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New Jersey security deposit rules for landlords
New Jersey's deposit rules are stricter than most landlords expect. Here is what the law requires, in plain English, from the day you collect it to the day you return it.
Updated October 25, 2026. Every rule below links to its official source; see all of them on our Legal sources page.
Everything below comes from the NJ Department of Community Affairs' Truth in Renting guide, which explains the Security Deposit Law (N.J.S.A. 46:8-19 to -26).
Does it apply to you?
It applies to most residential rentals. The exception is an owner-occupied two- or three-family home. Even then, the tenant can make the law apply by asking in writing; it applies 30 days after the request. A one- or two-family rental where you don't live is covered. You don't have to collect a deposit at all, but if you do, these rules apply.
How much you can collect
- No more than 1.5 times one month's rent (N.J.S.A. 46:8-21.2).
- Any yearly increase in the deposit can't be more than 10% of the current deposit.
- A pet deposit counts toward the same 1.5x limit.
- Prepaid rent counts as deposit, including "last month's rent", whatever you call it. At lease signing you can ask for the deposit plus the first month's rent, so no more than 2.5 months' rent in total.
Where to keep it
The deposit stays the tenant's money, held in trust. Don't mix it with your own money. A landlord with 10 or fewer units must put it in an interest-bearing account at an insured bank or savings and loan located in New Jersey. Landlords with more units have a few other options, such as an insured money market fund.
The interest belongs to the tenant. Pay it in cash or credit it toward rent each year on the lease anniversary or renewal, or on January 31 if you told the tenant in writing that's when you pay it.
The notice you must send within 30 days
Within 30 days of receiving the deposit, and with each yearly interest payment, tell the tenant in writing:
- the name and address of the bank;
- the amount of the deposit;
- the type of account;
- the current interest rate.
Send a new notice within 30 days if you move the money to another account or bank, or transfer it to a new owner. If the tenant doesn't get this notice, or isn't paid interest, the tenant can give written notice and use the deposit, plus 7% yearly interest, toward rent. For a missed annual notice or payment, the tenant must first give you 30 days to fix it (N.J.S.A. 46:8-19.1).
Returning it: 30 days
- Return the deposit, plus interest and minus any deductions, within 30 days after the tenancy ends (N.J.S.A. 46:8-21.1).
- Deliver it in person or by registered or certified mail.
- If you deduct anything, send an itemized list by registered or certified mail within the same 30 days.
- Deductions can cover damage beyond normal wear and tear and other money owed under the lease. You can't take deductions while the tenant still lives there.
If you miss the deadline or the tenant disputes the deductions, the tenant can sue. A court can award double the amount wrongly withheld, plus court costs and attorney's fees.
Shorter deadline: if the tenant has to leave because of a fire, flood, condemnation or evacuation, the deposit is due within 5 business days.
Put it in the lease
Our New Jersey lease won't accept a deposit over 1.5 months' rent, and it includes the bank notice and the 30-day return terms. Have a rent increase coming? The deposit can go up with it, within the limits above (see our NJ rent increase guide).
Want a lease that already does all this?
Answer one question at a time. We keep the numbers within your state's limits and attach the required disclosure pages. New leases and renewals.
Frequently asked questions
What is the maximum security deposit in New Jersey?
1.5 times one month's rent (N.J.S.A. 46:8-21.2). Pet deposits and prepaid rent, including last month's rent, count toward that limit, per the NJ DCA Truth in Renting guide.
How long does a NJ landlord have to return a security deposit?
30 days after the tenancy ends, with interest and an itemized list of any deductions, by personal delivery or registered or certified mail (N.J.S.A. 46:8-21.1). It's 5 business days if the tenant had to leave because of a fire, flood, condemnation or evacuation.
Does a NJ landlord have to put the deposit in an interest-bearing account?
Yes. A landlord with 10 or fewer units must use an interest-bearing account at an insured bank or savings and loan in New Jersey, and tell the tenant the bank, amount, account type and rate within 30 days.
Is an owner-occupied two-family exempt from the NJ Security Deposit Law?
Owner-occupied two- and three-family homes are exempt, but the tenant can make the law apply 30 days after a written request, per the NJ DCA.