As a rental property investor or landlord, you are undoubtedly aware of the importance of the security deposit. These funds work as “insulation” against the risks and costs associated with damage to your units, and are a necessary component to the landlord/tenant relationship. However, as a landlord, you are also likely to face complaints from your renters as to the up-front cost of the deposit and/or the withholding of deposit funds to fix damages to the unit. New Jersey lawmakers attempted to address and streamline security deposit issues by enacting the 2010 Security Deposit Law, which outlines the general principles applying to residential and commercial security deposits – and what the parties can do in the event a conflict arises.
Amount of Security Deposit
As a landlord, you are within your rights to require a deposit of up to one and one-half times the monthly rent amount. For example, if the tenant’s monthly rent payment is $1,000, you can require a security deposit payment of up to $1,500. In some situations, you may require payment of additional security deposit funds in the years following the initial payment. As your NY and NJ condo association law attorney will explain more thoroughly, subsequent years’ security deposit requirements cannot exceed 10 percent of the current deposit amount. As an example, if you have collected $3,000 worth of security deposit funds in an account, you may only demand a maximum of $300 the following year.
Return of Security Deposit
Possibly the most contentious issue between landlords and tenants is the return of the security deposit at the end of the rental term. In general, the terms governing the return of a security deposit are delineated in the rental agreement. These terms should be specific, but may not expressly describe or acknowledge every possible event giving rise to a refusal to refund.
Under the Security Deposit Law, a landlord may only withhold a deposit if, upon proper inspection following the conclusion or termination of the rental agreement, the landlord finds that the unit has been damaged beyond normal wear and tear. In this case, the landlord may deduct the amount necessary to repair the problem and must return the balance promptly to the tenant. If no damage is found, the landlord must return the deposit within 30 days after the termination of the lease.
As the landlord, if you wrongfully withhold a security deposit, your tenant may initiate a lawsuit to recover the balance. If the tenant wins, you may be required to pay double the deposit, court costs and attorneys’ fees. This result could be disastrous for the financial health of your rental investments, but it can likely be avoided with compliance guidance from an NJ and NY landlord attorney.
Contact a Condo Association and Landlord Attorney Today
If you are facing difficult issues with your tenants objecting to the withholding of a security deposit, or would like to discuss your options in collecting security deposits up front, contact Griffin Alexander, PC today. You can reach our New Jersey office by calling (973)-366-1188 today.
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