Landlords know the importance of the security deposit, which is typically 1 and ½ times the monthly rent collected at the beginning of their tenancy and returned based upon the condition of the property when the tenants move out. However New Jersey has very specific requirements for handling security deposit funds.
For example, within 30 days of receiving the security deposit the landlord much notify a tenant in writing the name of the institution holding the funds. There are two places where a landlord may keep a deposit: in a Money Market Fund in compliance with the specific state regulations or an Interest- Bearing Bank Account. If they choose the latter, a landlord is required to write to the tenant annually and inform them of the amount of interest accrued as the accrued interest belongs to the tenant. If a landlord decides to move the security deposit to a different institution he or she is required to notify the tenant, in writing, within 30 days of doing so.
Additionally, if a landlord sells the property they must inform the tenant, in writing, within 30 days of the transfer of ownership. Once a tenant has moved out or their lease is terminated the security deposit must be returned within 30 days of either event, including all interest.
Security deposits may only be utilized by the landlord once a tenant has moved from the property and only if rent is outstanding and/or there is property damage above and beyond normal wear and tear. Any such deductions must be clearly itemized and sent to the tenant in writing within 30 days of the date they vacated the property.
A landlord’s failure to comply with these stringent regulations provides the tenant with powerful remedies. As a landlord, protect yourself and follow the rules.