Arizona Court of Appeals, Division One affirms tenants’ right to return of a security deposit without requiring them to demand a list of itemized deductions.

Tenants and Landlord entered into a one-year residential lease agreement wherein Tenants paid a $2,000 refundable security deposit and a $150 cleaning deposit. When they found mold on the property, Tenants terminated the lease and requested return of their July rent and their security deposit. Landlord refused.

Tenants filed suit, alleging that the property was uninhabitable, that Landlord refused to return the security deposit, and that Landlord failed to provide a statement itemizing any charges against the security deposit. The superior court ruled for Tenants, finding that Landlord wrongfully withheld the deposit and failed to provide an itemized list of deductions. Tenants were awarded treble damages as provided by statute.

A.R.S. § 33-1321(D) provides that on termination of the lease and demand by the tenant, a landlord must provide a statement itemizing any charges applied to a tenant’s security deposit, along with any amount due within 14 days. On appeal, Landlord argued that “demand by the tenant” should be read to require not only a demand for the return of the security deposit, but a specific demand for an itemized list of deductions before a landlord is required to tender either.

The Arizona Court of Appeals disagreed. First, A.R.S. § 33-1321(G) requires all refundable deposits be refunded to the tenant a the end of a tenancy. Landlord’s reading of the statute would contradict that statutory directive, allowing and landlord to retain a security deposit indefinitely. Second, the Court looked to Schaefer v. Murphey, 131 Ariz. 295, 297 (1982), in which the Arizona Supreme Court concluded that to take advantage of the law permitting landlords to make charges against a security deposit, a landlord must deliver the itemized list as provide for in the statute. Landlord did not do so. Finally, Landlord’s statutory construction would not work in practice. Only the landlord knows what itemized deductions it wishes to claim. Requiring a tenant to demand an itemized list of deductions, in addition to the security deposit, would improperly shift the statutory obligation and create an absurd result.

Judge Thumma authored the opinion, in which Judges Brown and Jacobs joined.

Posted by: Michael Price