Yes and no. If you go to court, the court will only allow you to assess and collect late fees if there is a written rental agreement AND it includes a late fee provision. (See ARS Section 33-1369.B and 33-1377.F). If you don't go to court, then you may assess late fees. If, however, your tenant challenges the late fees (i.e., in court), then you will lose. Go here to give me your "war stories": Google+
"Normal wear and tear" can (and usually does) mean different things to different people. One judge may think it means one thing, but another judge will likely think it means something different. That leaves too much uncertainty. This is precisely the reason that a residential landlord should define "normal wear and tear" in the rental agreement. If you define it in the rental agreement, then you should not need to spend time in court (or before trial) arguing about what it means. The definition I use when I draft a residential rental agreement is:
Normal wear and tear is the natural and gradual deterioration that occurs when the rental property is used as a residence. Normal wear and tear does not include excessive and/or abusive use, misuse, negligence, carelessness, accident, criminal damage, vandalism, or theft, whether caused by Tenant, Occupants, guests, invitees, third-parties and/or trespassers. Normal wear and tear does not include holes (pinholes, nail holes, or otherwise), gouges, scratches, stains, burns, and/or damage of any kind in the ceiling, walls, doors, floor coverings, and/or appliances.
Feel free to use the foregoing language in your rental agreement.
When a rental property is sold during the term of the lease, the new owner takes the property "subject to" (discussed more below) the existing lease. This is true of a normal sale and a “short sale” because a short sale is still a sale of the rental property; the only difference is that, in a short sale, the lender has agreed to accept less than the full amount due on the existing loan, which does not affect the tenant in any way. As stated, the new owner takes the property “subject to” the existing lease, which means the new owner steps into the shoes of the former owner and is bound by the existing lease. The new owner must allow the tenant to stay until the end of a fixed term lease, but if the lease always was or has converted to a month-to-month lease, then the new owner may terminate tenancy by giving the tenant a 30-Day Notice of Termination. Of course, there is an exception; if the lease included a provision that the lease would terminate upon sale of the rental property, then the tenancy would terminate as provided in the lease.
Maybe. The tenant is bound by an Arizona lease until the termination date, but the lease may have a “buy out” provision (also known as a liquidated damages provision), whereby the tenant pays the landlord a specified amount and the landlord lets the tenant terminate the lease early. It is also possible (although highly unlikely) that a lease may include a provision that allows the tenant to terminate the lease if the tenant moves out-of-state, gets a new job, etc., but that is normally a provision that the landlord would have had to add to the lease form. Assuming none of the foregoing apply, then the tenant can talk to the landlord about a “mutual termination,” whereby the tenant and the landlord sign a document terminating the lease in exchange for something (normally payment of money by the tenant to the landlord). If the lease does not have one of the foregoing provisions and the landlord does not wish to agree to a mutual termination, then the tenant is financially responsible for rent until the end of the lease term. If the tenant vacates sooner than that, then the tenant is obligated for all rent, late fees, and any other amounts that accrue under the lease, plus expenses incurred by the landlord to re-rent the rental unit, but less any rent the landlord collects from a new tenant before the end of the lease term. If the tenant does not pay the foregoing amounts and the landlord files a civil lawsuit, then the tenant may also be financially responsible for the landlord’s attorney’s fees and court costs.
No, out-of-state owners/landlords are not required to have a local property manager, but out-of-state owners/landlords of residential rental property must have an in-state “statutory agent” (see A.R.S. Section 33-1902.B), which is different than a property manager. A property manager manages the property, collects rent, etc., whereas a statutory agent merely receives notices and legal service of process on behalf of the owner. If an out-of-state residential landlord fails to have a statutory agent, the landlord is subject to substantial statutory fines (i.e., $1,000 plus $100 per month) and this is also legal grounds for a tenant to terminate an existing lease. So, as a practical matter, although an out-of-state residential landlord IS NOT required to have a property manager, it makes sense to have an Arizona property manager because s/he can be more responsive to complaints, etc. Also, if there is an eviction, the Arizona property manager can provide testimony about the relevant facts, otherwise the out-of-state owner will need to personally appear to give testimony. If you are an out-of-state residential landlord and need an Arizona statutory agent, go here: www.ArizonaStatutoryAgentServices.com.
Yes. Generally, the law permits people to enter into contracts, including commercial leases, upon whatever terms the landlord and tenant agree. Therefore, if you sign a commercial lease for a store in a shopping center, for example, that is written to favor only the landlord, then, yes, you have effectively forfeited all rights not expressly granted to the you, the tenant, by the lease agreement.
The Arizona Residential Landlord and Tenant Act (the "ACT"), A.R.S. §§ 33-1301 to 33-1381, gives tenants many rights, but these statutes do not apply to "commercial" leases (i.e., rental of real property other than dwelling units). The Landlord and Tenant statutes that apply to commercial leases, A.R.S. §§ 33-301 to 33-381, give the tenant practically no rights. Presumably, the Arizona legislature felt that persons who rent dwelling units (i.e., apartments, homes, etc.) need more protection from landlords than persons who have the financial wherewithal to rent commercial real estate.
An example will best illustrate the drastic distinction between residential leases and commercial leases. The ACT requires that the landlord give a delinquent tenant a Five-Day Notice to Pay or Quit before initiating an eviction action. A.R.S. § 33-1368(B). Further, a residential tenant has an absolute right to pay the total amount owed (i.e., past due rent, late fees, court costs and attorneys' fees) and force the landlord to accept reinstatement of the lease. A.R.S. § 33-1368(B). A commercial landlord, however, when rent is in arrears for five days, may, at the landlord's option, either re-enter and take possession (i.e., lock the tenant out) or "without formal demand" commence an eviction action. A.R.S. § 33-361(A). Further, once the commercial landlord has terminated the lease, the tenant cannot (unless the landlord consents) reinstate the lease, even if s/he pays all amounts due (i.e., past due rent, late fees, court costs, attorneys' fees). As you can see, the rights afforded to residential tenants by the ACT greatly exceed the rights afforded commercial tenants by the statutes. Moreover, one of the statutes in the ACT prohibits landlords from attempting to take away any of the tenant’s rights that are granted by the ACT; meaning, a residential landlord cannot even put provisions in the residential rental agreement (even if signed by both parties) that take away any of the tenant’s rights under the ACT. The only way, then, for the commercial tenant to obtain more rights is to have these rights written into the lease agreement (i.e., the landlord cannot re-take possession for any type of default without five-days prior written notice).
Returning to the answer to the question: the solution to your problem is simple in theory, but sometimes difficult in practice. Read the "proposed" lease agreement very carefully and/or have your attorney review it. Note any changes that you would like made to the terms "offered" (remember, at this point, the terms contained in the lease agreement are merely the terms offered by the landlord). Ask the landlord to modify the lease to include the terms that you wish changed. The landlord may change all, some or none of the terms you desire. You will either ultimately come to an agreement with the landlord or not. If the vacancy factor for the type of property you are looking for is high, your chances of convincing the landlord to modify his/her offered terms is greater than when the occupancy factor is low. If the landlord simply will not budge, then look elsewhere for a location and terms that are acceptable. Again, your chances of finding alternate commercial space on terms you find acceptable are greater when the vacancy factor for the type of property you are looking for is high.
Some specific concerns that you will have as a new store owner in a shopping center are: (1) does your lease include a non-compete clause, so that the landlord cannot rent space in the same shopping center to a tenant with a similar business, (2) does the lease obligate you to remain for the entire term of the lease even if the anchor tenant terminates or vacates (an anchor tenant is normally the largest tenant in the shopping center and typically draws most customers to the shopping center; for example Home Depot or a grocery store), and (3) are you required to be open for business certain hours of the day and certain days? Naturally, there may also be many other concerns specific to the type of business you are running and/or the type of property that you are leasing.
Once you have signed the lease agreement, however, onerous or not, you are bound by the terms of the written lease agreement; there is no statutory rescission period (i.e., you do not have a few days to "think about it" and cancel the deal without penalty). Only in the most exceptional circumstances will a court of law intervene and rule that a particular term is "unconscionable" (i.e., unenforceable) under the law.
Maybe. The Act, Section 33-1318, allows a tenant to terminate a lease -- without any financial penalty whatsoever -- if the tenant is a victim of domestic violence AND the tenant sends a written request to the landlord to be released from the lease within thirty days after the incident. The tenant must also provide the landlord with evidence of the incident. There is no other statute or case that allows a tenant to terminate a lease if the tenant is the victim of a crime when the crime IS NOT domestic violence.
A residential month-to-month tenancy in Arizona may be terminated by either party providing the other party with a written notice at least thirty days before the end of the next “periodic term” and tenancy must terminate at the end of a “periodic term.” (See A.R.S. Section 33-1375.B: http://www.azleg.gov/FormatDocument.asp?inDoc=/ars/33/01375.htm&Title=33&DocType=ARS ). In a month-to-month tenancy, the “periodic term” is one month. For example, if you want to terminate tenancy on November 30, then you must give a written notice of termination on or before October 31. If you give the notice on October 15, tenancy still terminates at the end of November, NOT on November 15, because tenancy must terminate at the end of a “periodic term.” You must take care that you give a full thirty days advance notice. Don’t count the day you hand-deliver the notice. If you serve the notice via certified mail, then add another five days, which means you would need to give thirty-five days advance notice. Be careful to calculate the days properly; some months have thirty days, some have thirty-one days, and February has twenty-eight or twenty-nine days.
In Arizona, a month-to-month rental agreement is binding. A month-to-month rental agreement can be oral or written; both are enforceable. In either case, both the landlord and tenant must give thirty days advance written notice to terminate tenancy. The applicable statute provides: “The landlord or the tenant may terminate a month-to-month tenancy by a written notice given to the other at least thirty days prior to the periodic rental date specified in the notice.” (See ARS Section 33-1375.B). The phrase “the periodic rental date specified in the notice” means the beginning of the next rental term. If tenancy renews on the first day of each month and rent is due on the first day of the month, then the “periodic rental date” is the first of the month, which would then mean that a thirty day notice would have to be given at lease thirty days prior to the first day of the month. For example, if today is the fifteenth day of the month (any month) and I give a thirty day notice to terminate a month-to-month tenancy today, then tenancy would terminate at the end of the next month, not at the end of this month and not on the fifteenth of next month. The same is true if I gave a notice on the sixteenth day of the month, the last day of the month, or any day in between – tenancy would still terminate at the end of next month. You also have to take into consideration the number of days in the month and the method of service. If you serve the written notice in person, don’t count the day of service; if you send notice via certified mail, you will need to add up to five additional days to the thirty day notice (see ARS Section 33-1313 regarding notice).
Yes, with one exception. The LL/T Act applies "to the rental of dwelling units." Your house is a dwelling unit and, therefore, the Act applies to you and your house, which means that all the requirements of the LL/T apply to any tenant renting a room. In the case of a person renting a room and having access to common areas (i.e., kitchen, bathroom, living room, etc.), the LL/T Act refers to that tenant as a "roomer" (see ARS Sec. 33-1310(13): " 'Roomer' means a person occupying a dwelling unit that lacks a major bathroom or kitchen facility, in a structure where one or more major facilities are used in common by occupants of the dwelling unit and other dwelling units. Major facility in the case of a bathroom means toilet, or either a bath or shower, and in the case of a kitchen means refrigerator, stove or sink." The only distinction in the Act between a roomer and a tenant appears in ARS Sec. 33-1314(D): "Unless the rental agreement fixes a definite term, the tenancy shall be week-to-week in case of a roomer who pays weekly rent, and in all other cases month-to-month." There are no other distinctions. Therefore, you must treat the roomer as you would any other tenant, with the sole exception being that if the roomer pays rent weekly and you wish to terminate the roomer’s week-to-week tenancy, then you only have to give ten days notice (see ARS Section 33-1375(A)), rather than thirty days notice (see ARS Section 33-1375(B)).
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A 5-Day Notice to Pay or Quit (referred to herein as a "5-Day Notice") can be served upon a tenant as soon as rent is delinquent. If rent is due on the first day of the month and is not paid on the first day of the month, then the landlord may (but is not required) to serve the tenant with a 5-Day Notice on the second day of the month.
What if there is a late fee provision? No difference. A late fee provision specifies when late fees will be assessed and the amount thereof. A lease is not required to have a late fee provision and many lease forms do not include a late fee provision. If the late fee provision had any impact on when the 5-Day Notice could be served, then rent would never be delinquent in a lease with no late fee provision.
A Notice of Abandonment can be served on the tenant if the tenant is absent from the dwelling unit without notice to the landlord: (1) for seven days, if rent is delinquent for ten days, and there is personal property belonging to the tenant inside the dwelling unit or (2) for five days, if rent is delinquent for five days, and there is no personal property belonging to the tenant inside the dwelling unit.
A landlord may serve a 5-Day Notice or a Notice of Abandonment if the foregoing requirements are met. Sometimes both will apply. For example, if rent is delinquent five days, the tenant has been absent from the dwelling unit without notice to the landlord for five days, and there is no personal property inside the dwelling unit. Measured against the foregoing criteria, both seem to apply. So what should the landlord do? Which is the better choice?
My recommendation is to do both. If you just do the Notice of Abandonment and the tenant shows up three days later, you cannot proceed with the abandonment and you have lost three days because you did not serve a 5-Day Notice at the same time as the Notice of Abandonment. If you serve both notices at the same time, you can defer the decision on which course of action to pursue until five days later.
A word on "service" of these notices.
a. The 5-Day Notice can be serve via certified mail and hand-delivery. When served by hand-delivery, you begin counting five business days, beginning the day after hand-delivery to the tenant. When served via certified mail, you begin counting five business days, beginning the day after the tenant signs for the certified letter or five business days after the Notice of Abandonment was sent via certified mail to the tenant, whichever occurs first.
b. The Notice of Abandonment must be posted on the front door (or other conspicuous entry point) of the rental property and sent on the same day via certified mail. Counting of the days is the same as above.
If the landlord proceeds with the abandonment, then the landlord can get possession of the rental unit in about two weeks, but the landlord loses the opportunity to get a money judgment against the tenant. The landlord can still sue the tenant in a regular civil action later and get a judgment for rent, late fees, damages, etc., but a regular civil action takes several months, rather than just a couple weeks.
If the landlord proceeds with the 5-Day Notice, then the landlord can file an eviction action and get a money judgment against the tenant (assuming, of course, that the landlord is the prevailing party at the eviction hearing) for rent, late fees, attorneys fees, and court costs. Typically, you cannot get cleaning expenses or property damages because the landlord does not yet have possession and has no way of knowing the extent of the cleaning and/or property damage at the time of the eviction hearing. The landlord can file a regular civil action for additional rent (if the tenant vacated before the end of the lease term), cleaning expenses, property damages, etc., if the security deposit does not cover all of the landlord’s money damages.
So which one is "better"?
- If you want a money judgment, and you want it as soon as possible, then you want to serve a 5-Day Notice and then file an eviction action if the tenant does not pay the amount due within the five days. This choice will get you a judgment.
- If you want possession of the rental property as soon as possible and you do not care about getting a judgment against the tenant (either because you intend to file a regular civil action later or because you don’t believe you will ever be able to collect anything from this tenant), then follow the abandonment procedure. This choice will get you possession sooner than if you file an eviction action.
Yes. The Arizona Residential Landlord and Tenant Act was amended in July 2010 and a new statute was added – A.R.S. Section 33-1331. In short, the statute says that if a rental property is already in foreclosure, then the landlord must inform the tenant of this fact before the landlord enters into a new rental agreement with the tenant. Under this new statute, it is clear that the landlord must disclose the foreclosure before entering into a new fixed term lease with a tenant. That would apply to a brand new tenant (whether that tenant is signing a new fixed term lease or a new month-to-month lease) AND to an existing tenant who will be signing a new fixed term lease. What is not clear is whether it applies to a month-to-month agreement that existed before July 2010 (when the statute became effective), which renews automatically each month (until/unless canceled by one of the parties) and that continues to renew automatically after July 2010. Similarly, it is also unclear whether it applies to a fixed term lease that began before July 2010, but has expired (either before or after July 2010) and now continues on a month-to-month basis.
No. The Act requires: "The landlord shall:... (2) Make all repairs and do whatever is necessary to put and keep the premises in a fit and habitable condition." (See ARS Sec. 33-1324(A)(2)). But the Act does not require the landlord to: (1) paint the walls, (2) replace or clean the carpet, (3) sanitize the kitchen or bathrooms or (4) change the locks, before renting to a new tenant or at specific intervals. Naturally, the landlord may do all or some of those things, but the Act does not require it.
The "correct" answer depends on many variables. If the spa (or whatever) was not working when the tenant took tenancy and the landlord made clear that it would not be fixed, then the answer is clear -- the landlord would not have to fix it. If the spa was working when the tenant took tenancy, but it stopped working because of something the tenant, occupant or a guest did, then the tenant is responsible for repairs. (See ARS Sec. 33-1341). If the spa was working when the tenant took tenancy and the tenant is not responsible under Sec. 33-1341, then we must determine if the landlord's refusal to fix the spa constitutes a "default," which is referred to in the Arizona Residential Landlord and Tenant Act (the "Act") as a "noncompliance." The first place to look is in the rental agreement. If the rental agreement includes language that makes clear the landlord is not obligated to fix the spa, then (again) the answer is clear – the landlord would not have to fix it. If the rental agreement says nothing about the spa, then we turn to the Act. Section 33-1361 of the Act allows the tenant to serve a notice on the landlord of a noncompliance and, if the landlord does not fix the problem, then the tenant may terminate and vacate or may sue for damages. The amount of time the tenant must give the landlord depends on the nature of the noncompliance. A "noncompliance materially affecting health and safety" is subject to a five day notice; absent unusual circumstances, a malfunctioning spa probably does not affect health and safety and probably constitutes (if anything) a "material noncompliance." A "material noncompliance" is subject to a ten days notice. A "material noncompliance" also includes a "material falsification of the written information provided to the tenant." (See ARS Sec. 33-1361(A)). If the tenant rented the subject property because (or at least partly because) of the spa (i.e., therapy for an injury or medical condition), then the landlord’s refusal to fix the spa would probably constitute a material noncompliance. In addition, if the landlord advertised the subject property (i.e., newspaper ad, yard sign, flier, Internet listing, etc.) and one of the features included in the advertisement was the spa, then the landlord’s refusal to fix the spa would probably constitute a material noncompliance. I say "probably" because two judges hearing the same set of facts may reach different conclusion. There is yet another potential argument. Section 33-1363 gives the tenant a "self-help" remedy, allowing the tenant to pay a licensed contractor to make repairs and then deduct the cost of repairs (the Act provides for specific monetary limits) from the next month’s rent, but Section 33-1363 only applies if the inoperative spa constitutes a violation of Section 33-1324. A spa is probably not an "essential service," does not affect health and safety and an inoperable spa does not render the subject property unfit or uninhabitable. (See Section 33-1324). Arguably, the spa constitutes "other facilities" supplied by the landlord (see Section 33-1324(A)(4)), but that is a tenuous argument, at best. So, the best approach is for the tenant to serve a ten day notice of material noncompliance. Whether or not a judge will side with the tenant will depend on: (1) language in the rental agreement, (2) whether the spa was the reason (in whole or in part) the tenant rented that property, and (3) especially if the landlord included the word "spa" in any advertising (i.e., newspaper ad, fliers, sign, etc.).
Forget foreclosure for a moment. In a “regular” sale of a rental property by the owner/landlord to a new buyer, the new owner takes the rental property “subject to” the existing lease, which means that both the new owner and the tenant are bound by the terms of the existing lease. Neither the new owner, nor the tenant may unilaterally cancel or terminate the lease (except in the very rare occassion when the lease contains a provision that terminates the lease upon sale of the rental property). Prior to 2009, foreclosure of a rental property “foreclosed” (i.e., extinguished) all interests in the rental property that were “junior” in priority to the lien being foreclosed by the lender, which meant that a foreclosure terminated the lease and the tenant had to vacate the rental property no matter how much time was still left on the lease. The Helping Families Save Their Homes Act of 2009, signed into law by President Obama on May 21, 2009, included a provision entitled Protecting Tenants at Foreclosure Act of 2009. The latter Act provides that the new owner of the rental property takes the rental property “subject to” the existing lease, which means both the new owner/landlord and the tenant are bound by the existing lease. Having said that, there are a few exceptions and the Act only applies to a “bona fide” lease. The full text of both Acts can be found at the following links.
Helping Families Save Their Homes Act of 2009
Protecting Tenants at Foreclosure Act of 2009 (scroll down to Section 701)
Keep in mind, however, that the Arizona Residential Landlord and Tenant Act still applies. Whether or not there has been a change of ownership of the rental property, the LL/T Act allows a tenant to give notice regarding various property defects and, if the defects are not remedied, the tenant may terminate and vacate the rental property.