Legal Question in Landlord & Tenant Law in New Jersey

Assuming no damage beyond normal wear and tear, yes. He is liable to pay 7% interest on the deposit. You can have the deposit applied to rent.

In New Jersey, a landlord must deposit security deposit money into an interest-bearing account and, within 30 days, inform the tenant of the name of the bank holding the money. If the landlord does not do that, the tenant may give the landlord notice that the security deposit is to be applied to rent and the landlord may not demand any more money by way of security. That applied not only to the current lease, but to all renewal leases.

See also: http://info.corbettlaw.net/lawguru.htm