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. s.80a-1 et seq.) whose shares
are registered under the "Securities Act of 1933," 48 Stat. 74 (15 U.S.C. s.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 and Insurance 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.
The person investing the security deposit pursuant to subsection a. or b. of this section shall thereupon notify in writing
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 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 be permitted to compound to the benefit of the tenant, or be paid to the
tenant in cash, or be credited toward the payment of rent due on the renewal or anniversary of said tenant's lease.
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In the event 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, the tenant may give written notice to the person receiving the same that such
security money 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.
