‘Voluntarily’ Paying More for Security Deposit

Question: My mother lives in Indiana, and wants to rent a Scottsdale vacation rental from November 15 to April 15 for $6,000 per month. The property manager, however, is demanding payment from her of the entire $30,000 rent on the move-in date of November 15, plus a $5,000 security deposit. I am a licensed real estate agent, and I have been taught that the security deposit for any rental home is limited to one and a half month’s rent. How can the property manager of this Scottsdale vacation rental home demand from my mother the five months’ rent in advance?

Answer: A.R.S. § 33-1321 relating to the amount of a security deposit originally stated that no more than one and a half month’s rent could be required by a landlord as a security deposit for any rental home. Owners and property managers of Scottsdale vacation rental homes objected, however, because the vacation rental season in Scottsdale is primarily the months of January, February, and March – beginning after the Christmas holidays and ending with spring training. If a renter of a Scottsdale winter vacation rental defaulted on the monthly rent payments during the vacation rental season, there would be a significant loss of rental income. For example, if your mother paid only one and a half month’s security deposit, plus the first month’s rent on November 15, but then your mother stopped paying any rent after the November 15 rent payment, the property manager would be required to give notice of nonpayment of rent and begin eviction proceedings. As a practical matter, your mother might not be evicted, and a new tenant found, until late February or March, or even after the end of the vacation rental season. In addition, if there is damage to the vacation rental home, the repair costs would have to be paid from your mother’s security deposit. Therefore, there was a strong and successful lobbying effort to amend A.R.S. § 33-1321 to allow “voluntary” payment by any tenant of more than one and a half month’s rent as a security deposit. Bottom line: Your mother will probably have to “voluntarily” pay in advance the $30,000 rent and $5,000 security deposit.

Note: A major real estate developer in the Valley had potential criminal problems, but still had the money to pay $8,000 a month rent for a Paradise Valley home. Because of the real estate developer’s potential criminal problems, however, the owner of the Paradise Valley home was reluctant to agree to a one-year lease. Bottom line: The real estate developer “voluntarily” paid $96,000 rent in advance for the one-year lease.