You've put your time and effort into buying and spiffing up a rental property to rent out. However, there are always risks associated with becoming a landlord.
You might have bad tenants that don't pay rent or destroy property. Asking for security deposits when a tenant moves in can mitigate these risks, but there are laws you need to follow.
Keep reading to learn what you need to know about security deposits in New Jersey.
Security Deposit Amount
One important law regarding security deposits in New Jersey is the amount landlords can charge. The most you can collect is the equivalent of one and a half months of rent.
Let's say your property rent is $1,000. You can take up to $1,500 as a security deposit. According to the New Jersey statute, you cannot take more, but you can take less than the maximum.
Holding Security Deposits
Any banking institution in New Jersey can hold security deposits. Internet banks are okay if they are licensed to do business in the state.
Security deposits are required to be held in an interest-bearing account. This remains the tenant's money, so any interest accumulated also belongs to the tenant.
As interest accrues, the amount may go over the security deposit limit. You'll have to return the interest each year if tenants renew their lease.
To make things easier, you can credit against the following month's rent. This way, you don't have to take out checks to pay tenants their annual interest.
Using Security Deposits
There are security deposit laws safeguarding landlord and tenant rights. Landlords are protected because security deposits mitigate the risk that tenants will break the lease.
You can use all or a portion of the security deposit if your tenant doesn't meet the lease requirements. You can only use the security deposit when the tenant moves out.
You have 30 days after the tenancy to create a disposition letter totaling how much you are deducting from the security deposit. You'll return unused portions to the tenant.
If the cost of repairs or unpaid rent exceeds the security deposit amount, you must tell the tenant no money will be coming back to them. Let them know if they owe you money and how much to pay.
Release Requirements
To send the disposition letter or security deposit check, you'll need the resident's forwarding address. If they don't leave an address, send the letter to their last known address.
Even though the last known address is likely your rental property, you are still meeting the requirements.
A property manager can help you stay compliant with the New Jersey statutes.
How Can Rental Management Help?
The best landlord advice is to hire a rental property management company to help. Security deposit laws in New Jersey are complicated, but an experienced property manager will understand them.
PMI North Jersey is a full-service property management company based out of Teaneck. We provide landlords with state-of-the-art technology and unmatched knowledge of local real estate.
If you need help with security deposits, contact us today to learn about our services.
