N.J. Stat. Ann. § 46:8-1 et seq. § 46:8-21
Liability on transfer
Operative Text
3. Any owner or lessee turning over to his or its grantee, assignee, or to a purchaser of the leased premises at a foreclosure sale the amount of such security deposit, plus the tenant's portion of the interest or earnings accumulated thereon, is hereby relieved of and from liability to the tenant or licensee for the repayment thereof. Whether or not the deposit plus accumulated interest are so transferred, the grantee, assignee or purchaser of the leased premises is nevertheless responsible for the proper investment of the security deposit, giving all notices and paying interest pursuant to section 1 of P.L.1967, c.265 (C.46:8-19) and for the return of the security deposit, plus any accumulated earnings or interest thereon, to the tenant or licensee, in accordance with the terms of the contract, lease, or agreement unless he or it shall thereafter and before the expiration of the term of the tenant's lease or licensee's agreement, transfer such security deposit to another, pursuant to section 2 of P.L.1967, c.365 (C.46:8-20) and give the requisite notice in connection therewith as provided thereby. L.1967,c.265,s.3; amended 1971, c.223, s.5; 1985, c.42, s.3; 2003, c.188, s.3.
Under N.J.S.A. 46:8-1 et seq. § 46:8-21, when a rental property changes hands—whether through sale, assignment, or foreclosure—the original owner is released from liability for the security deposit once that deposit (plus the tenant's share of accumulated interest) is properly transferred to the new owner. The new owner then steps into the original owner's shoes and becomes fully responsible for holding the deposit correctly, paying required interest, and returning the deposit to the tenant at the end of the tenancy. This chain of responsibility continues each time the property is transferred, provided the proper transfer and notice procedures are followed.
Plain English — not legal advice.
Property owners and managers selling or transferring a rental property should be aware that N.J.S.A. 46:8-1 et seq. § 46:8-21 provides a clear path to being relieved of security deposit liability: transferring the full deposit plus the tenant's accumulated interest to the grantee, assignee, or foreclosure purchaser. Compliant operators document this transfer and ensure the incoming owner receives all required notices so that the new party can fulfill ongoing obligations—such as proper investment of the deposit and timely interest payments under C.46:8-19. Failing to complete the transfer correctly can leave the original owner exposed to continued liability even after the property has changed hands.
General guidance for property managers — not legal advice for your specific situation. Consult an attorney for advice on your case.
N.J.S.A. 46:8-1 et seq. § 46:8-21 protects tenants by ensuring that a security deposit obligation does not simply disappear when a property is sold, assigned, or transferred through foreclosure—the new owner becomes responsible for holding the deposit properly, paying interest, and returning it at the end of the tenancy. If a tenant believes the new owner has failed to meet these obligations, options generally include raising the violation as a defense in any eviction or small claims proceeding, filing a complaint with a local rent board if one exists, or reaching out to a tenant-rights organization for guidance. Tenants may also wish to request written confirmation from both the prior and new owner that the deposit was properly transferred as required by this provision.
General guidance for tenants — not legal advice for your specific situation. Consult a tenant-rights organization or attorney for advice on your case.
Generated October 6, 2026 — auto-generated, not yet human-reviewed. See /transparency for methodology.
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