Failing to Timely Account for Security Deposits Can Subject
Landlords to Financial Risks
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
This article was originally published in 2008.