New Jersey Security Deposit Laws: 1.5x Cap & Mandatory Interest

New Jersey's security deposit laws are among the most stringent in the nation, with strict requirements for how much a landlord can collect, where the money must be held, what interest tenants earn, and how quickly it must be returned.

Disclaimer: This guide provides general legal information for educational purposes only and does not constitute legal advice. Always consult a New Jersey attorney. Information last verified: March 2026.

Maximum Deposit Limit

Under N.J.S.A. 46:8-21.2, a landlord cannot collect a security deposit exceeding 1.5 times the monthly rent.

• If rent is $2,000/month, the maximum security deposit is $3,000.
• After the first annual lease renewal, the landlord may increase the deposit only by 10% of the prior deposit per year, regardless of whether the rent has increased more dramatically.

Mandatory Interest-Bearing Account

Unlike most states which simply require a separate account, New Jersey mandates that the deposit be held in an interest-bearing account at a New Jersey-based, FDIC-insured banking institution.

Within 30 days of receiving a deposit, the landlord must provide the tenant with a written notice identifying:

• The name and address of the banking institution.
• The type of account.
• The current interest rate.

Annual Interest Payment

The landlord must pay or credit the tenant with the accrued interest annually, either as a direct cash payment or as a credit on the next month's rent. Failing to pay interest entitles the tenant to apply the interest as a credit against their rent.

Return Timeline

If deductions are taken, the landlord must provide an itemized list of all damages and charges, along with the remaining balance.

Penalties for Wrongful Withholding

If a landlord fails to return the deposit or provide an itemized list within the required timeframe, the tenant can sue for:

• Double the amount of the wrongfully withheld deposit.
• Reasonable attorney's fees and court costs.

Non-Refundable Fees

New Jersey does not recognize "non-refundable" security deposits. Any payment that functions as a security deposit (regardless of what the landlord labels it) is subject to the 1.5-month cap and all interest/return requirements. Application fees are generally not considered security deposits, but any fee paid as a condition of occupancy may be scrutinized by the courts.

Automate Your Deposit Compliance

Tracking annual interest payments, 30-day return windows, and 10% annual increase caps across a portfolio is a compliance nightmare. Landager automates your NJ deposit ledger, computing interest credits annually and preventing deposit increases that exceed the statutory 10% annual threshold.

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