As an Arizona landlord, charging a security deposit is a great idea. It’s meant to protect you against financial losses and cover unexpected costs associated with leasing out a rental unit. For instance, if a tenant fails to pay their monthly rent in accordance with the lease agreement, or if they cause damage exceeding normal wear and tear, a landlord can use the tenant's security deposit to recover their losses when the tenant moves out.
When collecting security deposits or making a deduction, a landlord must abide by certain Arizona rules and laws.
In this post, we are providing a basic overview of the Arizona security deposit laws and answering some commonly asked questions.
Is there a limit to how much security deposit a landlord can charge?
Yes, there is a security deposit limit. Per Arizona law, a landlord cannot request that a tenant pay more than one and one half month's rent for security deposits.
The only exceptions to this is if the tenants voluntarily agree to pay more or if the deposit is for mobile home spaces. For a mobile home residence, landlords can request a maximum of two months’ rent as security deposit.
It’s also worthwhile noting that, in Arizona, security deposits include compulsory advance rent payments.
Are Arizona landlords allowed to charge a nonrefundable deposit?
If you charge a non-refundable deposit for your rental unit, you must state that in writing. You must also explain the purpose of why you are collecting such a deposit or fee that is not refundable.
In Arizona, if your deposits and fees aren’t designated as ‘nonrefundable fees’, they are automatically deemed as ‘refundable security deposits.’
Are there specific rules in Arizona on how landlords should store their tenants’ security deposit?
Some states give landlords specific rules on how they must store their tenants’ security deposits. But this isn’t the case in Arizona. You don’t have to store a security deposits in any particular way.
Do landlords have to notify their tenant upon receipt of their security deposit?
No, per Arizona law, landlords aren’t required to provide your tenant with a receipt for the rental security deposit once it's in their possession. Nevertheless, most lanlords do it anyway. In the notice, they state when they received the deposit and how much they received.
Do tenants in Arizona have a right to a walk-through inspection?
Yes. Arizona tenants are permitted the right to be present during the move out inspection. The only thing the tenant is required to do is notify the landlord of their desire to be present during the move-out inspection.
However, as a landlord, you may waive this right if you’re evicting the tenant or you fear for your safety.
Why may a landlord deduct part or all of a tenant’s deposit?
Arizona landlords have a right to make an appropriate security deposit deduction.
The following are some of the legally justifiable reasons to deduct part or all of your tenant’s deposit:
- Tenant's failure to pay utilities. A tenant must clear all utility bills in their name before moving out. If they haven't paid these bills, you can make security deposit deductions.
- Cleaning cost. This is enough justification to make a deduction to a security deposit if a tenant has left the premises in extreme unsanitary conditions. For example, if the premises is extremely filthy, then yes, landlords would be entitled to a portion of the deposit to cover the labor and cleaning expenses.
- Damage exceeding normal wear and tear. You may also be able to withhold part of a deposit if they have caused excessive property damage. Examples of excessive damage include broken doors and windows, missing outlet covers and huge stains on the carpet.
- Unpaid rent. Once a tenant signs a lease agreement, they are contractually bound to pay each month's rent on the agreed date. If they don’t make rent payments or pay late their late rent fee, you may be able to cut your losses by withholding part or all of their deposit.
- Early lease termination. Breaking a rental agreement is ending a signed agreement before its term. Unless a tenant has a legally justified reason for terminating the lease doing so, you can withhold part of their security deposit.
When and how must landlords return their tenants’ security deposits in Arizona?
Once a tenant moves off premises, landlords have 14 days to return the security deposit. The 14 days don’t include holidays and weekends.
The 14-day period only begins when certain conditions have been met. The conditions are as follows:
- The lease agreement has ended or has been terminated.
- The tenant has returned the property back to the landlord.
- Tenant has sent a notice in writing with a request for the return of their security deposit.
Unless your tenant has made other arrangements, it's part of a landlord's duty to mail the deposit refund to their last known address by first-class mail.
If you’re withholding part or all of the deposit, you must provide a written itemized list of deductions that states the reason for each deduction, as well as the cost of repair.
What happens to the security deposit if there’s a change in property ownership?
If the rental unit ownership changes during a tenancy, you must transfer all deposits to the incoming landlord. New landlords become responsible for holding the deposit throughout their tenancy in strict adherence to Arizona security deposit rules.
What happens if you disregard these security deposit rules?
There are repercussions that happen if a landlord fails to abide by the Arizona security deposit rules. Generally, after a dispute of this nature, it may result in landlords paying their tenants up to twice the amount wrongfully withheld, plus funds that cover court and attorney fees.
As a landlord, it’s vital to collect a security deposit from your Arizona tenants. A security deposit will help protect you financially and help you mitigate risks.
We hope this article about the security deposit laws in Arizona was helpful and informative.
If you have further questions, contact SGI Property Management Phoenix.
Disclaimer: This blog is not intended to be used as a substitute for legal advice from a licensed attorney. Arizona laws frequently change, and this post might not be updated at the time of your reading. Please contact a licensed attorney or professional property management company for any questions you have in regard to this content.