Make Sure You Know the Law About Security Deposits

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Just about every landlord understands the value of security deposits.  However, there are rules in place that must be followed.   In fact, every landlord should know the law.  Otherwise, they may find themselves in landlord/tenant court.

Are you a landlord engaged in a dispute with a tenant over the security deposit refund?

When it comes down to it, you are in the company of many other landlords.  The problem when the tenant moves out of your rental property.   You go to inspect the place and are thankful that you took the deposit in the first place.

Notwithstanding, you are still obligated to do things a certain way.  In fact, your legal obligations even begin with the amount of money you request.  Moving forward, you might not know when it is appropriate for you to deduct from—or withhold—a security deposit.

The bottom line is that if the tenant caused damages beyond normal wear-and-tear, you might be entitled to keep a portion, or all, of the security deposit.

The Purpose of Security Deposits

 Security deposits are for your protection if something in the rental property is damaged, dirty, or broken by renters at the end of their lease. This deposit, also referred to as a “damage deposit,” will be returned to your tenant when he or she moves out if the tenant followed the terms of the lease agreement.

When tenants move into your rental property, you normally collect from them the security deposit, plus typically their first month’s rent. According to N.J.S.A. 46:8-21.2, you can collect as much as one and one-half times the monthly rent. Also, you can raise the security deposit to coincide with a rent increase.  That said, you cannot ask for more than a 10 percent increase in any one year.

When the tenant moves in, you may invest the security deposit in a money market fund in a New Jersey-based investment company or a bank account.

For renters to get their deposit back, they need to follow the rules and return the property to the condition it was in when they first moved in.

As a landlord, you should provide a move-in checklist for the tenant.  In fact, you should also require the tenant to sign the document. This will make them accountable for the condition of the property, including any pre-existing damage.

Here’s another good idea.  You might also want to take pictures of the unit and do a walk-through with them. Taking these steps will help you if you need to withhold any portion of the security deposit.

Security Deposits: Withholding or Deducting Money

 New Jersey’s Security Deposit Laws describe the procedures for making deductions from a deposit and the methods for returning a tenant’s security deposit.  For example, you are not allowed to deduct from a security deposit for any items that have only normal wear-and-tear. In case you’re not sure, this could include any of the following:

  • Broken appliances and lightbulbs
  • Rug wear
  • Dirty blinds and curtains
  • Warped doors and windows
  • Picture or pin holes in walls.

Damages that exceed normal wear-and-tear that you can deduct from a security deposit include:

  • Unpaid rent
  • Holes in walls
  • Broken walls, windows, window screens
  • Doors or locks that are smashed
  • Broken appliances
  • Holes, tears, or burn marks in the carpets or curtains
  • Cracked tiles and damaged fixtures
  • Broken doors and locks
  • Stopped toilet; mildew in the bathroom
  • Animal stains.

Just like you did before they moved in, you should take pictures of the unit after the tenant moves out. If you deduct anything from the security deposit, you must provide an itemized list of the deductions. You may be able to use money from the security deposit to repair any significant damage, clean the rental property, and cover the cost of rent.

There are time limits when it comes to the security deposit.   If you return the security deposit, you must do so within 30 days after the tenant moves out. Meanwhile, you must also return any accumulated interest or earnings.  If you’ve decided against returning any portion of the security deposit, you must also notify the client in writing of your decision.

Contact Us

Need legal advice concerning security deposits?  Contact the Law Office of Lawrence M. Centanni to understand the law and protect your interests.  We look forward to helping you!


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