by Colleen Flynn Cyphers
Residential tenancies in New Jersey are governed by the New Jersey Security Deposit Law, N.J.S.A. 46:8-19 to 25. The law outlines the guidelines for collecting, holding and returning security deposits to residential tenants. Security deposits in commercial tenancies are not bound by the rules set forth in this statute.
In New Jersey, a Landlord cannot charge more than one and one-half month’s rent as a security deposit. The security deposit can be increased during the terms of the lease to coincide with a rent increase, however, the increase in the security deposit cannot be higher than ten percent (10%).
The Landlord has two (2) options in deciding how the security deposit is to be held. The Landlord can invest the money in a money market as long as the investment company is based in and registered in New Jersey and the fund has a maturity date of one year or less. The other option is for the Landlord to deposit the money in an interest bearing bank account. For a Landlord who owns ten (10) or more units, the money must be placed in an account that pays interest equal to or greater than the interest paid on the bank’s money market account. A Landlord that owns fewer than 10 units may deposit the money into an interest bearing bank account with no specific requirement as to the interest rate.
Within thirty (30) days of receiving the security deposit, the Landlord must provide written notice to the Tenant with the following information: the name and address of the bank, the type of account where the money is being held, the amount of the security deposit, and the interest rate. The Landlord must also provide the Tenant with an annual writing, forwarding the interest earned on the investment.
At the end of the lease term, the Landlord has thirty (30) days to return the security deposit, plus accrued interest, to the Tenant. If the Landlord retains any of the deposit for reasons such as damage to the premises or unpaid rent, the Landlord must provide an itemized statement to the Tenant providing for any deductions taken from the security deposit.
For more information about security deposits in residential tenancies, or questions regarding Landlord/ Tenant law, please contact the experienced attorneys at LevinCyphers, who have decades of experience in Landlord/Tenant Court.