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New Jersey security deposit process

Last updated: May 05, 2015

What’s the deal with security deposit laws in New Jersey?

New Jersey laws permit landlords to charge up to one and one-half months’ rent as a security deposit. Additional security deposit costs collected on an annual basis cannot be any larger than 10% of the present security deposit.

Landlords must return the security deposit within 30 days after the tenant has surrendered the property in general circumstances, but this deadline is five days if flood, fire, evacuation, or condemnation caused the tenant’s departure. The landlord has to include annual interest payments on the amount as well.

Although the law outlines what landlords must do with regard to natural disasters or condemnation, one Tom’s River couple believes they are owed a security deposit after moving into a home they believe to be haunted. After several alleged experiences with ghosts, the couple brought in the Shore Paranormal Research Society, members of which confirmed “paranormal” activity within the structure. The couple fled the home and demanded their security deposit back, but the landlord filed a countersuit due to the family breaking the one-year lease. A judge has not yet ruled over whether paranormal activity entitles the family to a returned security deposit.

The landlord may withhold part or all of the security deposit if the tenant has caused damages within the home, providing a detailed list of how that deposit was used to pay expenses for repairs. The jury might still be out on whether ghostly inhabitants influence the use of the security deposit, you can read on to learn more about current deadlines and limits related to deposits for your human tenants.

Do landlords need to charge tenants a security deposit in New Jersey?

It’s prudent to charge a security deposit in New Jersey. This amount can help pay for property damage beyond typical wear and tear.

Beyond this, the security deposit can also help landlords cover missed rent for a tenant who skips town completely. What if you discovered that your tenant vanished with unpaid rent, leaving you in the hole? A security deposit can help guard against a financial blow.

What are the limits on rental deposits in New Jersey?

  •     A security deposit can be up to 1.5 months’ rent
  •     Annually, landlords can charge an additional deposit of not more than 10% the original deposit
  •     Security deposits and investments are not required for seasonal rentals

For an Atlantic City apartment with a monthly rent of $1000, the landlord is well within his or her rights to charge a security deposit of $1500 when a new tenant moves in.

Do landlords need to provide a receipt for a security deposit?

Yes, providing a receipt verifies proof that the security deposit was received. Many New Jersey landlords will do this by including a statement in the lease itself that serves as a receipt for the security deposit.

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A written statement with the name and address of the bank or savings and loan association or the investment company where the funds are being invested is also required. If the landlord does not place the security deposit in an account according to this law, or if notification is not given, the tenant can require that the security deposit plus an additional 7% each year be applied towards rent.

Does the money need to be kept in a separate account to allow it to accrue interest?

It depends on the situation. Landlords responsible for 10 or more rental units need to invest the security deposits into an insured money market fund with an investment company in the state of New Jersey or at a savings bank or loan association within the state of New Jersey, or a state version of a federally chartered bank. The security deposit may not be co-mingled with personal property of the landlord.

For a landlord responsible for less than 10 rental units, the money should be deposited in a state or federally chartered banking institution. The security deposit may not be co-mingled with personal property.

What can security deposit money be used for?

  • Nonpayment of rent
  • Damage done to the rental unit beyond normal wear and tear

What doesn’t the security deposit cover?

The security deposit cannot be used to charge cleaning fees if the tenants left the property “broom clean.”

What is the deadline to return a security deposit in New Jersey?

The security deposit (minus any costs incurred for cleaning or repairs, if applicable) must be returned to the renter no later than 30 days after the tenant has vacated the property. If the tenant was forced to leave due to fire, flood, evacuation, or condemnation, the security deposit needs to be returned within five days. In both cases, the landlord must return it by personal delivery, registered, or certified mail.

Do landlords need to notify renters of security deposit money used to fix damages?

Yes, the landlord must return the security deposit in addition to the tenant’s portion of the interest within 30 days accompanied by an itemized list of interest, earnings, and any deductions from the security deposit.

Where can I learn more about New Jersey Security Deposit laws?

If you have any questions, or think you may want to learn more about security deposit laws in New Jersey, please consult a lawyer.

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Disclaimer: The materials on this database provide general information related to the law and are intended to provide a layman’s summary of the law. The information provided does not constitute legal advice and the manager of this database is not a law firm. These materials are intended, but cannot be promised or guaranteed to be current, complete or up-to-date. All of the information offered are intended for general informational purposes only. You should not act or rely on any of the information contained on this database without first seeking the advice of a qualified attorney.

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