As an Arizona landlord, charging a security deposit is a great idea. It’s meant to protect you against financial losses associated with renting out a rental property. For instance, if a tenant fails to pay their rent, or if they cause damage exceeding normal wear and tear, you can use the security deposit to cover your losses.
When collecting the security deposits, you 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 limit. You cannot require your tenants to pay more than 1.5X the rent as security deposit.
The only exceptions to this is if the tenant voluntarily agrees to pay more or if the deposit is for mobile home spaces. For mobile home spaces, you can charge 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, you must state that in writing. You must also explain the purpose of collecting such a deposit or fee.
In Arizona, if your deposits and fees aren’t designated as ‘nonrefundable’, they are automatically deemed as ‘refundable.’
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 tenant’s security deposit in any particular way.
Do landlords have to notify their tenants upon receipt of their security deposit?
No. As a landlord, you aren’t required to provide your tenant with a receipt for the security deposit. Nevertheless, most landlords 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 have a 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 withhold part or all of a tenant’s deposit?
Arizona landlords have a right to make appropriate deductions from their tenants’ deposits.
The following are some of the legally justifiable reasons to withhold part or all of your tenant’s deposit:
- Unpaid utilities. A tenant must clear all utility bills in their name before moving out. If they don't, you can withhold part or all of their security deposit.
- Cleaning costs. This is enough justification to make deductions to a tenant’s security deposit if your tenant has left the unit in extreme unsanitary conditions. If the unit is extremely filthy, then yes, you’d 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 your tenant’s deposit if they have caused excessive property damage. Examples of excessive property damage include broken doors and windows, missing outlet covers and huge stains on the carpet.
- Nonpayment of rent. Once a tenant signs a lease agreement, they are contractually bound to pay rent. If they don’t, you may be able to cut your losses by withholding part or all of their deposit.
- Early lease termination. Breaking a lease is ending a lease before its term. Unless tenants have a legally justified reason for doing so, you can withhold part of their security deposit.
When and how must landlords return their tenants’ security deposits in Arizona?
Once your tenant leaves the unit, you have 14 days to return their 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 has ended or has been terminated.
- The tenant has returned the property back to the landlord.
- Tenant has asked for the return of their security deposit.
Unless your tenant has made other arrangements, you must mail the deposit 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 tenant’s deposit if there’s a change in property ownership?
If the property ownership changes during a tenancy, you must transfer all deposits to the incoming landlord. The new landlord will then become responsible for holding the tenant’s deposit in strict adherence to Arizona security deposit rules.
What happens if you disregard these security deposit rules?
There are repercussions that come with failing to abide by the Arizona security deposit rules. Generally, it may result in you paying your tenant up to 2X the amount wrongfully withheld, plus court and attorney fees.
As an Arizona landlord, it’s vital to charge your tenants a security deposit. 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 should not be used as a substitute for legal advice from a licensed attorney. Laws frequently change, and this post might not be updated at the time of your reading. Please contact us for any questions you have in regard to this content or any other aspect of your property management needs.