New Jersey Security Deposit Law

Maximum Security Deposit Amount

Maximum amount: 150% of the month’s rent is the maximum a landlord can charge for a security deposit in New Jersey. The security deposit may also increase when rent goes up, but it shouldn’t be more than a 10% increase of the original deposit (NJ Stat. 46 § 8-21.2).

One stipulation regarding security deposits relates to the number of properties a landlord owns in New Jersey. While the total number of properties doesn’t impact how much a landlord can charge for a deposit, if they have 10+ rental properties, the landlord must place deposits in an interest-bearing account or invest in the market. This rule doesn’t apply to landlords with fewer than 10 units (NJ Stat. 46 § 8-19).

Pet deposits: While pet deposits are illegal for service and emotional support animals (ESAs), landlords can charge up to 1.5 times rent for a security deposit, including a pet deposit (NJ Stat. 46 § 8-21.2).

Penalties: By neglecting to follow the applicable New Jersey security deposit laws, landlords may have to pay double the security deposit owed, plus the applicable interest, and cover damages. They may also face legal fees if it ends up in court (NJ Stat. 46 § 8-21.1).

Handling Damage Deposits

New Jersey’s security deposit law affects how landlords should manage security deposits.

Security deposit storage: The security deposit must be placed in a separate bank account that bears interest. Landlords must share the bank name and location with the tenant (NJ Stat. § 46:8-19).

Interest-bearing account: In New Jersey, the security deposit must go into an interest-bearing account. The tenant should receive the interest every year as a rent credit or physical payment on the anniversary of the lease agreement or January 31 of that year, whichever the lease specifies. The tenant reserves ownership of all accrued interest (NJ Stat. § 46:8-19).

Receipt: Landlords must give tenants a receipt specifying the whereabouts of the security deposit within 30 days (NJ Stat. § 46:8-19).

Documentation: Having a move-in checklist is well worth it for landlords in New Jersey. That way, a landlord can determine the property’s overall condition before renting it out to the next tenant. Having a move-out checklist is also handy for this same reason, because it allows the landlord to have documentation before deducting anything from the security deposit.

Ownership transfer: In the event of a property sale, the prior owner is responsible for giving the security deposit and interest to the new owner no more than 5 days later. The old owner should also mail the tenant a notice that the ownership has changed, including the new owner’s contact information. If the new owner puts the deposit in a different bank, the tenant should receive written notice about new ownership no more than 30 days later (NJ Stat. 46 § 8-21.1).

Deductions

What landlords cannot deduct: Under no circumstances can a landlord deduct from the security deposit if the issue could be defined as wear and tear. Landlords can use security deposits if the unit and/or its appliances are filthy and need extensive cleaning, if the tenant abandons the property, if rent or utilities have gone unpaid after the tenancy ends, or if there is damage caused by smoking.

Reasons landlords cannot deduct: A landlord can’t use security deposits for wear and tear, arising from day-to-day property use. Some things that would be considered wear and tear and not qualify for deductions would be loose door knobs or cabinet handles, curtain color deterioration from the sun, worn-in carpeting, or mineral deposits on sinks and faucets. While these things may require repair or cleaning, they are expected with a tenancy, and a landlord cannot legally deduct them from the security deposit.

Return Timeline

Time frame: The security deposit refund minus deductions is due no more than 30 days after a tenant moves away. The timeline speeds up significantly if the tenant has had to move away due to a qualifying emergency, in which case the refund would be due within 5 days. If the move-out is due to domestic violence, the landlord must send the refund within 15 days (NJ Stat. 46 § 8-21.1).

Deduction tracking: Landlords must send an itemized list of expenses when returning a security deposit to a tenant in New Jersey. The deductions should include notes on each charge and a receipt for each one (NJ Stat. 46 § 8-21.1).

Itemized deduction notification: Landlords should send the deductions with the security deposit refund within 30 days of move-out. A landlord can get the deductions to the tenant in a few ways, including personally handing the tenant the deposit and deductions list or sending it by mail (certified or registered). Different timelines apply if a tenant has to move out due to an emergency (5-day refund due) or a domestic violence situation (15-day refund due), both with an itemized list of deductions. If the landlord does not send the deposit back in time, along with the itemized list of expenses, the landlord could have to pay 200% of the total to the tenant and any legal fees (NJ Stat. 46 § 8-21.1).

Penalties: As indicated above, not abiding by the New Jersey security deposit laws and refunding the security deposit amount the tenant is entitled to in the designated time frame, or excluding the itemized list of deductions, opens up the landlord to having to pay twice the amount originally owed (NJ Stat. 46 § 8-21.1).

Handling Disputes

Move-in/move-out checklist: A landlord who uses a move-in/move-out checklist is setting themselves up for success. With this checklist, a landlord can keep close tabs on the property condition before the tenant moves in and once they move out. It can help them gather pertinent details, such as descriptions of the condition of certain property elements, photos of various parts of the property, and more. That makes it easy to manage a property in person and from far away since the full property condition will be carefully documented. It also alerts the landlord about anything that needs repair at the beginning or end of a tenancy.

Tenant challenge: Let’s say the tenant disagrees with the deposit return. What can a landlord do about it? Put simply, the first thing a landlord will need to do is review the deposit refund, charges, and receipts. From there, a conversation with the tenant is warranted to discuss the charges in greater detail.

However, sometimes a conversation is insufficient, and a tenant may set up a claim with the small claims court. If that is the case, the best a landlord can do is have all of their documentation in order and stay as professional as possible through the legal process.