Security deposits in New Jersey are regulated by New Jersey Revised Statutes § 46:8-19 to § 46:8-26. Certain municipalities may have local laws that supplement state regulations. To ensure full compliance, verify the regulations applicable in your area.

Maximum Security Deposit

New Jersey state law limits security deposits to one and a half months’ rent.

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Holding & Interest Requirements

Holding Requirements: Security deposits must be held in trust for the tenant and not commingled with the landlord/property manager’s personal funds

Less Than 10 Rental Units: Landlords/property managers must deposit the money in an interest-bearing account in (1) a New Jersey or federally chartered bank, or (2) a savings and loan association located in New Jersey and insured by the federal government. 

More Than 10 Rental Units: Landlords/property managers must (1) invest the funds in an insured money market fund established by an investment company based in New Jersey or (2) deposit the security deposit funds in an interest-bearing account in a state or federally chartered bank, savings bank, or savings and loan association located in New Jersey. 

‍Interest on Deposits: Landlords/property managers must pay accrued interest to the tenant annually, either as a cash payment or a credit toward the rental payment due on the renewal/anniversary of the lease.

Information Provided to Tenant: Landlords/property managers must notify the tenant in writing of (1) the name and address of the institution where the security deposit is being held, (2) the type of account, (3) the current interest rate, and (4) the amount of the security deposit, at the following times: (a) within 30 days of receipt of the security deposit from the tenant; (b) within 30 days of moving the security deposit from one institution to another; (c) at the time of each annual interest payments; and (d) within 30 days after the transfer of ownership or control of the property.

Deposit Refunds

Timeline: Within 30 days after the tenant vacates the property, the landlord/property manager must either (1) return the full security deposit and accrued interest, or (2) provide the tenant with an itemized list of any deductions to the deposit together with the portion of the security deposit and accrued interest being returned.

Permissible Deductions: Landlords/property managers may deduct the following from security deposit funds:

• Unpaid rent
• Damages beyond normal wear and tear
• Other lawful charges due under the lease

Documentation of Deductions: New Jersey state law does not currently require any specific documentation or details to accompany the itemized list of deductions. 

‍Penalties for Violations: Failure to return the security deposit or provide the itemized list of deductions as required by New Jersey state law may result in the landlord/property manager being liable for the security deposit and interest wrongfully withheld, plus attorney’s fees and court costs if the tenant wins in a lawsuit.

Sale of the Rental Property

If the property is sold, the landlord must transfer the security deposit and accrued interest to the new owner within 5 days of delivering the deed and notify the tenant by registered or certified mail of the transfer, including the name and address of the new owner.