Security Deposit Law
What New Jersey landlords must do with security deposits — the cap, interest, return deadline, account rules, and penalties — with citations to the statute itself.
Verified as of June 10, 2026
This page is general information, not legal advice. Statutes change — verify with the cited sources or an attorney.
Deposit cap
1.5 months' rent maximum. Any additional security collected later is capped at 10% of the current deposit per year.
Interest
Yes. Deposits must be held in interest-bearing New Jersey accounts (or qualifying money market funds for 10+ unit landlords), and the interest belongs to the tenant, paid or credited annually.
Return deadline
Return the deposit plus the tenant's accumulated interest, less itemized deductions, within 30 days after the lease ends, by personal delivery or registered/certified mail.
N.J.S.A. 46:8-21.2 bars an owner or lessee from requiring more than a sum equal to one and one-half times one month's rent as security for residential property. When you collect additional security (for example after a rent increase), the amount collected annually as additional security may not exceed 10 percent of the current security deposit.
Under N.J.S.A. 46:8-19, landlords of 10 or more rental units must invest deposits in a qualifying insured NJ money market fund or a variable-rate money-market-type bank account; smaller landlords must use an interest-bearing account at a federally insured NJ bank or savings institution. The interest or earnings belong to the tenant and must be paid in cash or credited toward rent annually (on the lease anniversary/renewal, or on January 31 if you have given the required written notice). Seasonal rentals of 125 consecutive days or less to tenants with a permanent residence elsewhere are exempt from the investment requirement.
Faster deadlines apply in special cases: 5 business days when the tenant is displaced by fire, flood, condemnation, or evacuation (with official posting/certification), and 15 business days when a domestic-violence victim terminates the lease under N.J.S.A. 46:8-9.6. Deductions and interest must be itemized in a notice delivered personally or by registered/certified mail, and no deductions may be taken while the tenant remains in possession.
The deposit remains the tenant's property held in trust and 'shall not be mingled with the personal property or become an asset' of the landlord (N.J.S.A. 46:8-19). It must be deposited in a federally insured New Jersey bank or savings institution account (interest-bearing; money-market-type or fund for landlords of 10+ units), and you must give written notice of the institution's name and address, account type, interest rate, and amount within 30 days of receipt, when the deposit is moved, at each annual interest payment, and within 30 days of a property transfer.
N.J.S.A. 46:8-21.1 requires the court, upon finding for the tenant, to award double the amount of moneys due, plus full costs and discretionary reasonable attorney fees. If you fail to properly invest the deposit, give required notices, or pay annual interest, the tenant may apply the deposit plus 7% per annum interest toward rent, after which you may never again demand a deposit from that tenant (46:8-19(c)). Knowing unlawful diversion of deposit trust funds is a disorderly-persons offense punishable by a fine of at least $200 and/or up to 30 days' imprisonment (46:8-25), and willful withholding from state-assisted tenants carries a $500-$2,000 civil penalty per offense (46:8-21.1).
No municipal security-deposit ordinances of note; New Jersey's Security Deposit Act (N.J.S.A. 46:8-19 et seq.) governs uniformly statewide. Seasonal rentals (125 consecutive days or less to a tenant with a permanent residence elsewhere) are exempt from the investment/interest requirement but not from the cap or return rules.
You may not require more than one and one-half times one month's rent as security. After a rent increase, any additional security collected in a year cannot exceed 10 percent of the current deposit.
Hold the deposit, unmingled, in a federally insured New Jersey bank account bearing interest (a qualifying money market fund or money-market-type account if you have 10+ units). Within 30 days of receipt — and again when the money moves, at each annual interest payment, and within 30 days of a sale — give written notice of the institution's name and address, account type, current interest rate, and amount.
Interest belongs to the tenant and must be paid in cash or credited against rent annually on the lease renewal or anniversary, or on January 31 if you gave the required written notice switching to January payments.
Within 30 days after the lease ends, return the deposit plus the tenant's share of interest, less itemized deductions, by personal delivery or registered/certified mail, with an itemized notice of interest and deductions. Displaced tenants (fire/flood/condemnation/evacuation) must be paid within 5 business days, and domestic-violence lease terminations within 15 business days.
The statute expressly forbids any deduction from the deposit of a tenant who remains in possession of the rental premises — you cannot draw it down mid-tenancy for repairs or unpaid rent.
When you convey the property, you must turn the deposit plus the tenant's accrued interest over to the grantee/assignee/foreclosure purchaser at delivery of the deed or within 5 days, and notify the tenant by registered or certified mail; the buyer is responsible for the deposit whether or not it was actually transferred.
The deposit is trust money that may not be commingled; once the tenant notices the failure, they can apply the deposit plus 7% per annum toward rent, and you permanently lose the right to demand any security deposit from them (N.J.S.A. 46:8-19(c)). Knowing diversion of the funds is also a disorderly-persons offense (46:8-25).
If the tenant sues for moneys due under 46:8-21.1 and wins, the court must award double the amount, plus full costs and possibly attorney fees. Small-claims jurisdiction covers these disputes up to $5,000 including penalties (46:8-21.4), so suits are cheap and easy for tenants.
These trigger the 7%-applied-to-rent remedy. For a missed annual interest payment or annual notice only, the tenant must first give you written notice and a 30-day cure window — but for other failures (initial notice, wrong account) there is no cure period.
The 1.5-month limit in 46:8-21.2 applies to the total security; the Act covers any 'money or other form of security' deposited or advanced (46:8-19), and any lease provision waiving the Act is absolutely void (46:8-24).
46:8-21.1 flatly prohibits deductions from the deposit of a tenant who remains in possession; recover mid-tenancy losses through rent demands or court action, not the deposit.
No more than one and one-half times one month's rent (N.J.S.A. 46:8-21.2). If rent goes up and you collect additional security, the additional amount collected in any year can't exceed 10% of the current deposit. Lease clauses asking the tenant to waive these limits are void (46:8-24).
30 days after the lease ends, by personal delivery or registered/certified mail, including the tenant's share of accumulated interest and an itemized statement of any deductions (N.J.S.A. 46:8-21.1). Special cases are faster: 5 business days if the tenant was displaced by fire, flood, condemnation, or evacuation, and 15 business days when a domestic-violence victim terminates the lease.
Yes. The deposit must be held in a federally insured, interest-bearing New Jersey account (landlords with 10 or more units must use a qualifying money market fund or money-market-type account), and the interest belongs to the tenant — pay it in cash or credit it against rent every year on the lease anniversary, or on January 31 with proper notice (N.J.S.A. 46:8-19).
If the tenant sues and the court finds for them, the award of double the moneys due is mandatory, plus full court costs and, at the court's discretion, reasonable attorney fees (N.J.S.A. 46:8-21.1). Tenants can bring these claims in small claims court for amounts up to $5,000 including penalties (46:8-21.4).
Mostly no — the Act does not apply to owner-occupied premises with no more than two rental units, unless the tenant invokes it by giving the landlord 30 days' written notice (N.J.S.A. 46:8-26). Once invoked, all the investment, notice, interest, and return rules apply.
No. N.J.S.A. 46:8-21.1 says no deductions may be made from the deposit of a tenant who remains in possession. Deductions for unpaid rent and lease charges happen only at move-out, itemized in the 30-day return statement.
This page is general information, not legal advice. Statutes change — verify with the cited sources or an attorney.
Statute facts on this page were verified against the cited official sources on June 10, 2026.
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