FACTS:

The broker represents the owner of residential real property. On September 4, 2011, a notice of trustee’s sale was posted on the rental. On October 6, 2011, the broker sent the owner a notice of termination of the management agreement along with an “Owners Authorization for Refund of Security Deposit,” which provides for the return of the security deposit to the tenant. Despite these efforts, the broker has been unable to contact the owner. In addition, the tenant has informed the broker of the tenant’s plans to move out of the property prior to the trustee’s sale (scheduled for December 23, 2011) and has requested a return of the security deposit.

ISSUE:

Can the Broker refund the tenant’s deposit now?

ANSWER:

No.

DISCUSSSION:

There is a difference between terminating the Property Management Agreement because a notice of trustee’s sale is received and being able to refund a deposit because of an actual trustee’s sale. More specifically, the broker is free to terminate its relationship with the owner. However, pursuant to lines 33-34 of the AAR Property Management Agreement, only upon the actual trustee’s sale is it permissible for the broker to return the deposit. Thus, the broker should not refund the security deposit unless the owner approves of the request.

Arizona REALTOR® Magazine – January 2012


About the Author

Michelle Lind

K. Michelle Lind, CEO of Arizona REALTORS®, is also an attorney, State Bar of Arizona board certified real estate specialist, and the author of Arizona Real Estate: A Professional’s Guide to Law and Practice.
Please note that this article is of a general nature and may not be updated or revised for accuracy as statutory or case law changes following the date of first publication. Further, this article reflects only the opinion of the author, is not intended as definitive legal advice and you should not act upon it without seeking independent legal counsel.