Arizona Security Deposit Laws
When investing in property you have a lot to consider. Do you require your tenants in Arizona to pay a security deposit prior to moving in? If you do, you must abide by certain rules. The rules are primarily regulated under AZ Rev Stat § 33-1321.
Understanding this piece of legislation can help you avoid potential issues with your tenant in the collection and return of their security deposit.
Landlords require tenants to pay a security deposit in order to cushion themselves from potential financial damages that may arise during the term of the lease. For example:
- If the tenant leaves without paying the rent due under the lease
- If the tenant fails to clear their utility bills
- If the tenant causes abnormal damage to the unit
- If the tenant leaves the unit trashed or so filthy that you’d need to hire expert cleaning services
The following is a basic overview of the Arizona security deposit law.
Maximum Security Deposit Limit
There is a limit to the amount of security deposit you can charge your Arizona tenant. You must not charge them any more than the equivalent of one- and half months’ rent. If the rent is, say, $1,200 a month, then you cannot charge them more than $1,800.
Additional Pet Deposit
Charging a pet deposit is allowed under Arizona’s law. If you allow pets into your rental unit, you may charge the tenant an additional deposit to cater for any potential damage their pet may cause to the unit.
However, you must be careful not to charge disabled tenants a Pet Deposit, Pet Rent any other Pet Fees who have service animals.
Other protected classes under the Arizona Fair Housing laws include: race, color, religion, nationality, and familial status. The Fair Housing laws and Landlord Tenant laws are necessary to consider when setting additional deposit fees.
Receipt Requirements
In other states, landlords are required to provide their tenants with a receipt for the security deposit. This is not the case in the state of Arizona. Advisedly, though, it may still be a good thing to do for the sake of record-keeping.
Interest on Security Deposit
Some states also require landlords to store security deposits in a certain manner. In the neighboring state of New Mexico, for instance, landlords are required to store their tenant’s deposit in an interest bearing account for leases exceeding a year.
This is not the case in Arizona, nor is it the case with most other southern states.
Security Deposit Deductions
Yes, Arizona law allows landlords to make certain deductions to their tenant’s security deposit. However, you must have a legitimate reason to do that. Lawful reasons for security deposit deductions in Arizona are as follows.
- Cover unpaid rent. Tenants are obligated to pay rent for the entire term of their lease agreement, whether or not they live there.
- Unpaid utility bills. A tenant must clear their utility bills prior to moving out.
- Non-refundable fees or deposits. If you have stated some fees or deposits as “non-refundable” in the lease, you can make such deductions after a tenant moves out.
- Costs of damage more than normal wear on the unit. Such damages include things like broken tiles, destruction from pets, smashed windows, holes in the drywall, and absent fixtures. If a tenant does any of these things, you can make appropriate deductions from their deposit.
Walk Through Inspection
Arizona tenants have a right to be present during the walk-through inspection/move out inspection. However, this right can be waived if, for whatever reason, you, as the landlord, fear for your own safety. You may fear for your safety if you evicted a dangerous tenant.
The purpose of a walk-through inspection is to document the property’s state relative to how it was during the move-in. If the tenant has caused damage surpassing normal wear and tear, you can make appropriate deductions from their security deposit.
Security Deposit Return
You must return the tenant’s deposit, or whatever is left of it, within 14 days after they have left. The 14 days exclude weekends and holidays. Certain conditions must be met before these 14 days begin.
Firstly, the lease has been terminated by the tenant, the tenant has returned the keys, and notified you that they wish to be given their deposit back.
You must send the balance of deposit to tenant plus any itemized list of deductions to the tenant via first-class mail to the last known place of residence to the tenant via first-class mail%2C%20prices%20start%20at%20%244.80.). Unless other other arrangements are made in writing by the tenant.
After the tenant receives the deposit and itemized list of deduction, they have the right to dispute any deductions within 60 days. Otherwise, any amount due is deemed valid and final and the tenant will not be able to make future claims.
Failure to return your tenant’s deposit may have certain financial repercussions. You may be made to pay the tenant up to 2X the wrongfully withheld amount, among other penalties.
Change of Property Ownership
If the property’s ownership changes during an active lease, you must transfer the deposit to the new landlord, less any allowable deductions. Once this is done, the new landlord will then inherit the responsibility of storing and returning the deposit back to the tenant.
Contact a Property Management Company
You now have a basic understanding of landlord obligations in regards to the tenant’s security deposit. If you need further help or clarification, please look no further than get MULTIfamily. We’re a quality property management company that property owners in Tempe turn to for professional help.
We can help you overcome any challenges you may be experiencing as a property owner. Get in touch today to learn more!
This blog should not be used as a substitute for legal advice from a licensed attorney in your state. Laws change, and this post might not be updated at the time of your reading. Please contact us for any questions you have in regards to this content or any other aspect of your property management needs.
Frequently Asked Questions
What is the maximum security deposit a landlord can charge in Arizona?
In Arizona you must not charge a tenant more than the equivalent of one and a half months' rent for a security deposit. For example, if the rent is $1,200 a month, then you cannot charge more than $1,800. These rules are primarily regulated under AZ Rev Stat 33-1321, which governs the collection and return of security deposits.
Can an Arizona landlord charge a pet deposit?
Yes, charging a pet deposit is allowed under Arizona's law. If you allow pets into your rental unit, you may charge an additional deposit to cover potential damage a pet may cause. However, you must not charge a pet deposit, pet rent, or any other pet fees to disabled tenants who have service animals, and you must consider fair housing protected classes.
When must an Arizona landlord return a security deposit?
You must return the tenant's deposit, or whatever is left of it, within 14 days after they leave, excluding weekends and holidays. Before the 14 days begin, the lease must be terminated, the tenant must return the keys, and the tenant must notify you they wish to receive their deposit back. Failure to return it may cost up to twice the wrongfully withheld amount.
What deductions can an Arizona landlord make from a security deposit?
Arizona law allows deductions with a legitimate reason. Lawful reasons include covering unpaid rent, unpaid utility bills, non-refundable fees or deposits stated in the lease, and costs of damage beyond normal wear on the unit. Such damages include broken tiles, destruction from pets, smashed windows, holes in the drywall, and absent fixtures.
Does Arizona require a security deposit receipt or an interest-bearing account?
No. Unlike some states, Arizona does not require landlords to provide a receipt for the security deposit, though keeping one is advisable for record-keeping. Arizona also does not require deposits to be stored in an interest-bearing account, unlike neighboring New Mexico which requires it for leases exceeding a year. This is not the case in Arizona or most other southern states.
Can a tenant be present during the walk-through inspection in Arizona?
Yes, Arizona tenants have a right to be present during the walk-through or move-out inspection. This right can be waived if, for any reason, you as the landlord fear for your own safety, such as after evicting a dangerous tenant. The inspection documents the property's state relative to move-in so you can deduct for damage beyond normal wear and tear.
What happens to a security deposit if property ownership changes in Arizona?
If the property's ownership changes during an active lease, you must transfer the deposit to the new landlord, less any allowable deductions. Once this is done, the new landlord inherits the responsibility of storing and returning the deposit to the tenant. After receiving the deposit and itemized list, tenants have the right to dispute deductions within 60 days.