Here's what the Security Deposit Reform law does:
1. Eliminated the landlord administrative fee. This administrative fee was always outrageous, but with interest rates so low, it's ridiculous -- tenants get little nor no interest on their deposit because the interest is absorbed by the fee.
2. Requires landlords to provide an annual notice of the amount of the deposit, the NJ Bank it is in, the type of account it is in, and the current interest rate on that type account.
Tenants have a very difficult time getting any information about their security deposit account, much less accurate, complete, up-to-date information. Banks won't even talk to them. The requirement of an annual notice solves this problem without adding a serious burden, since the notice would simply accompany the interest payment and could easily be computer generated.
3. Expand enforcement by allowing the tenant to take back the security deposit plus 7% interest (apply it to the rent) if the landlord does not provide the information listed in #2 about the tenant's security deposit. Tenants have never had an effective means of enforcing return of their deposit, obtain their interest or get have the landlord observe notice requirements. This provision provides this legal power.
4. Where a building has been sold, the new landlord get the deposit from the old landlord, invest it properly, make all required interest payments, give all required notices, and return it on time when the tenant moves.
5. Limit the amount the security deposit can increase in any one year to 10% (but no more than the current maximum of 1 1/2 months rent).
This would solve the problem of long term tenants who always had only one month's rent as security being hit with a gigantic increase to 1 1/2 months all at once.
6. Increase the Small Claims Court limit to $5,000 for Security Deposit cases only, so that tenants can really sue for twice the security deposit if the landlord doesn't return the deposit on time.
7. Clarify the law to prohibit deductions from the security deposit while the tenant still lives there. Although it was certainly never the intent of the legislature, some landlords actually try to do this, and we need crystal clear language in the law prohibiting it.
Note:
The Security Deposit is basically an insult to tenants. It says we're probably going to destroy the place and skip out without paying your last month's rent. Otherwise there would be no reason for it. This bill does nothing to change that. It just plugs upa number of loopholes which have added much injury to that insult over a long period of time.
Why Security Deposit Reform?
The New Jersey Tenants Organization is the oldest and largest statewide tenants organization in the United States. We are the voice of the one million New Jersey families who rent their homes. For a very long time, tenants have suffered because the Security Deposit Law is ridden with loopholes. It is in dire need of reform and repair. The Security Deposit Reform bill will do some of that. We are indebted to Senator Byron M. Baer for introducing such an important bill.
The requirement of a Security Deposit does not benefit tenants. It is solely for the benefit of the landlord. Tenants are injured by the loss of use of their money, by the inherent insult to their integrity, and by the inferior position they are put in when it comes time for the return of the deposit.
When the tenant moves out, the landlord, having possession of the deposit, can fabricate illegitimate deductions at will, and end up returning little if any of the security deposit. These unwarranted deductions are commonplace, since the tenant's only recourse, filing a lawsuit, is often extremely difficult, or at least extremely inconvenient, especially if the tenant has moved far away. Tenants have good reason not to trust the landlord in these circumstances. There is no security here for the tenant--only for the landlord.
What we would really like to do is to prohibit security deposits altogether. Security Deposit Reform Bill does not do that, however, the new law cleans up some of the worst loopholes and problems in the security deposit law.
