Common mistakes by landlords in handling tenant security deposits

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Landlord-tenant disputes over return of the security deposit are among the most-common issues that end up in litigation.

Here are four major reasons why disputes arise in handling tenant security deposits:

1. No move-in form to document property conditions
At move in, the landlord must provide tenants with a copy of the lease and a move-in condition form, which will be used for move-out inspection. The form is required by law and is not always provided. Lack of this documentation at move in could create disagreements at the end of the tenancy. The form should be returned by the tenant to the landlord and must be kept for the move-out process. Many times, the tenant may not receive the form or they do not complete it.

2. Missing documentation of property condition
Landlords should take photographs and videos of the property before the keys are provided to the tenant and at the end of the lease. These simple but important steps allow the landlord to prove that certain damages were caused by the tenant in the event of a dispute. This will be the basis for charges being assigned to the tenants.

3. Failure to itemize deductions from tenant’s security deposits
Arizona law requires the landlord to provide a statement to the tenant itemizing what deductions and costs were made from a security deposit. At the end of a tenancy, landlords regularly make deductions from the tenant’s security deposit and then return the balance of the deposit without providing a statement. You must provide a statement and itemize the deductions.

4. Failure to return the security deposit on time
It is the duty of the landlord to mail an itemized statement and refund to the tenant within 14 days, excluding Saturday, Sunday and legal holidays, after the landlord has taken possession of the property from the tenant. If the tenant made a request for the deposit and a landlord fails to return the itemized statement with balance due, this could be the basis for legal action. The tenant could recover twice the amount of money wrongfully withheld.

Landlords should always be prepared to deal with security-deposit disputes by tenants. Having a system with proper documentation during the lease and correctly and accurately states a security-deposit disposition at the end of a lease will help keep the landlord out of litigation. Property-management companies deal with these issues all the time and are prepared to handle and manage tenants’ dispositions and disputes.

Please reach out to us if you have questions or concerns about handling tenant security deposits. Visit our website.