Aside from rent, Arizona landlords also require tenants to pay a security deposit as part of the move-in costs. The following guide by the team of property managers at Property Plus USA aims to provide answers to commonly asked questions regarding security deposits in Arizona.

What is a security deposit?

A security deposit is a sum of money that landlords require their tenants to pay when moving in. It helps cushion landlords against a myriad of liabilities that may potentially arise during a tenancy.

Is there a limit to how much security deposit landlords can ask in Arizona?

Yes, there is a limit. In Arizona, landlords can only require their tenants to pay a maximum of 1.5X the rent amount as a deposit. Nevertheless, tenants are at liberty to pay more if they choose to do so.

So, let’s suppose you’re renting out your Scottsdale property for $1,000. In such a case, the maximum you’d require from a tenant as a security deposit should be no more than $1,500.

But why would a tenant want to pay more deposit? In Arizona, landlords are allowed by law to ask for rent (such as first and last month’s rent) before a tenant can move in. This doesn’t count as the security deposit, as the money is literally meant for rent.

As such, a tenant may want to pay more money if they really want to rent out a particular rental property.

Can Arizona landlords charge a nonrefundable security deposit?

Yes, you can. But you must put it in writing and clearly state that it isn’t going to be refunded at the end of the lease term. You must also explain the purpose of collecting such a deposit. As for all other fees not designated as such, you must refund them at the end of the lease term.

Fees that are typically nonrefundable include pet deposits and cleaning fees.

Does Arizona have specific rules on how landlords must store their tenants’ security deposits?

No, there are no laws that require landlords to store their tenants’ deposits in a certain way. So, you don’t have to store the deposit in a financial institution or in an account that accrues interest.

Matter of fact, you are permitted to use a tenant’s deposit to cover situations spelled out in the lease or rental agreement. That being said, you must ensure that the funds are available to the tenant when they are looking to move out.

Do you have to provide your tenant a written receipt of the security deposit?

Yes, this is required in the state of Arizona. Once you have received the tenant’s deposit, you must acknowledge that by sending your tenant a receipt.

You are also required to state the following in the receipt.

• The amount you received.
• The date you received the tenant’s deposit.

Do Arizona tenants have a right to a walk-through inspection?

Yes, Arizona tenants have a right to be present during a move-out inspection. The only exception to this is if you fear for your own safety.

Walk-through inspections help document the property’s condition relative to when the tenant was moving in. The tenant becomes responsible for any damage exceeding normal wear and tear. They must make all necessary repairs before finally moving out. If they don’t, then you’ll have a right to make appropriate deductions from their security deposits.

What circumstances can make a landlord keep all or part of a tenant’s deposit in Arizona?  

You can keep part or all of a tenant’s deposit under certain circumstances.

The following are the common circumstances to keep a security deposit:

• Cover unpaid rent. Once a tenant signs the lease, they are contractually liable for all rent due under the lease.
• Damage more than normal wear and tear. Common examples include a smashed bathroom mirror, a damaged toilet seat, and holes in the wall. Your tenant is liable for such damages.

When and how must landlords in Arizona return their tenants’ security deposits?

You have 14 days once your tenant has moved out to return their security deposit. This period, however, doesn’t include holidays and weekends.

You must mail the deposit by first class to the tenant’s last known address. The only exception to this is if you’ve made separate arrangements with your tenant or if the tenant has provided you with a different address.

You must also include a written itemized list alongside the portion of the deposit you’re returning. The itemized list must explain the reason for each and every deduction you’ve made.

What obligations to Arizona tenants have regarding security deposits?

To start with, tenants in Arizona are required by law to notify their landlords of their intention to move out. Among other things, they must state the date upon which they intend to leave and request for a walk-through inspection.

Also, tenants in Arizona have a responsibility to request the return of their deposit a few days prior to moving out. The request must be made in writing. The tenant must also make sure that they include a forwarding address.

Other responsibilities include:

• Notify the landlord about required repairs promptly.
• Use all facilities, such as electrical and plumbing, reasonably.
• Dispose of garbage and other waste in a clean and safe manner.
• Comply with all obligations on health and safety according to all applicable codes.

What happens if the property changes hands?

If you sell your property, the new owner shall become responsible for all matters regarding the deposit, including, returning it to the tenant when their lease term comes to an end.

What happens if you wrongfully withhold part or all your tenant’s security deposit?

There are consequences for failing to adhere to the Arizona security deposit laws. Specifically, it can result in the tenant being awarded up to 2X the amount wrongfully withheld by the landlord. And this may be in addition to the court and attorney fees the court may award the tenant.

Disclaimer: This blog is only meant to be informational. For expert advice, kindly get in touch with a qualified attorney or an experienced property management company.

The Bottom Line

As a landlord in Arizona, you are allowed to charge your tenants a security deposit when they intend to sign a lease for a rental property. However, there are many legal factors to consider so that you adhere to the Arizona landlord-tenant laws. Be sure to understand leasing laws, the legal eviction process, the Fair Housing Act, and more.

For more help, consider contacting the team of experienced property managers at Property Plus USA today!