New Jersey Security Deposit Laws in 2024

What is a Security Deposit?

A security deposit is a payment required by landlords from tenants prior to moving in. It serves as a form of security to cover any potential damages or unpaid rent once the tenant moves out. 

In New Jersey, landlords are allowed to collect a security deposit up to 1.5 times the monthly rent amount. For example, if the monthly rent is $1,000, the maximum security deposit would be $1,500.

Landlords in New Jersey must hold security deposits separate from their own funds, in a bank account used only for that purpose. They cannot combine security deposits from multiple properties into a single account. Interest earned on the account belongs to the tenant.

New Jersey Security Deposit Rules

New Jersey has comprehensive laws governing security deposits for residential rentals. These are contained in the state's Rent Security Deposit Act (NJSA 46:8-19 to 46:8-26). This law sets out protections for renters and responsibilities for landlords when it comes to handling security deposits in the state.

The security deposit law applies to most residential rental properties in New Jersey, including houses, apartments, mobile homes, and other dwelling units. However there are some exemptions, such as owner-occupied properties with no more than two rental units, hotels/motels, school dormitories, and other temporary residences.

Some key protections the New Jersey security deposit law provides to renters are:

  • Limiting security deposits to no more than 1.5 times the monthly rent
  • Requiring landlords to hold deposits in interest-bearing accounts and pay accrued interest to tenants  
  • Mandating notices to tenants about deposit accounts and transfers 
  • Establishing procedures and timelines for returning deposits
  • Allowing tenants to recover double the wrongly withheld deposit plus damages
  • Preventing landlords from waiving deposit law protections in leases

The law aims to protect tenants from abuse or misuse of security deposits, while also laying out clear guidelines for landlords to follow for handling deposits properly. Many disputes between landlords and tenants in New Jersey stem from disagreements over security deposits.

Notices Landlords Must Provide

Under New Jersey law, landlords must provide tenants with certain notices regarding security deposits:

Initial Receipt of Funds

Within 30 days of receiving a security deposit from a tenant, the landlord must notify the tenant in writing of the name and address of the bank where the deposit is being held. This notice should also include details on the account number, current interest rate, and initial amount of deposit.

Annual Account Balance

Every year during the lease term, the landlord must provide the tenant with a written notice stating the current balance of the security deposit account, including any accrued interest. This helps keep tenants informed on the status of their deposit.

Sale or Foreclosure of Property

If the rental property is sold or foreclosed upon, the landlord has 5 days to notify the tenant in writing. This notice should state the name and address of the new owner or foreclosing party. The original landlord must also transfer the security deposit to the new owner, while remaining liable for the deposit themselves for 2 years after sale.

Transferring Deposits to New Owners

When a rental property is sold or transferred to a new owner in New Jersey, the original security deposits must also be transferred. The specific process is:

  • The selling landlord must turn over all security deposits plus accrued interest to the new owner at the time of sale. 
  • The original landlord remains liable for the proper return of security deposits for 2 years after the transfer.
  • Tenants are not required to replenish or re-pay security deposits to the new owner. The amount originally paid to the prior landlord transfers over.
  • Within 5 days of the property sale or transfer, the new owner must provide written notice to all tenants of the change in ownership and transfer of deposits. This notice must include the new owner's name, address, and location of the transferred security deposit account.

So in summary - security deposits automatically move to the new landlord when a property changes hands in New Jersey. Original landlords stay liable for 2 years. And tenants don't need to come up with new deposit funds for the new owner.

Returning Security Deposits in New Jersey

In New Jersey, landlords must return security deposits along with accrued interest within 30 days after the lease ends and the tenant delivers possession of the unit. This applies as long as the tenant provides the landlord with a forwarding address.

Landlords can deduct from the security deposit to cover:

  • Unpaid rent
  • Damages to the unit beyond normal wear and tear 

They cannot deduct for normal wear and tear, which includes minor scuffs, small nail holes, and faded paint or carpeting. 

If the landlord fails to return the deposit or provides an insufficient itemized list of deductions within 30 days, the tenant can sue for double the amount of the deposit wrongly held. Tenants can file a lawsuit in New Jersey small claims court if the amount is less than $5,000. 

The judge may award double damages plus court costs to the tenant if the landlord improperly withheld the security deposit. Tenants receiving governmental rental assistance do not need to sue to recover their deposit.

Normal Wear and Tear vs. Damages in NJ

Normal wear and tear refers to the expected decline in the condition of a rental property over time from regular usage and aging. Under New Jersey law, landlords cannot deduct costs to repair normal wear and tear from a tenant's security deposit.

In contrast, damages refer to excessive deterioration of the property that exceeds normal wear and tear. Landlords can legally deduct the costs to repair these damages from the departing tenant's security deposit.

What is Considered Normal Wear and Tear in New Jersey?

  • Minor scuffs, scratches or nail holes in the walls that can be easily patched
  • Faded paint or wallpaper over time 
  • Worn carpet tread from regular foot traffic
  • Cabinet handles that become slightly loose
  • Tile grout that becomes slightly discolored 

These minor flaws in the condition of a rental unit are expected to occur naturally over the course of a tenancy. Landlords cannot deduct the costs to repair normal wear and tear from the security deposit.

What Type of Damages Can a Landlord Deduct For?

  • Large holes in drywall or plaster
  • Door frames and cabinets damaged beyond repair
  • Permanent stains or burns on carpet 
  • Missing tiles, cracked grout, or damaged flooring
  • Broken windows or ripped screens
  • Missing fixtures like sinks, toilets or appliances
  • Pet urine stains or odors in carpets

Excessive damage that requires replacement of floors, walls, or fixtures can be deducted from the security deposit to cover repair costs. However, landlords must provide an itemized list of deductions along with receipts.

Can Landlords Charge Cleaning Fees?

In New Jersey, landlords are permitted to charge cleaning fees to tenants, but there are certain requirements they must follow:

  • The tenant must leave the rental unit significantly dirtier than when they moved in. Normal wear and tear is not grounds for charging cleaning fees.
  • The landlord must provide the tenant with an itemized list of the cleaning being performed along with receipts for the services. General statements like "cleaning fees" without details are not allowed.
  • The landlord must give proper notice of the deductions from the security deposit. Cleaning fees cannot be stealthily withheld without informing the tenant.
    • The notice should describe the specific cleaning tasks, hours required, and rates charged. For example:
    • Oven cleaning by XYZ Cleaners - 2 hours at $50/hour = $100
    • Carpet steam cleaning by ABC Company - $200 
    • Wall scrubbing and touch up painting - 4 hours at $20/hour = $80
  • The notice must be given with the security deposit accounting within 30 days of lease end. The landlord cannot surprise the tenant with cleaning fees months later.
  • The cleaning fees charged must be reasonable and appropriate for the work performed. Excessive fees beyond market rates may be grounds for a lawsuit.

So in summary, New Jersey landlords can deduct cleaning fees from the security deposit if the unit is left substantially dirtier than move-in. But tenants must receive proper notice and accounting of the specific services, hours, and rates charged. Normal cleaning required between tenants is the landlord's responsibility.

How Tenants Can Sue for Deposit Return

If a landlord in New Jersey wrongly withholds all or part of a security deposit, tenants have the right to sue to recover up to double the amount improperly held. The process for suing a landlord over a security deposit dispute depends on the amount of the deposit:

For deposits less than $5,000

Tenants can file a small claims court case against the landlord without needing an attorney. The filing fees are minimal and the process is designed to be easy for non-lawyers to navigate. Tenants will need to gather evidence like the lease, rent payment records, move-in and move-out inspections, and communications with the landlord. Photos, videos, and repair estimates can help prove damages were normal wear and tear. At the hearing, the tenant and landlord will tell their sides of the story and the judge will make a determination on what should be returned. If the tenant wins, the court can award double damages plus court costs.  

For deposits more than $5,000

Tenants will need to file a civil case in New Jersey Superior Court to recover deposits over $5,000. Hiring an attorney is strongly recommended for the formal procedures and rules of evidence. The tenant will need to prove the landlord improperly withheld the deposit and evidence like photos, invoices, and witnesses will be critical. If successful, the tenant can recover double the deposit plus attorneys fees.

Government assisted housing exemption

Tenants receiving government rental assistance like Section 8 do not need to sue to recover deposits. They can request deposit return from the landlord and if denied, seek help from the agency providing rental assistance. The government agency will contact the landlord on the tenant's behalf to recover deposits that are unlawfully withheld.

Bankrupt Landlords and Security Deposits  

If a landlord files for bankruptcy, tenant security deposits become part of the bankruptcy estate's assets. The bankruptcy trustee takes over administration of the deposits.

Tenants become creditors in the bankruptcy case for the amount of their security deposit. To get the deposit back, tenants must file a proof of claim form with the bankruptcy court. This form lets the court know the tenant is owed money by the debtor (landlord). 

The trustee will notify all creditors, including tenants, of deadlines for filing claims. Tenants should consult a lawyer if they have trouble navigating the proof of claim process. 

Depending on the assets available in the bankruptcy estate, tenants may not recover their full deposits. Any losses would be treated the same as other general unsecured creditors.

Tenants should continue paying rent to the landlord or trustee during bankruptcy, as this is still owed under the lease. Rent cannot be withheld even if the security deposit is tied up in the proceedings. The automatic stay in bankruptcy freezes any eviction or deposit lawsuits against the landlord.

FAQ on NJ Security Deposits

This section answers some frequently asked questions about security deposit laws in New Jersey:

What is the NJ law on returning security deposits?

The Rent Security Deposit Act (NJSA 46:8-19 to 46:8-26) governs security deposits in NJ. It requires landlords to return deposits within 30 days of lease end and delivery of possession. Landlords can deduct for unpaid rent or damages. 

What is considered normal wear and tear in NJ?

Minor scuffs, small nail holes, faded paint and worn carpet are generally considered normal wear and tear that landlords cannot deduct for. Significant damage like large holes in walls or stained/ripped carpeting can be deducted.

Can a landlord charge a cleaning fee in New Jersey?

Yes, if the tenant leaves the property significantly dirtier than its condition at move-in. The landlord must provide receipts and written notice of any cleaning fee deductions.

How do I sue for a security deposit in NJ?

If the disputed deposit amount is less than $5,000, you can file a small claims court case against the landlord. No need to sue if you are receiving government rental assistance.

What if my landlord goes bankrupt?

Security deposits become part of the bankruptcy estate's assets. You can file a claim as a creditor to try to recover your deposit.

Can landlords waive security deposit laws in the lease?

No, landlords cannot waive the protections provided by NJ security deposit laws in a lease agreement.

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