An Argument for Relaxation of Strict Application of the Security Deposit Act Notice Requirement

The New Jersey Rent Security Deposit Act (NJSA 46:8-19 to 26) (“the Act”) provides that a landlord of residential premises must notify a tenant in writing, within 30 days of the initial receipt of a security deposit, of 1) the name and address of the bank in which the security is deposited, 2) the type of account in which the security is deposited, 3) the current rate of interest for that account and 4) the amount of the deposit. If the landlord fails to provide the notice, the tenant may give written notice to the landlord that the security deposit and an amount representing interest at the rate of seven percent (7%) per annum, be applied on account of rent payments due or to become due from the tenant. Thereafter, the tenant is not required to post any additional security and the landlord may not demand additional security from the tenant.

The Act also provides that a landlord must give this notice annually thereafter, within 30 days of buying the property or within 30 days of either moving the deposit from one bank to another or from one account to another. The Act provides that the annual notice must also advise the tenant how much interest has accrued on the deposit. However, unlike the initial notice, the Act expressly provides that before a tenant may use the security against rent because of the landlord’s failure to provide the annual notice, the landlord has 30 days from receipt of the tenant’s notice to “cure” that defect and comply with the annual notice requirement.

Because the landlord’s ability to “cure” a notice defect is not expressly provided for in the Act for a violation of the initial notice requirement, it is a common belief that, unlike the failure to give the annual notice, there is no defense to a landlord’s failure to give the initial notice and the security deposit must be applied against rent due and owing. However, I believe an argument can be made for a relaxation of the strict application of the Act. In the case of Princeton Hill Assoc. v. Lynch, 241 N.J. Super. 363 (App. Div. 1990) the Court held that a landlord should be afforded the opportunity to present evidence concerning any acceptable excuses for the landlord’s failure to provide notice within the initial 30 day period. In the Princeton Hill case, the landlord did not give the initial notice within 30 days of receiving the security deposit because the landlord did not open the bank account until two months after receiving the security deposit. Therefore, the Court held, the landlord could not have given the tenant notice within 30 days. The Court noted the Act’s intent to punish unscrupulous landlords not landlords who act in good faith.

I therefore believe that a landlord has an arguable defense for failure to provide the initial notice required by the Act whenever the landlord has an acceptable excuse for not providing notice to the tenant within 30 days after receipt of the security deposit; so long as the landlord has acted in good faith. Where a tenant attempts to apply the security deposit against unpaid rent as a defense in an action by a landlord for possession for non-payment of rent, an attorney representing the landlord should make the argument that the landlord is entitled to the opportunity to present evidence of an acceptable excuse for failing to adhere to the technical requirements of the Act. The focus should be on the good faith of the landlord in attempting to comply with the Act rather than an automatic application of the statutory remedy available to the tenant.