Taking a security deposit from a tenant is a necessary part of the rental process. The security deposit will protect the landlord incurring extra costs due to damage to the property. Any damage that can be attributed to the tenant that is beyond normal wear and tear is typically covered by a security deposit.

Amount and Allowable Charges

In Arizona a landlord can ask for up to one and one-half month’s rent as a security deposit.

There is no requirement to keep the security deposit in an escrow account, but a best practice for landlords is to designate a separate bank account for security deposits if you have multiple properties that you manage. Remember to always provide a move-in inspection that you conduct with your tenant to document any existing damage at the start of the rental term. Provide a written inspection checklist (LeaseRunner has one) and make sure that both the landlord and tenant sign the move-in inspection checklist.

Move Out Inspection/Return of Deposit

In Arizona the tenant has a right to be present for the move out inspection.

At the end of the tenancy and prior to move out, conduct another inspection with the tenant. Go through the property and point out any damage that is beyond wear and tear, giving the tenant the time and opportunity to fix the damage prior to move out to avoid charges to the security deposit. Again, putting this information in writing is an excellent idea. Then, after move out go through the property and document (take pictures!) any damage beyond normal wear and tear. In Arizona the tenant has a right to be present for the move out inspection. The tenant is not allowed to apply the security deposit toward the final month’s rent, but landlords can use the deposit for nonpayment of rent, late charge, and attorneys fees, in addition to actual physical damage to the property.

All of that written documentation will help the landlord when it’s time to create an itemized security deposit settlement statement. This statement needs to be sent to the tenant, along with the balance of the security deposit, within 14 days of move out, excluding weekend days and legal holidays. Before moving out the tenant must provide landlord with a forwarding address. It’s important to keep accurate records of the property’s condition and to retain those records for a period of time post-tenancy.