Security Deposit Question about using N.J.S.A. 46:8-19 - 26 for rent

[NJDoe]

Jurisdiction

New Jersey

Moved in July 2010 on a month to month basis. 2 family home that owner does not occupy.

The house we live in is being foreclosed on. We have not yet received notice that the owner (whom we see on a regular basis) has technically lost the house but we did receive paperwork from lawyers asking the court to enter final judgment a month ago, so we are assuming this is the end. (I call city hall on a biweekly basis to confirm who is listed as the owner.)

Landlord never provided me with proof the security had been deposited nor the interest yearly on wherever that deposit was being held so am I correct in thinking that according to N.J.S.A. 46:8-19 through 26, I can now use the security deposit as rent? By my calculations (2010-2017), including the 7% per annum this would cover us for more than 2 months at which point we would resume paying rent to the landlord, or, if at that point they'd lost the house, pay rent to the bank/new owner.

We do not intend to leave until the new owner/bank tells us we have to. The reason we want to use the security towards rent now instead of just getting our security when we leave (from whoever at that point, bank, new owner, etc.) is that is is worth more to us now. We can save more money living rent free for 2 months than would equal the deposit being returned to us when we move.

Is this a valid claim we can make? The owner owes almost half a million in property taxes and mortgage payments and we have a good, albeit now strained, relationship so I'm hoping she acquiesces to my living there rent free for a few months rather than suing her later for the security deposit. We are aware that once a new owner or the bank takes over we would have to resume paying rent so we want to do this now, while we still have the oppourtunity (if this is valid).

Link to deposit law: http://www.state.nj.us/dca/divisions/codes/publications/pdf_lti/sdepsit_law.pdf

 

[adjusterjack]

No, the security deposit statute DOES NOT give you the option of withholding rent as an offset.

However, you do have legal remedies if the security deposit is wrongfully withheld.

See 46:8-19 through 46-8-21.5:

2013 New Jersey Revised Statutes :: Title 46 - PROPERTY

Unfortunately, those remedies aren't likely to do you much good if you have to sue somebody who is already losing the house to foreclosure.

You can certainly ask the owner to allow you to live rent free for the next two months.

If she says no, then it's up to you to decide if you want to just quit paying rent and take a chance on the possibility of being evicted for non-payment and losing the deposit anyway.

It's your decision. Just make sure you are able to find another place rather quickly when the axe falls. Because when it does fall things will happen rather quickly and could end up trashing your credit if somebody files eviction in court.

 

[NJDoe]

Then what is this law for? It literally states
"If the person receiving a security deposit fails to invest or deposit the security money in the manner required under this section or to provide the notice or pay the interest to the tenant as required under this subsection, the tenant may give written notice to that person that such security money plus an amount representing interest 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."

 

[NJDoe]

Also found this on LSNJLAW - Understanding Your Security Deposit:

The law also says that if the landlord does not put the security money in a proper bank account, or does not give a proper written notice to the tenant every time the law says he or she has to, then the tenant can give a written notice to the landlord telling the landlord to use the whole deposit (plus seven percent interest per year) to pay the tenant's rent. (But be sure to read the next paragraph, which talks about a special situation.) This notice should be sent to the landlord by certified mail, return receipt requested, and you should keep a copy. The money can be used to pay future rent or any back rent the tenant owes. Once a tenant legally tells the landlord to use the security deposit as rent, the landlord can't ask the tenant for another deposit as long as the tenant lives in the apartment or house. Cite: N.J.S.A. 46:8-19(c); Delmat v. Kahn, 147 N.J. Super. 293 (App. Div. 1977).

Note: There are two exceptions to the rights described in the paragraph above.

• If a landlord does not obey the law that says he or she must pay the interest on the security deposit every year (or if the landlord does not use the interest to pay part of the tenant's rent), or
• If the landlord does not give a notice about the deposit to the tenant every year,

the tenant can use the deposit to pay past or future rent due. But before the tenant can do this, the tenant must give or send the landlord a letter giving the landlord 30 days to pay the interest or give the annual notice. (This notice should also be sent by certified mail, return receipt requested, and you should keep a copy.) Cite: N.J.S.A. 46:8-19(c).

 

[adjusterjack]

You apparently have enough reference material so that you can make an educated decision about what you do next.

However, two caveats:

1 - Never rely on guides. They often paraphrase and can be inaccurate. If a guide refers to a statute, then know the statute. If you end up in court you will need to quote the statute, not somebody's opinion of it.

2 - If you are going to rely on an appellate court decision, read it and know how it applies to your situation because you will have to quote the decision and not what somebody else says about the decision.

Here's the full decision:

Google Scholar

 

[Michael Wechsler]

I read that you're a month to month tenant. There are situations where people don't pay the rent and it works out for them, especially when they aren't sure to whom rent is to be paid. Now I'm not going to tell you what to do. But if you are month to month, you will not be able to stay in the home for more than one month should the owner/landlord give you notice, whomever that may be. A security deposit is not supposed to be used in lieu of rent. But, practically speaking, if that is what satisfies the rent then (from my experience) a landlord will not usually pursue a tenant for any monetary damages or deficiency if the premises isn't damaged and there is no amount that the landlord would claim to be deficient as an offset.

So the bottom line is that this is your decision to make as to the gamble you wish to take. Will the current landlord send you a notice of termination? Would he evict you if you didn't pay the rent? Would a landlord allow you to make up a rent deficiency? Would it even matter since, if they want you out, they can simply send a notice of termination and you've got a month. To me, this represents more of a strategic decision on your part as you've really got no long term rights to stay under the existing lease. Good luck.