NJ Landlord Law · Updated September 2026
New Jersey treats a security deposit as the tenant's money that you hold in trust. Take more than a month and a half, skip one written notice, or miss the 30-day return deadline, and you can lose the deposit, owe double, or both. Here is every rule, in the order you'll run into them, with the notices you're required to send.
The short answer. Under New Jersey's security deposit law (N.J.S.A. 46:8-19 to 46:8-26), you can collect up to 1.5 months' rent. The money goes into an interest-bearing account at a New Jersey bank, the interest belongs to the tenant, and you must tell the tenant in writing where it is within 30 days.
At move-out. Return the deposit plus interest, minus lawful deductions, with an itemized list, within 30 days, by personal delivery or certified or registered mail.
The penalty. A tenant who sues over a wrongfully withheld deposit gets double the amount, plus court costs and possibly attorney's fees.
It applies to every residential rental in New Jersey except an owner-occupied building with no more than two rental units. Even there, the tenant can bring the law into play at any time by giving you 30 days' written notice. Seasonal rentals of 125 days or less, to someone with a permanent home elsewhere, don't have to go into an interest-bearing account, but the rest of the law still applies.
If you own a single-family rental or a small multifamily you don't live in, the full law applies to you.
The cap is one and a half times the monthly rent (N.J.S.A. 46:8-21.2). On a $1,800 rental, the most you can collect is $2,700. If you ask for more security later, the additional amount collected in any year can't be more than 10 percent of the current deposit.
Give a signed, dated receipt marked "security deposit" for every payment. The DCA recommends it, and it settles arguments before they start.
The deposit is the tenant's property, held in trust. It can't be mixed with your own money or treated as an asset of yours. Where it goes depends on how many units you hold deposits for:
| Your portfolio | Where the deposit must be held |
|---|---|
| Fewer than 10 rental units | An interest-bearing account at a federally insured bank, savings bank or savings and loan located in New Jersey, earning the rate the institution pays on time or savings deposits. |
| 10 or more rental units | Either an insured money market fund run by a New Jersey-based investment company, or a variable-rate account at a federally insured New Jersey institution, reset at least quarterly to track money market rates. |
All deposits can sit in one account as long as you follow the other rules. Since 2003, you can't take administrative fees out of the deposit or its interest. The interest belongs to the tenant.
This is the rule that costs owners the most, because it's easy to miss and the penalty is automatic. You must give the tenant a written notice with:
You owe that notice at five points: within 30 days of receiving the deposit, within 30 days of moving it to another bank or account, at every annual interest payment, within 30 days after the property is sold or transferred, and once after the 2003 amendments took effect. The notice can be written into the lease itself.
[Date] [Tenant name(s)] [Rental address] Re: Notice of Security Deposit (N.J.S.A. 46:8-19) Your security deposit of $[amount], received on [date], is held in trust for you as follows: Institution: [Bank, savings bank, S&L or investment company name] Address: [Institution address, New Jersey] Type of account: [e.g., interest-bearing savings account] Current interest rate: [rate]% per year Amount deposited: $[amount] Interest earned belongs to you and will be [paid to you in cash / credited toward rent] on [your lease renewal or anniversary date / January 31 of each year]. [Landlord or manager name] [Phone] [Email]
If you don't deposit the money properly, don't send the notice, or don't pay the interest, the tenant can tell you in writing to apply the deposit, plus interest at 7 percent a year, to their rent. From then on, you can't collect another security deposit from that tenant for as long as they live there. For a missed annual notice or interest payment, the tenant has to give you 30 days to fix it first. For a deposit that was never properly placed in the first place, there's no grace period.
The interest is the tenant's. Each year, you either pay it in cash or credit it toward rent at the lease renewal or anniversary. You can switch everyone to a single January 31 payment date if you give tenants written notice first. Each annual payment comes with the same written notice about the bank and account.
Within five days of delivering the deed, the seller has to turn the deposits and the tenants' interest over to the buyer and notify each tenant by registered or certified mail who now holds their deposit. The buyer is responsible for the deposit whether or not the seller actually hands it over, and must send the tenant a new deposit notice within 30 days of acquiring the property. Buying a rental? Get the deposits and the ledger at closing, not a promise.
Within 30 days after the lease ends, return the deposit plus the tenant's interest, minus lawful charges, by personal delivery or registered or certified mail. Include an itemized list of the interest and every deduction, sent the same way. No deductions can be made while the tenant is still living in the unit.
Two situations run on shorter clocks:
You can deduct for damage beyond ordinary wear and tear and for money the tenant owes under the lease, such as unpaid rent. If the tenant owes more than the deposit covers, you can sue for the difference. Ordinary wear and tear, the slow aging of paint, carpet and fixtures from normal living, isn't the tenant's bill.
Our advice: photograph and date every room at move-in and move-out, keep invoices for every repair you charge, and describe each deduction in plain words with a dollar amount. A deduction you can't document is a deduction you'll lose in small claims, doubled.
If a tenant sues for a deposit and wins, the court must award double the amount owed, plus full court costs, and may award reasonable attorney's fees (N.J.S.A. 46:8-21.1). Disputes up to $5,000 go to the Small Claims section of the Superior Court, and between $5,000 and $10,000 to the Special Civil Part. On top of that, a landlord who willfully withholds a deposit paid through a state or federal assistance program can face a civil penalty of $500 to $2,000 per offense, and diverting a tenant's deposit is a disorderly persons offense.
You can collect a security deposit from a voucher tenant, and New Jersey's rules apply exactly as they do for any other tenant. Federal rules add two points (24 CFR 982.313). The housing authority can bar deposits larger than private-market practice or larger than you charge your unassisted tenants. And at move-out you must give the tenant a written list of every item charged against the deposit, with amounts, and promptly refund the rest. The housing authority's share of the rent isn't covered by the tenant's deposit, and a deposit paid through an assistance program carries the civil penalty above if it's wrongfully withheld. More in our Section 8 landlord guide.
One and a half times the monthly rent. Any additional security collected later can't exceed 10 percent of the current deposit in a year.
30 days after the lease ends, with an itemized list of interest and deductions, delivered in person or by registered or certified mail. It's 5 business days after a fire, flood or other displacement, and 15 business days after a lease ends under the Safe Housing Act.
Yes. The deposit must earn interest in a New Jersey bank or qualifying money market fund, and the interest belongs to the tenant. It's paid in cash or credited toward rent each year at the lease anniversary or on January 31 with prior notice.
The tenant can require, in writing, that the deposit plus 7 percent annual interest be applied to rent, and the landlord can't collect another deposit from that tenant for the rest of the tenancy.
Deductions are limited to damage beyond ordinary wear and tear and money owed under the lease. Routine cleaning after normal use is hard to justify. Cleaning to fix genuine damage or neglect, documented with photos and invoices, is much easier to defend.
Not automatically. Owner-occupied buildings with two or fewer rental units are exempt unless the tenant gives the landlord 30 days' written notice invoking the law, which they can do at any time during the tenancy.
Security deposit law in New Jersey is almost entirely paperwork: the right account, one notice within 30 days, interest every year, and an itemized return within 30 days of move-out. Get those four things right and the deposit protects you. Get one wrong and it becomes the tenant's leverage.
This guide is general information for landlords, not legal advice. Laws change. Confirm the current rules or talk to an attorney about your situation.
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