The short answer
New Jersey caps residential security deposits at one and a half months' rent, requires the money to be held in a New Jersey bank or savings institution account, requires written notice to the tenant of where it is held within 30 days, and requires return — with interest and an itemized list of deductions — within 30 days after the tenancy ends.
The core rules
- Cap: no more than 1.5 times one month's rent in total. Annual increases are limited to 10% of the existing deposit.
- Where it's held: an account in a New Jersey bank or savings institution, in the landlord's name for the tenant's benefit.
- Notice: within 30 days of receipt, tell the tenant in writing the institution's name and address, the account type, the interest rate, and the amount.
- Interest: paid to the tenant annually or credited toward rent, as the law allows.
- Return: within 30 days after the lease ends, by personal delivery or mail, with an itemized list of any deductions.
Exceptions and special timelines
Owner-occupied buildings with no more than two units are exempt unless the tenant gives 30 days' written notice invoking the law. Shorter return deadlines apply when a tenant is displaced by fire, flood, condemnation, or evacuation, and when a tenant ends a lease early under the domestic-violence protections in New Jersey law.
What you can deduct
Unpaid rent and damage beyond normal wear and tear. Repainting after a long tenancy or replacing worn carpet at the end of its life is usually wear and tear. Holes, burns, pet damage, and missing fixtures are not.
Why this matters
A landlord who wrongfully withholds a deposit can be liable for double the amount withheld plus court costs and attorney's fees. Clear move-in and move-out photos are the best protection — we document every turnover with dated, itemized condition reports.
Common questions
Can I use the security deposit as last month's rent?
The tenant can't unilaterally apply it, and landlords shouldn't plan on it. Treat the deposit as security against damage and unpaid rent, settled after move-out.
What happens to the deposit if I sell the building?
The deposit and interest must be transferred to the new owner, and tenants must be notified of the transfer.
General information about New Jersey rules as of October 2026, not legal advice. Laws and municipal requirements change — confirm specifics with your attorney or the municipality before acting.
Reviewed October 2026 by Comet Management, Hamburg, NJ.