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New Jersey Security Deposit Laws

NJ rental security deposit laws

A security deposit is akin to a safety net. Requiring it will ensure you are compensated for any loss that may arise from your tenant’s negligent use of their rented premises. Examples of things that it may cover include excessive property damage, nonpayment of rent, and lease termination. 

New Jersey, just like the rest of the 50 states, has a security deposit law in place to ensure that it’s used correctly. These laws are specifically noted in the Rent Security Deposit Act. According to the act, landlords must follow specific rules in regards to a tenant’s security deposit. 

The following is a basic overview of the New Jersey security deposit law. 

Is There a Limit? 

Yes. There is a limit to how much you can charge your tenants as a security deposit. The statewide law requires that landlords charge no more than the equivalent of 1.5X the rent amount as a deposit. 

So, supposing you charge your New Jersey tenants a monthly rent of $2,800. In that case, the maximum you can charge as a security deposit should be $4,200. 

Can a New Jersey Landlord Ask for a Pet Deposit?  

Yes. You can ask for an additional pet deposit under New Jersey’s law. However, this cannot go beyond the one and a half maximum. 

Please note that you cannot ask people with disabilities for an additional pet deposit. According to the Fair Housing Act, people with disabilities who use service animals are entitled to free and equal housing access. 

security deposit nj

You can hold the tenant liable for any damage the service animal causes to the unit, though. 

How Do You Store a Tenant’s Security Deposit? 

Landlords who fail to store their tenant’s deposits in the proper account will face legal and financial consequences. Your tenant can provide a written notice demanding that you use their deposit, plus 7 percent interest to pay their rent and you won’t be able to ask your tenant for any additional deposit.

New Jersey landlords can store their tenant’s security deposit in either of two ways: 

A Money Market Fund 

Landlords are allowed to use their tenant’s deposit as an investment into a money market fund. You must meet the following requirements if you choose this option:

  • The investment company must be based in New Jersey
  • The company must be registered under the Investment Company Act and has whose shares are registered under the Securities Act of 1933
  • The fund has a maturity date of at most a year

An Interest-bearing Bank Account

If you own at least 10 units, you must place the deposit in a bank account that pays interest. The payable interest must be at a rate equal to or greater than the interest paid on the bank’s money market accounts. 

As for landlords with at most 10 units, they have to place the money in an interest-bearing bank account, as well. However, in this case, the landlord doesn’t have to meet any specific requirement in regard to the interest rate. 

NJ security deposit law

You must pay the tenant any interest accrued annually. You can also credit this amount, if the tenant wishes, toward their next rent payment instead. 

Is a Written Notice Required in the State of New Jersey?

Yes, this is a requirement for New Jersey landlords. You must notify your tenant in writing acknowledging receipt of their deposit. Additional requirements include:

  • Within 30 days of receiving the deposit, you must include the notice as part of the lease or rental agreement. If the terms of use and return of the deposit are included in a clause, additional written notice may be unnecessary. 
  • You must notify your tenant if you move the deposit to a different bank or money market fund, and in the event, you transfer the property’s ownership. 

In the written notice, you must state the following:

  • The name and address of the bank or investment company. 
  • The account’s type where the deposit has been deposited or invested. 
  • The rate of interest. 
  • The security deposit amount. 
  • The signature of the landlord or the landlord’s agent. 

What Situations Allow a Landlord to Keep Part or All of the Deposit? 

You may be able to keep part or all of your tenant’s security deposit for any of the following reasons:

  • Nonpayment of rent. 
  • Damage exceeding normal wear and tear. 
  • Unpaid utility bills when a tenant is moving out. 
  • Lease termination without a legally justified reason. 

You must however wait until the tenant has moved out to make any deductions to their security deposit. 

help with security deposit NJ

How Long After the Tenant has Moved Out Do You have to Return Their Deposit?  

In New Jersey, landlords must return their tenant’s deposit within a period of 30 days after a tenant has moved out. It’s also at this point that you must return any accumulated earnings or interest. If you have made any deductions, you must include an itemized list of deductions. 

If the reason for ending their lease is due to domestic violence, you’ll have 15 days to return their deposit. If the tenant has to move because of a fire, flood, or condemnation of the property, you’ll only have 5 days to return the deposit. 

What Happens if the Property’s Ownership Changes Hands? 

If you sell your New Jersey property, it’s your responsibility to transfer the deposit to the new owner. This must include any accrued interest. Then, you must notify your tenants, in writing, about the ownership change. 


It’s important the familiarize yourself with the state’s security deposit laws as well as other rental regulations such as landlord-tenant laws, rent increase regulations, and the eviction process. 

If staying on top of the legal side of things while managing your rentals seems daunting, contact the experts at Capital Street Management today!


Disclaimer: This blog shouldn’t be used as a substitute for legal advice from a licensed attorney. Laws change frequently, and this post might not be updated at the time of your reading. If you have a specific question, kindly get in touch with a qualified attorney or an experienced property management company. 

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