the landlord has told you in writing that it pays interest on that date. Each payment comes with the annual notice listed above, and interest earned since the last payment comes back with your deposit when you move out. Security deposit interest requirements lists the other states that make landlords pay interest.

When the deposit must come back

Within 30 days after your lease ends, the landlord must return the deposit plus interest, minus any deductions, by personal delivery or by registered or certified mail. The landlord must also send an itemized list of the interest and each deduction, by one of those methods, within the same 30 days. Give the landlord a forwarding address in writing so both reach you.

The landlord may deduct for damage beyond normal wear and tear and for other money you owe under the lease, such as unpaid rent. It cannot make deductions from the deposit while you still live in the unit. If you owe more than the deposit, the landlord can sue you for the difference.

Three situations change the timing:

• You broke the lease. If you move out early without a legal reason, DCA says, based on a New Jersey court decision, that the lease ends when the unit is re-rented or the term expires, whichever comes first, and the 30 days start then. New Jersey lease rights covers ending a lease early.
• Fire, flood, condemnation, or evacuation. If an official posts the building as closed to occupancy, or a building inspector certifies that the displacement will last more than seven days, the landlord must have the deposit ready for you on request within five business days, and must tell you in writing within three business days where to collect it. If you collect it and later move back in, you must pay the deposit back in thirds: one-third right away, one-third within 30 days, and the rest within 60 days.
• Domestic violence. If you end your lease under the Safe Housing Act because you or your child faces an imminent threat of serious physical harm, the deposit must be available within 15 business days.

Return deadlines by state shows how New Jersey's 30 days compares with other states.

Double damages and where to sue

No state agency decides deposit disputes, so you have to go to court. If the court rules for you, it must award double the amount wrongfully withheld plus full court costs, and it may also order the landlord to pay reasonable attorney's fees.

1. Send a written demand. Mail it by certified mail with the amount owed, your forwarding address, and a payment deadline, and keep a copy.
2. Choose the court by the doubled total. The Small Claims section of the Superior Court's Special Civil Part hears deposit cases up to $5,000, counting penalties but not court costs. Claims above $5,000 and up to $20,000 are filed as regular Special Civil Part cases.
3. File in the right county. File where the rental is located or where the landlord lives or does business. The small claims filing fee is $35 for one defendant, plus $10 per defendant for the court to serve the complaint by certified and regular mail, and fee waivers are available.
4. Bring your records. Bring the lease, proof that you paid the deposit, the bank notices or proof that none arrived, the landlord's itemized list, and dated photos of the unit.

Example: if the landlord wrongfully keeps $2,000, the doubled claim is $4,000, which fits in small claims. If it keeps $3,000, the doubled claim is $6,000, so the case belongs in the Special Civil Part.

If the building is sold, the new owner is responsible for your deposit and interest whether or not the old owner transferred the money.