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