Short answer
The tenant can require that the deposit plus 7 percent a year be applied toward rent, and cannot be asked for another deposit while living there. Landlords with fewer than 10 units must keep deposits in an insured New Jersey bank account that bears interest, and send written notice within 30 days.
The account rules
The Department of Community Affairs says a landlord receiving security deposits for fewer than 10 rental units must deposit the money in a state or federally chartered bank in New Jersey, insured by the federal government, in an account that bears interest on time or savings deposits. Landlords with 10 or more units must use an insured money market fund established by a New Jersey investment company or a variable rate account. The deposit may not be mingled with the landlord's personal property or become an asset of the landlord.
The 30-day notice
Within 30 days of receiving a deposit, the landlord must give the tenant written notice stating the name and address of the bank, the type of account, the current interest rate and the amount deposited. The notice may be in the lease. The landlord must also notify tenants within 30 days of moving the deposit to another account or transferring it to a new landlord, and must give a security deposit notice at the time of each annual interest payment.
The remedy
If notice is not given, or if the deposit is not held as the law requires, the bulletin says the tenant has the right to require that the deposit plus 7 percent per year be applied toward rent due, by written request. The landlord gets 30 days to fix annual interest and notice problems after a written demand, but that grace period does not apply if the initial deposit was never properly placed. The bulletin adds that the current landlord cannot ask for another deposit while the tenant lives in the unit.
Amounts, returns and penalties
A landlord cannot require more than one and one half times the monthly rent as a security deposit, and a yearly increase cannot exceed 10 percent of the current deposit. At the end of the lease, the deposit and interest, less allowed deductions, must be returned within 30 days with an itemized list. If not, the court shall award double the amount, plus costs and, in its discretion, reasonable attorney's fees. A landlord who unlawfully diverts a deposit may be treated as a disorderly person.
Selling a rental with a messy deposit file
If the deposit records are incomplete, tell your attorney before listing or accepting an offer, since the new owner takes on the deposit responsibility. Kaizen Home Buyers makes cash offers on New Jersey houses as-is, with no repairs and no agent commission. We can give an offer within 24 hours and close in 14 to 30 days or on the date you choose. Call 267-329-0084. Sorting out the deposit with the attorney comes first, whichever way you sell.