Know before you go
- A deposit can be no more than one and a half months’ rent.
- The landlord has 30 days after the tenancy ends to return it, with an itemized list of any deductions.
- A tenant who wins a wrongful-withholding case may be awarded double the amount withheld.
New Jersey does not require a landlord to collect a security deposit at all. If one is collected, though, the state’s Security Deposit Law sets firm rules on how much it can be, where the money is kept, what the tenant must be told and how quickly it has to come back. The rules below come from the Department of Community Affairs guide Truth in Renting, which summarizes the statute and the court decisions that interpret it.
Key takeaways
- Maximum deposit: one and a half times one month’s rent, including anything labeled prepaid or last month’s rent.
- The money stays the tenant’s property and must sit in a New Jersey bank account that earns interest.
- Return deadline: 30 days after the tenancy ends, sent by personal delivery, registered or certified mail.
Which rentals are covered
The law applies to most residential rentals, including mobile homes. The main exception is an owner-occupied building with two or three units. Even there, a tenant can bring the tenancy under the law by sending the landlord a written request; the rules apply 30 days after that request.
How much a landlord can ask for
The cap is one and a half times one month’s rent. A landlord can ask for less, never more. After the first year, any yearly increase in the deposit may not exceed 10 percent of the current deposit.
Labels do not change the math. New Jersey courts have held that prepaid rent held to secure future rent counts as part of the security deposit, and that includes a so-called last month’s rent. In practice, the guide says, a landlord may not require more than two and a half months’ rent at the start of a lease: the deposit plus the first month. A separate pet deposit is allowed only if the combined total stays within the same one-and-a-half-month limit.
Where the money must be kept
The deposit continues to belong to the tenant and must be held in trust. It cannot be mixed with the landlord’s own money. A landlord who receives deposits for fewer than ten units must place them in an insured bank or savings and loan located in New Jersey, in an interest-bearing account. Larger landlords have a few more options, such as certain insured money market funds, but the money must still earn interest. Seasonal rentals of 125 consecutive days or less are exempt from this account requirement.
The interest belongs to the tenant. It is paid in cash or credited toward rent each year on the lease anniversary or renewal, or on January 31 if the tenant was told in writing that this is the payment date.
The notice you should receive
Within 30 days of receiving the deposit, and again with each annual interest payment, the landlord must tell the tenant in writing the name and address of the bank, the amount of the deposit, the type of account and the current interest rate. A similar notice is due within 30 days if the money moves to another bank or to a new owner.
If that notice never arrives or interest is not paid, the tenant may give written notice that the deposit plus 7 percent annual interest should be applied to rent. When the missing item is only the annual notice or the annual interest, the tenant must first give the landlord 30 days to fix it. Once the deposit has been used for rent this way, the landlord cannot demand a new one.
Getting the deposit back
Within 30 days after the tenancy ends, the landlord must return the deposit plus interest, minus any lawful deductions. Deductions can cover damage beyond normal wear and tear and other money owed under the lease. If anything is deducted, an itemized list must go to the tenant by registered or certified mail within the same 30 days. No deductions can be taken while the tenant still lives in the unit.
Tip: Before you hand back the keys, photograph or video every room and note the date. Give the landlord a forwarding address in writing. Both make it far easier to show what condition the unit was in and where the money should have been sent.
A broken lease changes the clock. If a tenant moves out early without legal cause, the tenancy is treated as ending when the unit is re-rented or the lease runs out, whichever comes first. The 30 days start from that date.
Faster deadlines apply when a tenant is displaced by fire, flood, condemnation or evacuation. In that case the landlord must return the deposit within five business days once an official has barred occupancy or certified that the displacement will last more than seven days.
When the landlord does not pay
No state agency resolves deposit disputes; they go to court. The Small Claims section of the Special Civil Part hears deposit cases up to $5,000, in the county where the unit is located or where the landlord lives. Larger claims go to the regular Special Civil Part. The filing steps are covered in Small Claims Court in New Jersey: Limits, Filing Fees, Where to File and How to Prepare.
The penalty is significant. If a landlord fails to return the deposit within 30 days, or the tenant disputes the deductions, the tenant may sue for double the amount wrongfully withheld. A tenant who wins may be awarded that double amount plus court costs and reasonable attorney’s fees.
If the building was sold
A new owner takes over the obligation. The buyer is supposed to obtain the deposit and accrued interest from the former owner, and whether or not that happens, the new owner is responsible for holding the money, sending the notices and returning it.
If rental assistance paid the deposit
A landlord who willfully withholds a deposit paid through a state or federal assistance program can face a civil penalty of $500 to $2,000 for each offense. Separately, misusing deposit money can be charged as a disorderly persons offense.
Deposit problems often show up alongside repair disputes at the end of a lease. If the condition of the unit is part of the argument, the repair rules in Repairs in a New Jersey Rental: The Warranty of Habitability, Heat Rules and What a Tenant Can Do explain what the landlord was responsible for keeping in working order.