ASSEMBLY, No. 1187
STATE OF NEW JERSEY
Introduced Pending Technical Review by Legislative Counsel
PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION
By Assemblyman DALTON
An Act concerning interest on security deposits and amending P.L.1967, c.265.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 1 of P.L.1967, c.265 (C.46:8-19) is amended to read as follows:
1. Whenever money or other form of security shall be deposited or advanced on a contract, lease or license agreement for the use or rental of real property as security for performance of the contract, lease or agreement or to be applied to payments upon such contract, lease or agreement when due, such money or other form of security, until repaid or so applied including the tenant's portion of the interest or earnings accumulated thereon as hereinafter provided, shall continue to be the property of the person making such deposit or advance and shall be held in trust by the person with whom such deposit or advance shall be made for the use in accordance with the terms of the contract, lease or agreement and shall not be mingled with the personal property or become an asset of the person receiving the same.
The person receiving money so deposited or advanced shall:
a. (1) Invest that money in shares of an insured money market fund established by an investment company based in this State and registered under the "Investment Company Act of 1940," 54 Stat.789 (15 U.S.C.§80a-1 et seq.) whose shares are registered under the "Securities Act of 1933," 48 Stat.74 (15 U.S.C.§77a. et seq.) and the only investments of which fund are instruments maturing in one year or less, or (2) deposit that money in a State or federally chartered bank, savings bank or savings and loan association in this State insured by an agency of the federal government in an account bearing a variable rate of interest, which shall be established at least quarterly, which is similar to the average rate of interest on active interest-bearing money market transaction accounts paid by the bank or association under 12 C.F.R. Part 1204.108, or equal to similar accounts of an investment company described in paragraph (1) of this subsection[, less an amount not to exceed 1% per annum of the amount so invested or deposited for the costs of servicing and processing the account].
This subsection shall not apply to persons receiving money for less than 10 rental units except where required by the Commissioner of Banking by rule or regulation. The commissioner shall apply the provisions of this subsection to some or all persons receiving money for less than 10 rental units where the commissioner finds that it is practicable to deposit or invest the money received with an investment company or State or federally chartered bank, savings bank or savings and loan association in accordance with this subsection. Except as expressly provided herein, nothing in this subsection shall affect or modify the rights or obligations of persons receiving money for rental premises or units, tenants, licensees or contractees under any other law.
b. Persons not required to invest or deposit money in accordance with subsection a. of this section shall deposit such money in a State or federally chartered bank, savings bank or savings and loan association in this State insured by an agency of the federal government in an account bearing interest at the rate currently paid by such institutions and associations on time or savings deposits.
c. The person investing the security deposit pursuant to subsection a. or b. of this section shall [thereupon] notify in writing within 30 days of the receipt of the security deposit from the tenant, or within 30 days of any change of investment, each of the persons making such security deposit or advance, giving the name and address of the investment company, State or federally chartered bank, savings bank or savings and loan association in which the deposit or investment of security money is made, and the amount of such deposit or investment.
All of the money so deposited or advanced may be deposited or invested by the person receiving the same in one interest-bearing or dividend yielding account as long as he complies with all the other requirements of this act.
[The person receiving the money so deposited or so advanced shall be entitled to receive as administrative expenses, a sum equivalent to 1% per annum thereon or 12.5% of the aggregate interest yield on the security deposit, whichever is greater, less the amount of any service fee charged by an investment company, a State or federally chartered bank, savings bank or savings and loan association for money deposited pursuant to this section, which shall be in lieu of all other administrative and custodial expenses.] The balance of the interest or earnings paid thereon by the investment company, State or federally chartered bank, savings bank or savings and loan association, hereinafter referred to as tenant's portion, shall belong to the person making the deposit or advance and shall, at the tenant's discretion, be permitted to compound to the benefit of the tenant, or be paid directly to the tenant in cash by December 31 of each year, or be credited toward the payment of rent due on the renewal or anniversary of [said] the tenant's lease.
[In the event] If the person receiving a security deposit fails to invest or deposit the security money in the manner required under this section or [notify the tenant of the name and address of the investment company, State or federally chartered bank, savings bank or savings and loan association in which the deposit or investment of such security is made, and the amount thereof, within 30 days after receipt of same from the tenant, or within 30 days after the effective date of this 1990 amendatory act, whichever occurs later] to provide notice, payment or credit pursuant to this subsection within 30 days of the date required, the tenant may give written notice to [the] that person [receiving the same] that such security money plus interest thereon at the rate of seven percent per annum be applied on account of rent payment or payments due or to become due from the tenant, and thereafter the tenant shall be without obligation to make any further security deposit and the person receiving the money so deposited shall not be entitled to make further demand for a security deposit.
d. The provisions of this section requiring that the security advanced be deposited or invested in a money market fund, or in an interest bearing account in a State or federally chartered bank, savings bank or savings and loan association shall not apply to any security advanced on a contract, lease or license agreement for the seasonal use or rental of real property. For purposes of this paragraph "seasonal use or rental" means use or rental for a term of not more than 60 consecutive days for residential purposes by a person having a permanent place of residence elsewhere. "Seasonal use or rental" does not mean use or rental of living quarters for seasonal, temporary or migrant farm workers in connection with any work or place where work is being performed. The landlord shall have the burden of proving that the use or rental of the residential property is seasonal.
(cf: P.L.1990, c.100, s.1)
2. This act shall take effect on the first day of the third month after enactment.
STATEMENT
This bill provides that subsequent to the initial notification upon receiving the security deposit, a landlord must notify a tenant of any change in the nature or location of a security deposit investment. If the landlord fails to give such notice, or any other notice, payment or credit required by the statute, the tenant may demand that the full amount of the deposit, plus interest at the annual rate of seven percent be credited toward the rent due.
Further, the bill clarifies the option of tenants to decide if they prefer their interest to accrue, be paid to them in cash, or be credited toward payment of rent due.
Specifies landlord obligations in handling tenant security deposits.