Housing
Understanding Your Security Deposit
This information last reviewed: 2/7/2014

The Rent Security Deposit Act

Most agreements to rent housing, or leases, require you to pay the first month’s rent before you move in. Most leases also require you to pay a security deposit. The New Jersey security deposit law, the Rent Security Deposit Act, specifies how a landlord must collect, maintain, and return a security deposit. Cite: N.J.S.A. 46:8-19. Under this law, a security deposit is money that belongs to the tenant but is held by the landlord in trust. A security deposit is made to protect the landlord against the tenant’s failure to follow his or her responsibilities as stated in the lease. This includes nonpayment of rent, or damage done to the apartment by the tenant, other than ordinary wear and tear. Read your lease carefully before you sign it. The lease should state clearly where the landlord will hold your security deposit and under what conditions it will be returned to you when you move out. The security deposit law now says that a landlord can’t take any money from the tenant’s security—for repairs, rent due, or anything else—while the tenant still lives in the apartment or house.

The Rent Security Deposit Act applies to all rental units, including tenant-occupied, single-family homes. The only exception is for rental units in owner-occupied buildings that have no more than two units other than the owner-landlord’s unit. However, the law does apply even to tenants in these small, owner-occupied buildings if the tenant sends a 30-day written notice to the landlord stating that he or she wants the landlord to comply with the law’s provisions.

Limit on amount of deposit

The most a landlord can collect as a security deposit is one and one-half times the monthly rent. Cite: N.J.S.A. 46:8-21.2. There are no exceptions to this limit. Sometimes a landlord will try to collect more security money from a tenant at the time the landlord raises the tenant’s rent, in order to have the security keep pace with the rent increase. The law now says that the most additional security money that a landlord can get in any one year is 10 percent of the current deposit. Cite: N.J.S.A. 46:8-21.2.

Ask for a receipt when you pay the security deposit. The receipt should include the date, the landlord’s signature, and the amount of the security deposit paid. The receipt should show that this money is for a security deposit. Also, make sure that your written lease states that you have paid a security deposit and includes the amount of the deposit.

Notice of security deposit

The Rent Security Deposit Act requires the landlord to put your security deposit in a separate bank account that pays interest. The landlord must tell you in writing the name and address of the bank where the deposit is being kept, the amount of the deposit, the type of account, and the current interest rate for that account.

The security deposit law says that this notice has to be given to the tenant in writing within 30 days after the tenant gives the deposit to the landlord. The law says that the landlord must also give the notice not just within 30 days of getting it from the tenant, but every year at the time the landlord pays the interest to the tenant (see Interest on your security deposit). And a new landlord must also give the notice within 30 days of buying the property. The notice must be given to the tenant within 30 days after the landlord has moved the deposit from one bank to another, or from one bank account to another (unless the change in the bank or account takes place less than two months before the annual interest payment). Finally, the law required all landlords to give their tenants a new notice—telling them where the deposit is, how much it is, and how much interest it is earning—by the end of January 2004. Cite: N.J.S.A. 46:8-19(c).

Your right to use the security deposit as rent

The law also says that if the landlord does not put the security money in a proper bank account, or does not give a proper written notice to the tenant every time the law says he or she has to, then the tenant can give a written notice to the landlord telling the landlord to use the whole deposit (plus seven percent interest per year) to pay the tenant’s rent. (But be sure to read the next paragraph, which talks about a special situation.) This notice should be sent to the landlord by certified mail, return receipt requested, and you should keep a copy. The money can be used to pay future rent or any back rent the tenant owes. Once a tenant legally tells the landlord to use the security deposit as rent, the landlord can’t ask the tenant for another deposit as long as the tenant lives in the apartment or house. Cite: N.J.S.A. 46:8-19(c); Delmat v. Kahn, 147 N.J. Super. 293 (App. Div. 1977).

Note: There are two exceptions to the rights described in the paragraph above.

  • If a landlord does not obey the law that says he or she must pay the interest on the security deposit every year (or if the landlord does not use the interest to pay part of the tenant’s rent), or
  • If the landlord does not give a notice about the deposit to the tenant every year,

the tenant can use the deposit to pay past or future rent due. But before the tenant can do this, the tenant must give or send the landlord a letter giving the landlord 30 days to pay the interest or give the annual notice. (This notice should also be sent by certified mail, return receipt requested, and you should keep a copy.) Cite: N.J.S.A. 46:8-19(c).

There are two other important points about the notice of security deposit:

  • If you have a written lease, read it carefully. Landlords will often put the name and address of the bank where your security is deposited, along with the other information required by law, right in the lease. This is sufficient notice under the law.
  • Even if the landlord sends you the notice within 30 days, the landlord still violates the law if the notice is not true. If you receive the notice, call the bank to find out if the money has been deposited. If the money was not deposited, you can tell the landlord in writing to use the security deposit to pay your rent just the same as if the landlord had not sent you a notice at all. Cite: Princeton Hill Associates v. Lynch, 241 N.J. Super. 363 (App. Div. 1990).

Interest on your security deposit

The Rent Security Deposit Act requires landlords who rent 10 or more apartments to place tenants’ security deposits in either an insured money market fund or a federally insured bank account. The account must pay a rate of interest set at least quarterly and equal to the average rate of interest paid by the bank on money market accounts.

These higher interest accounts must be in New Jersey-based institutions. Cite: N.J.S.A. 46:8-19(a).

The law requires landlords who rent fewer than 10 apartments to place security deposits in bank accounts that pay at least the regular rate of interest. Cite: N.J.S.A. 46:8-19(b).

Whichever type of account your security deposit is in, all of the interest earned on it is yours. The law no longer allows the landlord to keep any amount to cover his or her administrative expenses. Cite: N.J.S.A. 46:8-19(a).

The law now requires that the interest earned on the deposit must either be paid to you in cash every year or subtracted from the amount of rent you owe on the renewal or the anniversary of the lease. This must be done either when your lease is to be renewed or on January 31 each year. (The landlord must give you a written notice that he or she will be paying you on January 31 of each year instead of the date your lease is renewed.) Cite: N.J.S.A. 46:8-19(c).

Getting your security deposit back

The Rent Security Deposit Act states what a landlord must do with your security deposit when you move out, even if you move out before your lease is over. Within 30 days after you move out, the landlord must return your security deposit and interest, less any rent you owe or any charges for repairing damage that you have done to the property. If the landlord deducts any amounts for damages or rent, he or she must give you a complete list of the damages he or she claims you did to the property and the cost of repairs. The landlord must send you the list of damages by registered or certified mail, and the landlord must return to you any money left over from your security deposit. Cite: N.J.S.A. 46:8-21.1.

The landlord can only charge you for property damage that is more than ordinary wear and tear. Ordinary wear and tear means damage that takes place from the normal, careful use of the property. Examples of normal wear and tear are faded paint on the walls, loose tile in the bathroom, window cracks caused by winter weather, or leaky faucets or radiators. Examples of damages that might not be ordinary wear and tear are large holes in the walls caused by nailing up decorations, cigarette burns on floors, or a broken mirror on the bathroom cabinet.

Landlords cannot charge cleaning fees to tenants who leave their apartments broom clean. Landlords often try to deduct such fees, as well as fees for painting.

There are steps you can take to prevent a landlord from charging you for ordinary wear and tear, cleaning, or painting. Before you move out, ask the landlord or superintendent to personally inspect the apartment. Then ask that person to sign a note stating that you left the apartment clean and undamaged. If you cannot get the landlord or superintendent to inspect the unit, have a friend do so. Ask your friend to take photographs, and sign and date them. If you have a friend do this, make sure the friend can go to court with you if necessary. If you end up in court, the judge will not accept a letter from your friend as evidence.

Going to court to get back your security deposit

If, after 30 days, the landlord has not returned your security deposit, you can file a complaint against the landlord in Small Claims Court. The Rent Security Deposit Act states that if the court finds that a landlord wrongfully refused to return all or part of a tenant’s security deposit, the court must order the landlord to pay the tenant double the amount of the security deposit if it is not returned at all, or double the amount that the landlord wrongfully deducted from the deposit.

When you file your Small Claims Court complaint, make sure you ask for double the amount of the deposit. (Note: Even if you forget to ask for double the amount of money when you fill out your complaint, the court still must give you double because the law requires it.) Cite: N.J.S.A. 46:8-21.1; Gibson v. 1013 North Broad Assoc., 172 N.J. Super. 191 (App. Div. 1980); Hale v. Farrakhan, 390 N.J. Super. 335 (App. Div. 2007). If some of the deposit was returned, be sure to ask for double the amount that you feel the landlord should not have deducted from your deposit. Cite: Cottle v. Butler, 257 N.J. Super. 401 (Law Div. 1992). If you go to Small Claims Court, also write on the complaint the words “together with interest and costs of the suit.” This means that you will get the interest and the money that it costs you to file the complaint ($20 plus mileage). The court should also award you reasonable attorney’s fees if you hired an attorney.

Note: You can sue for up to $5,000 in Small Claims Court and you can sue in the Special Civil Part where different rules apply. If your landlord owes you more than $5,000, you can still sue in Small Claims Court if you are willing to give up anything over $5,000. Cite: P.L. 2003, c.188 (section 6).

Also note: If your security deposit was provided by the Board of Social Services or some other government agency, and the landlord is wrongfully trying to keep it, the law says that the landlord not only has to give the deposit back to you, but he or she may also have to pay the agency a penalty of between $500 and $2,000. The law says the Attorney General, the Department of Community Affairs, or some other state agency can sue to help you get your deposit back and to collect the penalty. Cite: N.J.S.A. 46:8-21.1; P.L. 2007, c. 9.

When your building is sold

If your apartment building or rented house is sold, the law makes it clear that the new owner must get the tenants’ security deposits, plus interest, from the old owner. The law plainly states that the new owner is responsible to each tenant for the full amount of the tenant’s deposit, plus interest, whether or not the new owner actually got the deposits from the old owner. Cite: N.J.S.A. 46:8-20 and 21.

What if you are displaced?

If you are forced to move because of fire, flood, condemnation, or evacuation, the landlord must return your security deposit plus your portion of the interest earned on it within five days. Before returning your money, the landlord may deduct any charges you owe under the lease agreement. This includes any rent you owed when you were displaced. The security deposit must be made available to you during normal business hours for 30 days, in the city in which the property is located. With the money, the landlord must give you a detailed statement of interest earned by the deposit and a list of any deductions. If the municipal clerk agrees, the landlord can turn your money over to the clerk. The city clerk must then make it available to you.

Within three business days after the owner is notified of the displacement, the owner must give you written notice by personal delivery or by mail to your last known address, stating where and when your security deposit will be available. The owner must send a duplicate notice to the relocation officer, if the city has one, or to the city clerk. When your last known address is that from which you were displaced, and the mailbox at that address is no longer usable, the owner must also post such notice at each outside entrance of that property. If you do not ask for the money within 30 days, the owner must redeposit it in an interest-bearing account in the same bank from which it was withdrawn.

If you move back into the same property later, you must immediately return to the landlord one-third of the security deposit. You must return another third within 30 days and the last third within 60 days from the date you moved back in. If you do not repay the security deposit, the owner may bring an eviction action against you for nonpayment of rent. Cite: N.J.S.A. 46:8-21.1.

 

For information about citations, and how to get more information about a particular law, see Finding the Law in the Landlord Tenant section.