Apartment Lease Question - Can Security Deposit Increase?

[Kinthalis]

So I got a letter along with my new apartment lease for this year letting me know that the security deposit has increased by around $50.

At first I thought the landlord was letting me know by how much my original security deposit (4 years ago when I first moved into the apartment) had increased (I know that it’s supposed to be placed in a savings account and accrues interest, which I believe is payed to me when I move out.). I didn’t do the math and thought that sounded fine for a year’s worht on interest on about $1300. I thought it was a bit strange though because he had never told me the amount before, I simply assumed it would go up about $30-$50 a year).

Today however, I get a call letting me know that he is expecting the check for the $50. And I was like ???

I know several people who are landlords and none of them have ever increased the security deposit on the same renters with a new lease. Also suspicious is the amount by which the deposit is increasing, it’s not an even number, which is why I immediately thought it was the interest increase on my original deposit amount. This would also be the first year of the 4 I’ve lived in the apartment where he has asked me for a security deposit increase. Weird. Another note: My rent has increased from $850 when I first moved in to $945 for this year. Which I guess might make some sense too, there’s about a $95 difference, split in 2, it kinda works…

So my questions are:

1. Is this normally done by landlords (increasing the securty deposit - specially by such a trivial amount after 4 years)?

2. Is it legal in my state (New Jersey).

3. Should I also be asking for the accrued interest on my original deposit, and am I correct in thinking I am due it once I move out?

Thanks!

[Lightnin]

Sure as hell seems wonky to me. What’s to stop him from raising it EVERY month, effectively increasing your rent? Sure, he’d have to give it all back to you when you moved out (unless he found a way to keep it), but in the meantime, he’d have some tax-free money to keep depositing in the bank to earn interest on.

I bet that if it IS legal, he can only do it by a set amount or number of times a year. I’d still be surprised if even that’s legal, though.

[Musicat]

IANAL, so I can’t say about the legal aspect.

But from a practical standpoint, is he paying or crediting you with interest on your deposit over time? If not, I’d say it would be only fair that his income from the interest would be adequate compensation and he shouldn’t ask for a larger deposit. Of course, new tenants would pay the higher amount.

I know in some cases (I’m including more than apartment rentals, like appliances, containers and tools), the security deposit is refunded after a period of time, like a year, under the theory that you have proved your integrity by then and the deposit isn’t necessary to ensure it.

Since most security deposits are intended to offset expenses caused by a tenant, I can’t see that the amount is any other than just a wild estimate of what might be needed, so it seems illogical to say that the first amount isn’t enough and he needs eactly $50 more.

[ethelbert]

From Findlaw

A security deposit and the last month’s rent are not the same thing. Last month’s rent is the pre-payment to the landlord for the last month of tenancy. The amount of the last month’s rent and of the security deposit each are usually one month’s rent, and in some states they can not be greater than one month’s rent. If the landlord later raises the rent, he or she can require the tenant to increase both the amount of the last month’s rent and the amount of the security deposit to equal the new rent. A landlord typically cannot transfer one for the use of the other without the tenant’s consent. Likewise, the tenant may not use the security deposit as the last month’s rent.

This is not specific to New Jersey & I have never rented in New Jersey, but it was the case in New York, although many landlords did not bother.

[Shayna]

@Kinthalis

1. Is this normally done by landlords (increasing the securty deposit - specially by such a trivial amount after 4 years)?

2. Is it legal in my state (New Jersey).

3. Should I also be asking for the accrued interest on my original deposit, and am I correct in thinking I am due it once I move out?

Here is a pretty good explanation of Tenant Rights as regards security deposits on rental property in New Jersey. The answers to your specific questions are ‘Yes’, ‘Yes’ and, for #3, both ‘Yes’ and ‘Depends’:

Limit on amount of deposit

The most a landlord can collect as a security deposit is one and one-half times the monthly rent. Cite: N.J.S.A. 46:8-21.2. There are no exceptions to this limit. Sometimes a landlord will try to collect more security money from a tenant at the time the landlord raises the tenant’s rent, in order to have the security keep pace with the rent increase. The law now says that the most additional security money that a landlord can get in any one year is 10 percent of the current deposit. Cite: N.J.S.A. 46:8-21.2.

Ask for a receipt when you pay the security deposit. The receipt should include the date, the landlord’s signature, and the amount of the security deposit paid. The receipt should show that this money is for a security deposit. Also, make sure that your written lease states that you have paid a security deposit and includes the amount of the deposit.

It sounds like the increase he’s imposed is less than the legal limit (in this case, $130).

Interest on your security deposit

The Rent Security Deposit Act requires landlords who rent 10 or more apartments to place tenants’ security deposits in either an insured money market fund or a federally insured bank account. The account must pay a rate of interest set at least quarterly and equal to the average rate of interest paid by the bank on money market accounts.

These higher interest accounts must be in New Jersey-based institutions. Cite: N.J.S.A. 46:8-19(a).

The law requires landlords who rent fewer than 10 apartments to place security deposits in bank accounts that pay at least the regular rate of interest. Cite: N.J.S.A. 46:8-19(b).

Whichever type of account your security deposit is in, all of the interest earned on it is yours. The law no longer allows the landlord to keep any amount to cover his or her administrative expenses. Cite: N.J.S.A. 46:8-19(a).

The law now requires that the interest earned on the deposit must either be paid to you in cash every year or subtracted from the amount of rent you owe on the renewal or the anniversary of the lease. This must be done either when your lease is to be renewed, or on January 31 each year. (But the landlord must give you a written notice that he or she will be paying you on January 31 of each year instead of the date your lease is renewed.) Cite: N.J.S.A. 46:8-19(c).

Getting your security deposit back

The Rent Security Deposit Act states what a landlord must do with your security deposit when you move out, even if you move out before your lease is over. Within 30 days after you move out, the landlord must return your security deposit and interest, less any rent you owe or any charges for repairing damage that you have done to the property. If the landlord deducts any amounts for damages or rent, he or she must give you a complete list of the damages he or she claims you did to the property and the cost of repairs. The landlord must send you the list of damages by registered or certified mail, and the landlord must return to you any money left over from your security deposit. Cite: N.J.S.A. 46:8-21.1.

The landlord can only charge you for property damage that is more than ordinary wear and tear. Ordinary wear and tear means damage that takes place from the normal, careful use of the property.

<snip> (much more info at linked cite)

I would put any and all questions and/or correspondence between you and your landlord regarding this in writing.

[Annie-Xmas]

I work in rental property management in New Jersey. The landlord can increase the security deposit to keep it at 1 1/2 times your rent. However, the monies are suppose to be kept in a separate, interest bearing account. We credit 3% a year.

Security is not the last month’s rent. It is a deposit for any repairs needed to the place after you move.

By my calculations, at 3% annual interst your security deposit should now be $923.35. I would offer to pay the $21.35 balance to bring it up to your current rent.

[Kinthalis]

Thanks everyone. At least I now feel better about paying the balance on the security deposit.

About the interest, Shayna’s cite says I should be getting the interest paid to me every year? This has never happenned, as I mentioned, he never even tells me how much ineterest the account has accrued.

I’m going to pay the security deposit, but I will also ask for the total amount of interest accrued on my $1300 deposit.

Should I ask, just to know, and so that I can make sure I’m being payed it when I move out, or should I ask for it to be payed to me now?

Thanks again!

[Shayna]

@Kinthalis

Should I ask, just to know, and so that I can make sure I’m being payed it when I move out, or should I ask for it to be payed to me now?

Thanks again!

I’m a landlord in California where we aren’t obligated by law to pay interest on monies held for security deposits, so I can only answer based on my interpretation of the cite I provided above. Based on my reading of that, as well as the actual text of the relevant Assembly Bill No. 2608 (Warning: .pdf file) (also be sure to note the "EXPLANATION - Matter enclosed in bold-faced brackets [thus] in the above bill is not enacted and is intended to be omitted in the law.), your landlord should have either paid you the accrued interest or deducted an equivalent amount from the monthly rent on the anniversary of your lease renewal every year, or every January 31st, whichever he prefers. However, in order to make the payment on January 31st instead of your anniversary date, he would have had to put that in writing.

Since your landlord has apparently not only not paid you (or allowed you to deduct) the accrued interest annually, but has also not informed you where and how your money has been invested, you must first give him an opportunity to comply. . .

38 . . . However, in the case of a failure by the person
39 receiving the security deposit to pay the annual interest or to provide
40 the annual notice at the time of the annual interest payment, if the
41 annual notice is not also serving as a notice of change of account or
42 institution, before the tenant may apply the security deposit plus
43 interest on account of the rent payment or payments due or to become
44 due on the part of the tenant, the tenant shall first give that person a
45 written notice of his failure and shall allow that person 30 days from

A2608 [1R]
4

1 the mailing date or hand delivery of this notice to comply with the
2 annual interest payment or annual notice, or both.[sup]1[/sup]

If he doesn’t comply, he owes you, per the preceding paragraph;

22 [In the event] If the person receiving a security deposit fails to
23 invest or deposit the security money in the manner required under this
24 section or [notify the tenant of the name and address of the investment
25 company, State or federally chartered bank, savings bank or savings
26 and loan association in which the deposit or investment of such
27 security is made, and the amount thereof, within 30 days after receipt
28 of same from the tenant, or within 30 days after the effective date of
29 this 1990 amendatory act, whichever occurs later,] to provide the
30 notice or pay the interest to the tenant as required under this
31 subsection, the tenant may give written notice to [the] that person
32 [receiving the same] that such security money plus an amount
33 representing interest at the rate of seven percent per annum be applied
34 on account of rent payment or payments due or to become due from
35 the tenant, and thereafter the tenant shall be without obligation to
36 make any further security deposit and the person receiving the money
37 so deposited shall not be entitled to make further demand for a
38 security deposit.

How far you want to pursue this depends on what kind of relationship you have, and/or want to establish with your landlord. But it seems to me as if he or she owes you some money, and you have every right to attempt to collect it. Good luck!

[Kinthalis]

I really don’t want bad blood between me and him. We’ve already had some problems where he wasn’t being very helpful at all with a heating sutuation a few years back.

I’m going to inform him of this and ask in a nice way for the money. Unfortunately if he ignores me, as he has done in the past, I probably won’t press the matter too much. Hopefully it won’t come to that though! Thanks Shayna!

[Shayna]

You’re welcome. To give you a general idea of approximately how much you might be talking about, using Annie-XMas’s 3% from her post above, compounded annually, this savings calculator says he would owe you $39 per year. If he had paid it out to you each year, you would only be calculating the interest due on the principal balance of $1,300 each year, so that would mean you’d’ve collected a total of $156 over the past 4 years. But all those variables could differ, based on what’s in your lease and how your landlord responds.

Have a great weekend!