Overview
New Jersey's security deposit laws are among the most detailed in the country, governed primarily by the Security Deposit Act (N.J. Stat. § 46:8-19 et seq.). The state requires deposits to be held in interest-bearing accounts, mandates annual interest payments to tenants, and sets strict return timelines.
This guide covers everything landlords and tenants need to know about security deposits in New Jersey.
Deposit Limits
New Jersey law sets the following security deposit limits:
- Maximum deposit: 1.5 months' rent
- After the first increase, landlords may increase the deposit only once per year, and the total may never exceed 1.5 months' rent based on the current monthly rental amount
Interest Requirements
New Jersey is one of the few states that requires landlords to pay tenants interest on their security deposits:
- The deposit must be placed in an interest-bearing account at a federally insured bank in New Jersey, or invested in a money market fund
- Landlords must provide written notice within 30 days of receiving the deposit, including the name and address of the financial institution and the amount of the deposit
- Interest or investment returns must be paid to the tenant annually, either as a direct payment or as a credit toward rent
Allowable Deductions
Landlords may only deduct from the security deposit for the following reasons:
- Unpaid rent: Any rent owed at the time of move-out
- Damage beyond normal wear and tear: Repairs for tenant-caused damage that exceeds ordinary wear
- Cleaning: Costs to restore the unit to the condition at move-in, beyond normal wear
- Lease violations: Costs arising from specific breaches of the rental agreement
What Constitutes Normal Wear and Tear?
Normal wear and tear includes:
- Minor scuffs or marks on walls
- Small nail holes from hanging pictures
- Worn carpet from regular use
- Faded paint from sunlight exposure
Damage beyond normal wear and tear includes:
- Large holes in walls
- Stained, burned, or torn carpet
- Broken windows, doors, or fixtures
- Unauthorized alterations to the premises
Return Timeline
Landlords must return the security deposit within 30 days of the tenant vacating the unit. In special circumstances involving fire, flood, condemnation, or evacuation, the deposit must be returned within 5 business days.
The return must include:
- The remaining deposit amount (if any deductions were made)
- An itemized written statement listing each deduction and the amount
- Any accrued interest that has not already been paid
If the landlord fails to return the deposit or provide the required itemized statement within the required timeframe, the tenant may be awarded double the deposit amount plus full return of the deposit by a court.
Dispute Resolution
If a tenant believes their deposit was wrongfully withheld, they can:
- Send a demand letter to the landlord requesting the return of the deposit
- File a claim in Small Claims Court (up to $5,000 in New Jersey, or $3,000 if no attorney is used)
- File a complaint with the New Jersey Division of Consumer Affairs
Courts take security deposit violations seriously in New Jersey. If the landlord is found to have acted in bad faith, the court may award the tenant double the deposit amount as a penalty, plus attorney's fees and court costs. Failure to place the deposit in an interest-bearing account or provide proper notice is itself a violation.