New Jersey Landlords: How to Handle a Security Deposit Lawsuit

Even the most meticulous landlord can be sued by a tenant over the return of a security deposit. Fortunately, New Jersey landlords can take some basic steps to minimize the possibility that they'll spend hours in court haggling over back rent, cleaning costs, or damage to their rental property.

Take Steps to Avoid a Lawsuit

The best way to deal with a security deposit lawsuit is to avoid one altogether. There's no guarantee that a tenant won't sue, but if you follow these tips, you'll be on solid ground if you have to head to court.

Follow New Jersey's Security Deposit Laws

The most important thing you can do to avoid a small claims court dispute is to follow state law scrupulously when you return security deposits.

New Jersey law requires landlords to return security deposits within 30 days of the end of the tenancy. If the tenant has to move out because of fire, flood, condemnation, or evacuation, the landlord must return the deposit within five days. Or, if the tenancy ends because of domestic violence, the landlord must return the security deposit within 15 business days of the end of the tenancy. (N.J. Stat. § 46:8-21.1 (2025).)

The return of the deposit must be accompanied by a written itemization of how the security deposit was applied. (You'll prepare this after doing an inspection, discussed below.) It should include any deductions for cleaning, repairs, back rent, or other financial obligations required under your lease or rental agreement. List each item (such as "repainting living room wall" or "five days unpaid rent") and the dollar amount of the deduction. For repairs and damage, attach receipts (if you've already had the work done) or provide a reasonable cost estimate.

Prepare a Move-Out Letter

A move-out letter to tenants who have given you notice that they are ending the tenancy can clarify your expectations and help the tenant leave the rental in the best condition possible. Your move-out letter should:

• tell the tenant how you expect the unit to be left (be specific about cleaning things like floors, appliances, and window coverings)
• explain your final inspection procedures
• list the kind of deductions you may legally make (unpaid rent and necessary cleaning and repairs, outside of "ordinary wear and tear"), consulting your state law for specific guidance
• remind the tenant to return keys and provide a forwarding address, and
• state when and how you will send any refund that is due.

Inspect the Rental Unit

After the tenant leaves, you will need to inspect the rental unit to assess what cleaning and damage repair is necessary. Many landlords do this on their own and simply send the tenant an itemized statement with any remaining balance of the deposit. If at all possible, however, do your inspection with the tenant who's moving out, rather than by yourself. This will go a long way toward minimizing deposit disputes. Ideally, you will have used some kind of inventory or checklist when the tenant moved in so you can compare the condition of the rental at the start and end of the tenancy.

It's also a good idea to take photos or videos of the rental unit so that you have visual proof of its condition when the tenant moved out. Ideally, you will have also done this when the tenant moved in, so you have before and after photos.

If time allows, consider offering the tenant a second chance at cleaning or fixing any damage you've identified in the final inspection before you deduct cleaning charges from the security deposit.

New Jersey Small Claims Lawsuits

No matter how carefully you followed New Jersey security deposit laws, you still might be sued by a tenant who disagrees with your deductions, or claims that you failed to return the deposit when and how required. Tenants usually sue in small claims court, where it's cheap to file, lawyers aren't necessary, and disputes typically go before a judge (there are no juries) fairly quickly. You don't need a lawyer—in fact, they're not even allowed in some cases.

The maximum security deposit amount for which a tenant can sue in New Jersey small claims court is $5,000.

When a Tenant May Sue

Before going to court, your tenant will most likely email, write, or call you demanding that you refund more than you did or fix some other problem involving the deposit. Although some states require this type of demand letter before the tenant can begin a small claims case, New Jersey does not.

If you have failed to meet the deadline for returning the deposit (see above), do what you can to make things right. If you don't and the tenant sues you and wins, the tenant is entitled under New Jersey law to an award of double the security deposit plus the cost of bringing the lawsuit and, possibly, reasonable attorneys' fees. (N.J. Stat. § 46:8-21.1 (2025).)

Settling a Potential Lawsuit

Do your best to stay out of court. Try to work out a reasonable compromise, perhaps with help from a local mediation service. If you reach an agreement with your former tenant, sign a settlement agreement in which the tenant agrees to accept payment as full and final satisfaction of your obligation to return the deposit.

If compromise isn't possible, your tenant will probably sue you promptly, but might have up to six years to do so. (N.J. Stat. 2A:14-1 (2025).) So, don't throw out cleaning bills, receipts for repairs, or photos showing dirt and damage, lest you be caught defenseless.

Preparing for a Small Claims Court Hearing

If the tenant sues you, the court will officially notify you of the date, time, and place of the small claims court hearing. Preparation is key to winning your case. You want to make it clear that you knew (and followed) all the security deposit rules. In addition, you'll want to assemble tangible evidence to take to court (what you need depends on the specifics of your case), such as:

• a copy of your lease or rental agreement, signed by both you and the tenant
• copies of any correspondence, such as a move-out letter, spelling out your rules and policies on cleaning, damage repair, and security deposits
• any move-in and move-out inventories (ideally, signed by both you and the tenant), photos, and videos of your rental unit that show the condition of your property at the start and end of the tenancy
• the security deposit itemization you sent the tenant, setting out details on all your deductions
• backup for the itemization, such as hours spent by you or repair or cleaning people on the unit, copies of receipts for cleaning and related services, and details regarding any deductions you took for unpaid rent
• one or two witnesses (or written statements from witnesses) who were familiar with your rental unit and will testify that the place was a mess or that certain items were missing or damaged after the tenant moved out, and
• anything else relevant to your case.

Defending Yourself in Court

Small claims courts are informal places, but you might want to consider watching a few cases a few days before your court date, so you know what to expect. Your court website might also provide useful advice. Before you go to court, practice your statement with a friend or relative so that you can defend yourself in an efficient and convincing way, backed up with relevant evidence.

The trial consists of both you and your tenant explaining your positions and presenting any evidence or witnesses. This typically takes less than half an hour, and the judge either announces a decision right in the courtroom or mails it within a few days.

What to Do If the Tenant's Deposit Doesn't Cover Damage and Unpaid Rent

Tenants aren't the only ones who can use small claims court. If the security deposit doesn't cover what the tenant owes you for back rent, cleaning, or repairs, you could file a small claims lawsuit against the former tenant.

Remember that you must provide the tenant an itemization by the state deadline, even if you don't send money—for example, if the tenant has left owing several months' rent or the entire deposit didn't cover necessary cleaning and damage repair.

Start by writing a demand letter to the tenant, asking for the amount of your claim. Include a copy of your written itemization of how you applied the tenant's security deposit to the charges (this itemization should have requested payment of the balance). Ask for exactly what you want and be sure to give the tenant a deadline. Conclude by stating that you will promptly file a lawsuit in small claims court if you don't reach an agreement by the deadline.

If your demand letter doesn't produce results, ask yourself the following questions before going to court:

• Do I have a strong case and substantial evidence to win?
• Can I locate the former tenant?
• Can I collect a judgment if I do win?

If the answer to any of these questions is no, think twice before filing suit.

More Information on Small Claims Court and Security Deposits

Nolo's Small Claims Court & Lawsuits section provides a wide variety of articles on small claims court, including an overview of New Jersey small claims rules and procedures. The small claims section of the Nolo site also includes general articles on what to do if you are sued in small claims court, how mediation works in small claims cases, how to file an appeal in a small claims court case, and more. For complete details on the subject, see the Nolo book Everybody's Guide to Small Claims Court.

The Landlords & Tenants section of the Nolo site includes dozens of useful articles on property management, rental applications, preparing a lease, repairs, and more.

Nolo's Every Landlord's Legal Guide includes detailed advice on itemizing security deposit deductions for unpaid rent, cleaning, and repairs; handling deposits when a tenant files for bankruptcy or is evicted; dealing with deposits from cotenants; drafting a settlement agreement; collecting a court judgment if you sue and win your case, and more.