Application of Security Deposit Letter
(Residential Eviction) (NJ)

Summary

This application of security deposit letter may be used by a residential tenant in New Jersey to inform a landlord that because the landlord has failed to comply with the New Jersey Security Deposit Law, the tenant is exercising its right to apply the security deposit to its rent. This template contains practical guidance and drafting notes. New Jersey's Security Deposit Law, N.J. Stat. 46:8-19 et seq., requires that landlords maintain tenants' security deposits in a specific manner and provide certain information to tenants. The Security Deposit Law applies to all residential landlord-tenant relationships except those tenancies within owner-occupied properties with two or fewer rental units. Generally, the law requires that a landlord segregate the tenant's security deposit and hold it in trust for the tenant's benefit. Additionally, the law requires that the tenant's security deposit be invested with a financial institution in the State of New Jersey in an account which bears interest. The interest earned on a tenant's security deposit is the property of the tenant—and must be credited to the tenant annually. Under N.J. Stat. 46:8-19, if a landlord fails to properly invest a security deposit or fails to provide the tenant with the required information about the deposit, then the tenant may apply the deposit plus 7% interest to rent. In practice, it is common for a tenant in a residential eviction proceeding for nonpayment of rent to bring a letter invoking this provision to court on the scheduled nonpayment trial date. Invoking the Security Deposit Law reduces the amount owed to the landlord and necessarily reduces the amount required to secure an automatic dismissal of the action. For further guidance see Residential Eviction for Nonpayment of Rent (NJ).