| Quick Facts | Answer |
| Maximum / Limit | 1½ Months’ Rent |
| Receipt Requirement | Required (for cash payments) |
| Inventory Requirement | None |
| Interest Requirement | Required (or investment earnings) |
To learn about laws on security deposit returns in New Jersey, click here.
Some cities and counties may have regulations which are different from those presented here. Always check local laws.
Maximum Security Deposit Allowed in New Jersey
New Jersey law limits the maximum security deposit to one and one-half month’s rent.
If a landlord collects additional money for the security deposit later in the tenancy, they can only increase the total security deposit by 10% per year.
Can Landlords Charge an Additional Pet Deposit in New Jersey?
In New Jersey, landlords can charge a pet deposit, except for service dogs and emotional support animals. However, the total security deposit cannot exceed one and one-half month’s rent. Landlords cannot exceed the limit by giving them another name like “pet deposit” or “damage deposit.”
This law does not prevent landlords from adding a monthly pet premium or “pet rent” charged for the right to keep an animal on the property.
How Much Rent Can a Landlord Collect Upfront in New Jersey?
Landlords in New Jersey can collect the first month’s rent in advance. Landlords can only collect an additional one and one-half month’s rent in advance, whether called a “security deposit” or “last month’s rent.” Last month’s rent is considered part of the security deposit in New Jersey.
Security Deposit Collections in New Jersey
When collecting a security deposit, landlords in New Jersey must provide a written notice to the tenant including:
- Amount of the deposit
- Name and address of the investment company or depository where the security deposit will be kept
- Type of account where the security deposit will be held
- Current rate of interest for the account
The written notice must be provided within 30 days of receiving the security deposit by either including the information in the lease agreement or delivering the notice to the tenant.
The landlord must send additional written notices:
- Within 30 days of transferring the security deposit to another account (unless the transfer occurs fewer than 60 days before the landlord provides the tenant with annual interest or earnings)
- Every year at the time the landlord pays or credits interest or earnings
Do Landlords Have To Provide a Receipt for the Security Deposit in New Jersey?
While landlords in New Jersey must provide a written disclosure to tenants containing information such as where the security deposit will be held, an additional receipt is only required when the tenant pays in cash.
What Obligations Do Landlords Have To Establish the Condition at Move-in in New Jersey?
New Jersey law does not require landlords to document or establish the property’s condition at move-in. While other states legally require a written inventory of damages when collecting a security deposit, New Jersey does not.
Security Deposit Holdings in New Jersey
Landlords in New Jersey that collect 10 or more security deposits must hold them in one of two places: an interest-bearing account or by investing in shares of an insured money market fund.
Option 1: Interest-bearing account. The landlord may place the security deposit in a state or federally-chartered bank or savings and loan association in an account insured by the FDIC that gains a variable rate of interest typical of similar accounts.
Option 2: Shares of a money market fund. The landlord may purchase shares of an insured money market fund through an investment company based in New Jersey. All investments of the fund must mature in one year or less.
Alternative: Security deposits for nine or fewer units. If the landlord holds nine or fewer security deposits, they should be held in an interest-bearing account in any New Jersey financial institution insured by the FDIC.
Are Tenants Entitled to Interest on Their Security Deposit in New Jersey?
Landlords in New Jersey do owe interest (or earnings from an investment fund) on security deposits. However, this requirement only applies to landlords that collect security deposits for 10 or more rental units.
The interest or earnings must be either credited towards rent or paid to the tenant directly on every anniversary of the tenant’s lease or annually on January 31st (by written notice to the tenant).
The tenant can demand by written notice that the entire security deposit plus 7% annual interest be applied toward the tenant’s rent if the landlord fails to do either of the following:
- Invest or properly hold the security deposit
- Provide the written notice required when collecting the security deposit
If a tenant exercises this right, the landlord cannot collect another security deposit for the remainder of the tenancy.
How Are Security Deposits Accounted for in New Jersey?
Security deposits are not considered taxable income when they are collected.
What Happens to a Security Deposit When the Property is Sold in New Jersey?
When a property is sold in New Jersey, the seller has five days after the sale of the property to:
- Transfer the security deposit and any interest or earnings to the new owner, who must handle it according to the same rules
- Notify the tenant by registered or certified mail of the name and address of the person that assumed responsibility for the security deposit
Sources
- 1 N.J. Stat. § 46:8-21.2
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An owner or lessee may not require more than a sum equal to 1 1/2 times 1 month’s rental according to the terms of contract, lease, or agreement as a security for the use or rental of real property used for dwelling purposes. Whenever an owner or lessee collects from a tenant an additional amount of security deposit, the amount collected annually as additional security shall not be greater than 10 percent of the current security deposit.
Source Link - 2 Reilly v. Weiss, 406 N.J. Super. 71, 79 (App. Div. 2009) (internal citations omitted)
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[Landlords] cannot “subdivide” a tenant’s funds into refundable pet deposits, not subject to the SDA, and other general security deposits that are subject to the SDA. If the combined amount of all such deposits exceeds the statutory limit of the SDA, permitting such practice would be an end run and would make a sham of the SDA and thwart the legislative intent.
Source Link - 3 N.J. Stat. § 46:8-19(c)
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The person investing the security deposit pursuant to subsection a. or b. of this section shall notify in writing each of the persons making such security deposit or advance, giving the name and address of the investment company, State or federally chartered bank, savings bank or savings and loan association in which the deposit or investment of security money is made, the type of account in which the security deposit is deposited or invested, the current rate of interest for that account, and the amount of such deposit or investment, in accordance with the following:
(1) within 30 days of the receipt of the security deposit from the tenant;
(2) within 30 days of moving the deposit from one depository institution or fund to another, except in the case of a merger of institutions or funds, then within 30 days of the date the person investing the security deposit receives notice of that merger, or from one account to another account, if the change in the account or institution occurs more than 60 days prior to the annual interest payment;
(3) within 30 days after the effective date of P.L. 2003, c. 188(C.46:8-21.4 et al.);
(4) at the time of each annual interest payment; and
(5) within 30 days after the transfer or conveyance of ownership or control of the property pursuant to section 2 of P.L. 1967, c.265 (C.46:8-20). …
Source Link - 4 N.J. Stat. § 46:8-49.2
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a. A landlord shall provide a receipt, either printed or emailed, to a tenant for each cash payment made to the landlord for any amount due to the landlord pursuant to a residential lease, renewal, or extension agreement. The receipt shall accurately indicate the amount of the payment, the purpose of the payment, when the payment was received, the printed or typed names of both the landlord and tenant, and who accepted the payment.
b. A landlord who violates this section shall be subject to the penalty provisions of section 5 of P.L. 1975, c.310 (C.46:8-47), except that the penalty shall be $100 more for a second violation by a landlord within a five-year period, and the penalty shall be $200 more for each subsequent violation by a landlord within a five-year period.
c. It shall be a valid defense in any action or proceeding against a tenant to recover possession of real property for the nonpayment of rent that the landlord violated this section with respect to the months in which the violation or violations occurred.
Source Link - 5 N.J. Stat. § 46:8-19(a)
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Whenever money or other form of security shall be deposited or advanced on a contract, lease or license agreement for the use or rental of real property as security for performance of the contract, lease or agreement or to be applied to payments upon such contract, lease or agreement when due, such money or other form of security, until repaid or so applied including the tenant’s portion of the interest or earnings accumulated thereon as hereinafter provided, shall continue to be the property of the person making such deposit or advance and shall be held in trust by the person with whom such deposit or advance shall be made for the use in accordance with the terms of the contract, lease or agreement and shall not be mingled with the personal property or become an asset of the person receiving the same. The person receiving money so deposited or advanced shall:
a.
(1) Invest that money in shares of an insured money market fund established by an investment company based in this State and registered under the “Investment Company Act of 1940,” 54 Stat. 789 (15 U.S.C.s. 80a-1 et seq.) whose shares are registered under the “Securities Act of 1933,” 48 Stat. 74 (15 U.S.C.s. 77a. et seq.) and the only investments of which fund are instruments maturing in one year or less, or
(2) deposit that money in a State or federally chartered bank, savings bank or savings and loan association in this State insured by an agency of the federal government in an account bearing a variable rate of interest, which shall be established at least quarterly, which is similar to the average rate of interest on active interest-bearing money market transaction accounts paid by the bank or association, or equal to similar accounts of an investment company described in paragraph (1) of this subsection. This subsection shall not apply to persons receiving money for less than 10 rental units except where required by the Commissioner of Banking and Insurance by rule or regulation. The commissioner shall apply the provisions of this subsection to some or all persons receiving money for less than 10 rental units where the commissioner finds that it is practicable to deposit or invest the money received with an investment company or State or federally chartered bank, savings bank or savings and loan association in accordance with this subsection. Except as expressly provided herein, nothing in this subsection shall affect or modify the rights or obligations of persons receiving money for rental premises or units, tenants, licensees or contractees under any other law.
Source Link - 6 N.J. Stat. § 46:8-19(b)
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Persons not required to invest or deposit money in accordance with subsection a. of this section shall deposit such money in a State or federally chartered bank, savings bank or savings and loan association in this State insured by an agency of the federal government in an account bearing interest at the rate currently paid by such institutions and associations on time or savings deposits.
Source Link - 7 N.J. Stat. § 46:8-19(c)(5)
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All of the money so deposited or advanced may be deposited or invested by the person receiving the same in one interest-bearing or dividend yielding account as long as he complies with all the other requirements of this act. The interest or earnings paid thereon by the investment company, State or federally chartered bank, savings bank or savings and loan association, shall belong to the person making the deposit or advance and shall be paid to the tenant in cash, or be credited toward the payment of rent due on the renewal or anniversary of said tenant’s lease or on January 31, if the tenant has been given written notice after the effective date of P.L. 2003, c. 188 and before the next anniversary of the tenant’s lease, that subsequent interest payments will be made on January 31 of each year. If the person receiving a security deposit fails to invest or deposit the security money in the manner required under this section or to provide the notice or pay the interest to the tenant as required under this subsection, the tenant may give written notice to that person that such security money plus an amount representing interest at the rate of seven percent per annum be applied on account of rent payment or payments due or to become due from the tenant, and thereafter the tenant shall be without obligation to make any further security deposit and the person receiving the money so deposited shall not be entitled to make further demand for a security deposit. However, in the case of a failure by the person receiving the security deposit to pay the annual interest or to provide the annual notice at the time of the annual interest payment, if the annual notice is not also serving as a notice of change of account or institution, before the tenant may apply the security deposit plus interest on account of the rent payment or payments due or to become due on the part of the tenant, the tenant shall first give that person a written notice of his failure and shall allow that person 30 days from the mailing date or hand delivery of this notice to comply with the annual interest payment or annual notice, or both.
Source Link - 8 N.J. Stat. § 46:8-20
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Any person, whether the owner or lessee of the property leased, who or which has or hereafter shall have received from a tenant or licensee a sum of money as a deposit or advance of rental as security for the full performance by such tenant or licensee of the terms of his contract, lease or license agreement, or who or which has or shall have received the same from a former owner or lessee, shall, upon conveying such property or assigning his or its lease to another, or upon the conveyance of such property to another person by a court in an action to foreclose a mortgage thereon, at the time of the delivery of the deed or instrument of assignment, or within five days thereafter, or in the event of the insolvency or bankruptcy of the person receiving said deposit, within five days after the making and entry of an order of the court discharging the receiver or trustee, deal with the security deposit by turning over to his or its grantee or assignee, or to the purchaser at the foreclosure sale the sum so deposited, plus the tenant’s portion of the interest or earnings accumulated thereon, and notify the tenant or licensee by registered or certified mail of such turning over and the name and address of such grantee, assignee or purchaser. Notwithstanding any other provision of law to the contrary, it shall be the duty and obligation of the grantee, assignee or purchaser to obtain from the grantor who is the owner or lessee at the time of the transfer, conveyance or purchase any and all security deposits, plus accrued interest on the deposits, that the owner or lessee received from a tenant, licensee or previous owner or lessee, and which deposits were invested, or should have been invested, in the manner required by section 1 of P.L. 1967, c. 265 (C.46:8-19).
Source Link
