With the on-going recession (yes, I said “on-going”) and with people trying to save every last dollar, we have seen a rise in the number of lawsuits filed by tenants for a return of their deposit.  In fact, this is the most common type of lawsuit that we see filed by tenants.  This is largely because of the treble damages that the tenant can be awarded and because many tenants rely on the deposit and feel harmed when it is not returned – regardless of the condition of the home.  There are several nuisances within the applicable law that a landlord must be aware of to protect against these claims.  However, its impossible to stop someone from filing suit against you – your job is to have all of your evidence together to present the best defense.

             A.R.S. § 33-1321(D) provides that after demand by the tenant, after termination of the tenancy and delivery of possession, the landlord has 14 days to provide an accounting of the deposit and return to the tenant any funds they are entitled.  Under subsection E, if the landlord fails to comply with its obligations, the tenant may receive the money due and owing plus an amount equal twice the amount wrongfully withheld. 

             First, the statute requires that the accounting be sent within 14 business days.  Unless the parties agree in writing otherwise, the accounting MUST be mailed regular mail to the tenant’s last known address.  While not legally required, it is also a good idea to certify mail the accounting.  Be sure to keep a copy of what is being mail. 

            Second, a landlord should account for all deposits the tenant paid.  Pursuant to A.R.S. § 33-1321(B), any fee that is collected, which is not identified in writing as non-refundable, is refundable and must be properly accounted for.  On a practical side, all nonrefundable deposits should also be accounted for.

             Third, while a landlord must send out an accounting in the first 14 business days, there is an on-going duty to amend the accounting.  Therefore, after lawfully obtaining possession, a landlord should immediately access the property, and begin getting estimates for the cost of repairs and begin the work.  If the work is not completed within the 14 business days, a landlord must still send the accounting, with the estimates, and specify that the accounting will be updated once the work is completed and all invoices are collected.  A landlord can only charge the amounts actually paid to fix the premises; most judges find that a landlord can not charge for work that may have been needed, if the work wasn’t actually completed.

             Finally, the deposits can be applied to unpaid rent, subject to a landlord’s duty to mitigate.  Therefore, if a tenant leaves before the end of the lease, the tenant is liable for the remaining rent, but the landlord is obligated to attempt to re-rent the property and reduce the amount owed.  A judge could find that a tenant is not liable for the unpaid rent, if a landlord failed to take reasonable steps to re-rent the premises. 

             Remember, before you can even begin the accounting process, you must enter the property, prepare a list of all the belongings the tenant left behind, and take pictures of the entire unit, including the tenant’s property.  In addition to lawsuits for failing to return a deposit, some tenants claim that the landlord failed to return their personal belongings after being locked out.  Unless you have an itemized list of the property with supporting pictures, the tenant could claim that you wrongfully “stole” his 55 inch flat screen television, his Picasso hanging on the wall, and his Bentley parked in the garage.  Regardless of the type of suit the tenant files, the best protection a landlord can have is detailed records and pictures.  In defending a security deposit accounting case, it is especially important to have pictures to show the condition of the home, before and after the tenant resided in the property.