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Failing to Timely Account for Security Deposits: Risks for Landlords
As a landlord, you are required to give your tenants an accounting of the disposition of their deposit (and returning any excess deposit, if applicable) within 14 days after the termination of their tenancy, even if your claim for damages exceeds the amount of the security deposit.
The Arizona Mobile Home Parks Residential Landlord and Tenant Act requires landlords to account for and return excess deposits within 14 days after the termination of a tenancy. If a landlord fails to do so, the tenant is entitled to recover from the landlord the property and money due to the tenant, plus damages equal to double the amount wrongfully withheld. However, what happens if the landlord has legitimate damage claims against the tenants’ deposit, but nonetheless fails to properly account for the deposit within the statutory time frame? Arizona does not have any reported case law on this issue, but a recent decision from Colorado may be instructive.
In the Colorado case, a landlord failed to timely provide a tenant with an accounting of the tenant’s security deposit. Six days after the statutory time frame had run, the landlord provided the tenant with a detailed accounting identifying the legitimate damages to which the landlord was entitled and returning to the tenant the small, remaining portion of his security deposit. The tenant then sued the landlord for the return of his entire deposit and treble damages under Colorado law.
The court concluded that the landlord did not timely account for or return the security deposit as required by law, that the retention was thus both willful and wrongful, and that the tenant was entitled to treble damages, plus attorneys’ fees and costs. On further appeal, the court upheld the ruling and concluded that the landlord’s failure to timely account for the security deposit constituted a forfeiture of all rights to withhold any portion of the deposit, thereby entitling the tenant to treble damages.
Due to the similarity of Arizona’s law and Colorado’s law, it is highly probable that Arizona courts would rule the same. As a landlord, you therefore need to make certain that you provide your tenants with an accounting of the disposition of their deposit (and returning any excess deposit, if applicable) within 14 days after the termination of their tenancy, even if your claim for damages exceeds the amount of the security deposit. Failure to do so will put you at risk of being liable for the amount wrongfully withheld, plus double the amount of the security deposit, and attorneys’ fees and costs.