TENANT SECURITY DEPOSITS
NEW LEGISLATION IN EFFECT 1/1/05
Legislation concerning security deposits held by residential landlords and related tenant rights have been amended as of January 1, 2005.
Some important revisions to the current law are:
New Notice Requirements - the notice to tenant providing them with name and address of lending institution in which the security deposit is being held, and the amount being held now requires that the notice also inform the tenant of the type of account in which the security deposit is being deposited or invested - and the current rate of interest for that account.
1) The notice must be given within 30 days of the receipt of the security deposit from the tenant, or
2) within 30 days of moving the deposit from one depository to another except in the case of a merger of institutions or funds, then within 30 days of the date of receipt of notice of said merger, if the change in the account or place of account occurs more than 60 days prior to the annual interest payment,
3) within 30 days of the effective date (1-1-05);
4) at the time of each annual interest payment; and
5) within 30 days after the transfer or transfer of ownership or control of the property.
Penalties for Failure to Provide Notice - Under
N.J.S.A. 46:8-19 if a tenant did not receive information on where their security was being held within 30 days of delivering the deposit to the landlord, the tenant was entitled to demand the security be applied to the rent and the landlord could not ask for the deposit to be replenished. Now, before making the demand, the tenant must provide the landlord with written notice of their failure to provide the required notice, giving the landlord a 30-day grace period. After 30 days, if the landlord has not provided the required notice, the tenant can demand the security deposit be applied toward their rent and the landlord will be required to apply an amount equivalent to interest at 7% per annum of the security deposit toward the tenantís rent.
The limitation of the maximum amount of security deposit remains at 1-1/2 times one monthís rent, however
N.J.S.A. 46:8-21.2 has been amended to limit subsequent security deposit increases to an amount equal to no more than 10% of the security deposit previously held by the landlord.
The annual administration fee has been eliminated.
There will no longer be any compounding of a tenantís share of the interest.
One very important aspect of the amendments is that a new owner of property is now responsible for the proper investment of the security deposit, giving all notices and paying interest plus any accumulated earnings thereon. If your clients purchase rental property, and the security deposits are transferred or credited to the purchaser, or even if they are not transferred, the tenant must be advised within the statutory period of the change in ownership as well as the required notices concerning the security deposits plus accumulated interest. This revision places an addition burden on a new owner to assure that all security deposits have been transferred and all necessary notices are given to the tenants.
The landlord is no longer permitted to make a deduction from the security deposit. The deposit must be returned in full to the tenant at the end of the termination of the lease.