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The New Jersey Security
Deposit law, known as The Rent Security
Deposit Act, specifies how a landlord must collect,
maintain, and return a security deposit. The
security deposit does not belong to the landlord. It
is to be held in a bank, in a separate account known as a
Landlord-Tenant account or some other name. Check
with local bank.
A security deposit is made to protect the landlord
against the tenant's failure to follow his or her
responsibilities as stated in the lease. This
includes nonpayment of rent, or damage done to the
apartment by the tenant, other than ordinary
wear and tear
(normal).
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Read your lease first. The lease should state
clearly where the landlord will hold your security
deposit. It
must be deposited in a "Landlord Tenant"
account.
The
NJ Rent Security
Deposit Act applies to all rental units, including
tenant-occupied, single-family homes. The only
exception is for rental units in owner-occupied
buildings that have no more than two units other
than the owner-landlord's unit.
The
law does apply even to tenants,
owner-occupied buildings if the tenant sends
a 30-day written notice to the landlord
stating that he or she wants the landlord to
comply with the law's provisions. |
Limit on
amount of deposit
The most a landlord can collect as a security
deposit is one and one-half times the monthly
rent. There are no exceptions to this limit.
Sometimes a landlord will try to collect more
security money from a tenant at the time the
landlord raises the tenant's rent, in order to have
the security keep pace with the rent increase. The
additional security money that a landlord can get in
any one year is 10 percent of the current
deposit.
Ask for a receipt
when you pay the security deposit. The receipt
should include the date, the landlord's signature,
and the amount of the security deposit paid. The
receipt should show that this money is for a
security deposit. Make sure the lease states that
you have paid a security deposit and includes the
amount of the deposit. KEEP ALL YOUR PAPERWORK. It
should be dated and signed.
Notice of
security deposit
The Rent Security Deposit Act requires the landlord
to put your security deposit in a separate bank
account that pays interest. The landlord must tell
you in writing the name and address of the bank
where the deposit is being kept, the amount of the
deposit, the type of account, and the current
interest rate for that account. NOTE: The Landlord
may put this directly in the lease.
The security
deposit law says that this notice has to be given to
the tenant in writing within 30 days after the
tenant gives the deposit to the landlord. The
law says that the landlord must also give the notice
not just within 30 days of getting it from the
tenant, but each year at the time the
landlord pays the interest to the tenant.
A new landlord must also give the notice
within 30 days of buying the property. The notice must be given to
the tenant within 30 days after the landlord has
moved the deposit from one bank to another, or from
one bank account to another (unless the change in
the bank or account takes place less than two months
before the annual interest payment). Finally, law
requires all landlords had to
give their tenants a new notice—telling them where
the deposit is, how much it is, and how much
interest it is earning—by the end of January 2004.
Your
security deposit as rent : The law also says
that if the landlord does not put the security money
in a proper bank account, or does not give a proper
written notice to the tenant every time the law says
he or she has to, then the tenant can
give a written notice to the landlord telling the
landlord to use the whole deposit (plus seven
percent interest per year (subject to change) to pay
the tenant's rent.
All notices should be sent to the landlord by
certified mail, return receipt requested, and you
should keep a copy.
The money can be used to pay future rent or any back
rent the tenant owes. Once a tenant legally tells
the landlord to use the security deposit as rent,
the landlord can't ask the tenant for another
deposit as long as the tenant lives in the apartment
or house.
Note: There
are two exceptions to the rights described in the
paragraph above.
- If a landlord
does not obey the law that says he or she must
pay the interest on the security deposit every
year (or if the landlord does not use the
interest to pay part of the tenant’s rent), or
- If the landlord
does not give a notice about the deposit to the
tenant every year, then
the tenant can use the
deposit to pay past or future rent due.
But before the tenant can do this, the tenant
must give or send the landlord a letter giving the
landlord 30 days to pay the interest or give the
annual notice.
There are
two other important points about the notice of
security deposit:
- Landlords will
often put the name and address of the bank where
your security is deposited, along with the other
information required by law, right in the lease.
This is sufficient notice under the law.
- Even if the
landlord sends you the notice within 30 days,
the landlord still violates the law if the
notice is not true. If you receive the notice,
call the bank to find out if the money has been
deposited. If the money was not deposited, you
can tell the landlord in writing to use the
security deposit to pay your rent just the same
as if the landlord had not sent you a notice at
all.
Interest on
your New Jersey Security deposit
The Rent Security Deposit Act requires landlords who
rent 10 or more apartments to place tenants'
security deposits in either an insured money market
fund or a federally insured bank account. The
account must pay a rate of interest set at least
quarterly and equal to the average rate of interest
paid by the bank on money market accounts.
These higher
interest accounts must be in New Jersey-based
institutions.
The law requires
landlords who rent fewer than 10 apartments to place
security deposits in bank accounts that pay at least
the regular rate of interest.
The law no longer
allows the landlord to keep any amount to cover his
or her administrative expenses.
The law now
requires that the interest earned on the deposit
must either be paid to you in cash every year or
subtracted from the amount of rent you owe on the
renewal or the anniversary of the lease. This must
be done either when your lease is to be renewed, or
on January 31 each year. (But the landlord must give
you a written notice that he or she will be paying
you on January 31 of each year instead of the date
your lease is renewed.)
See Also: Getting
Back Your New Jersey Security Deposit
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