FAQ’s – Frequently Asked Landlord-Tenant Questions

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WHEN to serve a notice on a residential tenant

An “informal notice” may be sent to a tenant at any time.  An “informal notice” is a notice that you WILL NOT use as a basis to evict a tenant or to terminate tenancy.  Examples of “informal notices” include: a notice that the tenant sent the rent check to the wrong address last month, a notice that the tenant is not keeping the grass properly watered, or a reminder that parking is assigned and the tenant is parking in the wrong assigned parking space.

A “formal notice,” on the other hand, is a prerequisite to an eviction action.  “Formal notices” include: a 5-Day Notice to Pay or Quit (for nonpayment of rent), a 10-Day Notice for Material Noncompliance, or a 5-Day Notice of a Noncompliance Materially Affecting Healthy & Safety.  A “formal notice” MUST be served upon the tenant before the landlord files an eviction action in court (called a special detainer action for residential tenants).

So, when can the landlord serve a formal notice?  As soon as the default has occurred.  For nonpayment of rent, assuming rent is due on the first day of the month, then the 5-Day Notice to Pay or Quit may be served on the second day of the month because rent is delinquent on the second day of the month.  And this is true without regard to when (or if) late charges begin to accrue.  For a non-monetary default, such as a 10-Day Notice of Material Noncompliance (i.e., for unauthorized pets, unauthorized guests, noise, etc.), the notice may be served on the same day the default occurs.  You may also serve the notice “sometime after” the default has occurred, but a delay of more than a couple days (other than for nonpayment) may cause some judges to conclude that the default was not that significant if failed to act promptly.

HOW to serve a notice on a residential tenant

This applies to both commercial and residential.

  1. You may serve any tenant notice in person (i.e., hand-deliver) yourself or have someone serve it on your behalf (i.e., manager, friend, etc.). If you have someone else deliver the notice, it should be someone who will be available and willing to go to court to testify that they hand-delivered the notice, if that becomes necessary. Ideally, you should have the tenant acknowledge receipt of the notice by having the tenant sign your file copy (but this is not a legal requirement); give him/her the original.

Putting a copy under the windshield wiper of the tenant’s vehicle is not lawful service. Service by regular first class mail is also not lawful service. Nevertheless, without regard to the method of service (i.e., lawful service or not), if the tenant actually receives the notice and admits to receiving the notice in court, then service of the notice is lawful and effective under the Act.

Alternatively, you may serve a tenant notice by having a private process server or the Sheriff serve it. The latter method has the benefit of leaving a more lasting impression on your tenant to pay the rent when it is due, but is costly and may take several days before service is actually made.

Finally (for residential), you may serve any tenant notice by sending it certified mail, return receipt requested, but the time specified in the notice (i.e., 5-Day Notice, 10-Day Notice, etc.) does not start until the earlier of: (1) actual receipt of the letter or (2) five business days after it is mailed. This may have the effect of extending the notice period by up to five days.

REMINDER: Personal service of the notice and sending it by certified mail, return receipt requested, are two methods of service that are expressly permitted by the Act. Posting (i.e., taping or otherwise affixing a notice to the door) is not lawful service of a notice by the landlord. (Note: “Posting” is permitted for service of process {i.e., a Summons and Complaint} when done by a process server after personal service has been attempted).

What type of notice must I serve (for a residential tenant)?

The type of default determines the notice you must serve.

  1. 5-Day Notice to Pay or Quit. Use this notice when the tenant has failed to pay rent. If the tenant wants to make a partial payment (either before or after you serve this notice) AND you wish to accept a partial rent payment (which the landlord IS NOT required to do), then you should use a “partial payment agreement.” (See the blog post on this topic for further information). If you fail to use a “partial payment agreement” and the tenant fails to pay the remaining amount due, then you must wait until the next time the tenant fails to pay rent to commence eviction for nonpayment of rent. A “partial payment agreement,” as defined by A.R.S. Section 33-1371, is a “contemporaneous writing” of the terms and conditions of the partial payment. A “contemporaneous writing” is a written agreement between the landlord and tenant that is signed by both parties at the time the partial payment is accepted by the landlord. The language in the agreement may be as simple as: “I, landlord, agree to accept from tenant a partial payment of $___. The remaining amount due of $___ shall be paid by tenant on or before _____.” (Signed by both parties).

5-Day Notice of Noncompliance Materially Affecting Health & Safety. This type of noncompliance must first be a noncompliance with A.R.S. Section 33-1341 and then MUST ALSO materially affect Health & safety. In other words, it must meet both tests: (1) it must be a violation of Section 33-1341 and (2) it must materially affect health and safety. If it does not satisfy both tests, then you must use a 10-Day Notice of Material Noncompliance (below).

Notice of Immediate Termination – Material and Irreparable Breach. Where the noncompliance is the result of egregious conduct or serious actual or potential harm, then the Act provides for immediate termination of the rental agreement and an expedited issuance of the Writ of Restitution. In this case, the statute (A.R.S. Section 33-1368(A)(2)) even provides several examples of what constitutes a “material and irreparable breach.” If you proceed under this Section of the Act, serve the tenant with the Notice of Immediate Termination and, simultaneously (i.e., the same day), file the Special Detainer action in court.

10-Day Notice of Material Noncompliance. This notice is used for everything else (i.e., when the none of the foregoing apply). By definition, a “material noncompliance” is a noncompliance with a particular term in the rental agreement which is “material” (i.e., an important or key element of the agreement). Not every noncompliance with the rental agreement is a material noncompliance. For example, if the rental agreement states “no pets,” but the tenant gets a goldfish, this may technically be a noncompliance with the rental agreement but most judges will not find this to be a “material noncompliance.” Common uses for this form include: unauthorized pets, unauthorized occupants, noise, failure to maintain the property, damage (not severe) to the property, etc.

Which is “better” to serve on a tenant: a 5-Day Notice to Pay or Quit or a Notice of Abandonment?

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.

Landlord should collect only one deposit — the security deposit!

A landlord cannot collect a security deposit equal to more than one and one-half month’s rent. For example, if the monthly rent is $1,000.00, then the maximum security deposit a landlord may legally collect is $1,500.00.  For more information about “maximum amount of deposit,” see this blog post.

For now, just understand that any amount you collect that is refundable, without regard to what you call it (i.e., pet deposit, cleaning deposit, key deposit, etc.) is “security” under the ACT and is subject to the one and one-half month’s rent limitation.  If, however, you collect a pet fee, cleaning fee, rekeying fee, or any other fee or charge that the tenant will never get back no matter what the tenant does or does not do, then that money is not “security” under the ACT, is not subject to the one and one-half month’s rent limitation, and does not have to be refunded to the tenant — ever!  Consequently, in the same example above, the landlord may collect a $1,500 security deposit, a $250 nonrefundable cleaning fee, a $250 nonrefundable redecoration fee, and a $25 nonrefundable application fee, but that same landlord COULD NOT collect a $1,500 security deposit and a $1 key deposit, because then the amount of deposits the landlord would be holding exceeds one and one-half month’s rent.

Here is a similar example, but demonstrates why the landlord should only collect one “deposit” — the security deposit — and no other “deposits.”  Same example as above but the landlord collects a $1,000 security deposit and a $500 refundable cleaning deposit. So far, the landlord is okay (i.e., the total “security” collected is less than or equal to one and one-half month’s rent). The tenant leaves at the end of the lease term and owes $2,000 in past due rent. There is no property damage and the property is left cleaner than when the tenant moved in. The landlord will want to apply all $1,500 to the past due rent, but he can’t. Under the Act, “‘security’ means money or property given to assure payment or performance under a rental agreement.” (See A.R.S. § 33-1310(14)). The tenant left the property clean and, therefore, the tenant is legally entitled to return of ALL of the $500 cleaning deposit.  Why?  Because the $500 “cleaning deposit” is “security” under the ACT because it is refundable.  The rental agreement may or may not explain the conditions upon which the tenant will receive a full refund of the $500 cleaning deposit, but any judge who hears this case will (rightfully) conclude that the purpose of a “cleaning deposit” is to assure the landlord that the property will be clean when the tenant moves out; if not, then the landlord is entitled to deduct cleaning expenses from the $500 cleaning deposit.  In our example, the tenants vacated owing rent, but left the rental unit spotless.  It was the landlord — not the tenant — who decided to collect $500 and to label it a “cleaning deposit.”  The “cleaning deposit” can only be used for cleaning expenses, not unpaid rent, property damage or anything else.  If the landlord holds onto that $500 deposit, then the landlord has “wrongfully withheld” part of the tenant’s refundable deposits and the tenant can sue the landlord for the $500 deposit, plus statutory damages equal to twice the amount wrongfully withheld (i.e., $1,000), plus attorney’s fees and court costs. A really bad result for the landlord.

Fortunately, the solution is simple. The landlord should collect only one deposit – a security deposit. I always recommend that my clients collect only a security deposit (not to exceed one and one-half month’s rent) because the ACT permits the landlord to apply the security deposit to any amounts owed by the tenant: rent, property damage, cleaning, whatever.

Can a residential tenant terminate a lease: (1) within 3, 5, 10 or some other number of days after signing the lease, (2) if the tenant loses his/her job, (3) gets a job transfer, (4) if there is crime in the area or (5) if they are the victim of a crime?

I get these questions a lot. So much, in fact, that a blog post on these specific issues is warranted.

1. Can a residential tenant terminate a lease within 3, 5, 10 or some other number of days after signing the lease?

No. That one is simple enough. There is no statute and no case that gives tenants this right. Nevertheless, there is an exception. If the written agreement specifically gives the tenant that right (i.e., “Tenant may cancel this agreement within three days” or “Subject to review and approval by Tenant’s attorney within the next three days” or some similar language), then the tenant can cancel the lease.

2. Can a residential tenant terminate a lease if the tenant loses his/her job?

No. The only exception is (as above) when the written agreement specifically gives the tenant that right.

3. Can a residential tenant terminate a lease if the tenant loses his/her job?

No. Starting to see a pattern here? Unless the written agreement specifically gives the tenant that right, once the tenant signs the agreement, the tenant is bound by the agreement.

4. Can a residential tenant terminate a lease if there is crime in the area?

No. Crime is everywhere; there is no statute or case that allows a tenant to terminate a lease because of crime in the area. HOWEVER, if the landlord marketed the property as being in a “crime free” area or made some other representations about the complete absence of crime in that area, complex, etc., AND it turns out that the area had a high crime rate, then the tenant would likely be able to terminate the lease — NOT because there was crime in the area, but because the landlord had “misrepresented” the premises to the tenant. (See A.R.S. Section 33-1361). Similarly, if the landlord misrepresented some other “material information,” then the tenant may be able to terminate the lease based upon that misrepresentation. (See A.R.S. Section 33-1361).

5. Can a residential tenant terminate a lease if the tenant is the victim of a crime?

Maybe. The Act, Section 33-1318 (which became effective August 2007), 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.

May a landlord discriminate against certain people when evaluating whether or not to accept an applicant as a tenant?

Yes. Surprised? Read this entire post to make sure you clearly understand. Landlords, banks and others who base their approval (or disapproval) on someone’s ability to make payments on a loan or some other financial obligation may lawfully discriminate based on income, credit, current obligations and other factors. Make no mistake about it — this is a type of discrimination, but it is lawful discrimination. What a landlord (or others) cannot do is unlawfully discriminate. It is unlawful to discriminate against a tenant applicant based on race, color, religion, national origin, sex, handicap or familial status (i.e., because the applicant has children), but a landlord may discriminate against an applicant on any other basis. For example, a landlord may reject a tenant application because s/he has insufficient income, drives a motorcycle and/or because s/he is a lawyer.

How to evict a residential tenant for nonpayment of rent?

One of the most common, but frequently misunderstood, types of civil litigation is eviction of a residential tenant by a landlord for nonpayment of rent. Simple civil litigation, even in justice court, can take from three months to over a year to complete. Fortunately, the Arizona Residential Landlord and Tenant Act (the “Act”) affords landlords an expedited procedure for evicting a tenant for nonpayment of rent. The procedure is fairly simple and straightforward, but you must properly complete each step. Properly done, the landlord can have the tenant out of the rental unit and have a money judgment against the tenant for past due rent within three weeks after rent first became overdue. Improperly done, the court may dismiss the action, allow the tenant to stay in the unit and award the tenant a judgment against the landlord for the tenant’s attorney’s fees (if the tenant hired an attorney).

1. The proper procedure is best illustrated by an example. Terry Tenant has a written rental agreement with Larry Landlord. The agreement provides that rent is due on the first day of the month and that late fees begin to accrue after the fifth day of the month at the rate of $10.00 per day. Today is second day of the month. Terry Tenant has not yet paid his rent and Larry Landlord wants to begin eviction proceedings.

The first step in an eviction for nonpayment of rent is delivery of a Five-Day Notice to Pay or Quit (the “Notice”) by the landlord (or his agent) to the tenant. The Notice must state that rent is overdue and that the landlord intends to terminate the tenant’s rental agreement if rent is not paid within five calendar days (not business days) after delivery of the Notice (do not count the day the Notice is delivered). A.R.S. § 33-1368(B) and (H). The Notice may be served on the first day that “rent is unpaid when due.” A.R.S. § 33-1368(B). Our rental agreement states that late fees will not accrue until after the fifth, but clearly states that rent is due on the first day of the month. Although late fees and the rental due date are related, they are separate and distinct dates. Even if a landlord does not charge a late fee at all, rent still is due on a certain date and may be evicted if rent is not timely paid. The language of the rental agreement controls when rent is due and overdue. Therefore, in our example, Larry may serve the Notice on or after the second day of the month. In the case of an oral agreement or a written agreement that does not specify the due date, rent is due “at the beginning of each month” (i.e., the first day of the month). A.R.S. § 33-1314(C).

Larry serves the Notice upon Terry by hand-delivering it to him on the second day of the month. Larry could have had someone else deliver the Notice (i.e., a friend, property manager, process server, etc.) or could have sent the Notice by certified mail. If the Notice is served by mail, the five days begin to run the day after: (1) actual receipt by the tenant, or (2) five days after the Notice is mailed, whichever occurs first. A.R.S. § 33-1313(B).

If Terry does not pay the rent within the five days, then, on the sixth day of the month, Larry may file the eviction action (properly called a “special detainer” action, but commonly referred to as a forcible detainer action). A.R.S. §§ 33-1368, 33-1377.

If the total amount of past due rent sought does not exceed $10,000.00, then Larry may file the special detainer action in justice court, which is typically were most eviction actions are filed. A.R.S. § 22-201(C). If the total amount due is over $10,000, then Larry must file in superior court. A.R.S. § 22-201(C).

To file a special detainer action, Larry completes a form called a Complaint and files it with the court. The court then issues a Summons for each tenant/defendant named in the Complaint (this is somewhat of a misnomer — Larry will actually fill out the Summons form, the clerk of the court merely writes in the date and time of the “return date” (discussed below), stamps the form and gives it back to Larry). In some courts (i.e., justice court), the Summons and Complaint forms have been combined into one form.

Larry then gives the Summons and Complaint to a process server, who, in turn, “serves” (i.e., hand-delivers) a copy of the Summons and Complaint upon Terry. The Summons and Complaint must be served on each named tenant/defendant at least two (2) days before the return date. A.R.S. § 33-1377(B). Alternatively, if personal service is attempted but not successful, service may be effected by the process server by posting a copy of the Summons and Complaint on the subject property (i.e., on the front door) and, on the same day, mailing a copy of the Summons and Complaint via certified mail, return receipt requested, to the tenant’s last known address, which is usually the rental property address. A.R.S. § 33-1377(B). Posting and mailing (commonly referred to as “nail & mail” service) must be accomplished, however, within one day of issuance of the Summons. A.R.S. § 33-1377(B).

Larry then goes to court on the return date specified on the Summons, at the time and place indicated. The “return date” is the date specified on the Summons by the clerk of the court at the time the Summons was issued. Terry will enter his plea — guilty or not guilty — on the return date. In justice court, trial may follow immediately after entry of the tenant’s plea or be set for a few days later. In superior court, if the tenant pleads not guilty, a trial date will be set for a few days later. In both justice court or superior court, if the tenant pleads guilty on the return date, judgment will be entered that day.

On the trial date, whether or not Terry shows up, Larry must present evidence to the court that indicates he is entitled to possession of the rental unit and, if applicable, a money judgment for past due rent. If Terry does show up, Terry will be permitted to explain why rent was not paid. “Hard times” (i.e., loss of job, disability, etc.) will not be an acceptable defense. Acceptable defenses available to tenants include:

a. The rent was not yet due when the tenant was served with the Five-Day Notice or the Notice itself was defective (i.e., lacks required information).

b. The Complaint was filed before the five day period (after service of the Notice) expired.

c. The special detainer action was filed in the wrong court.

d. The Summons and/or Complaint was improperly served.

e. The tenant no longer lives in the rental unit and the landlord has accepted surrender of possession.

f. The special detainer action is an unlawful retaliation against the tenant (i.e., retaliation for reporting building code violations, etc.).

g. There was a justification for nonpayment of rent, based on some type of breach of the rental agreement by the landlord (i.e., failure to repair, failure to provide heat/cooling, etc.).

h. The rent has been paid or part of the rent was paid and accepted after service of the Five-Day Notice.

I. The landlord inconsistently enforces of the terms in the rental agreement (i.e., s/he allows some tenants to be late with the rent, but not others). Provided the tenant can demonstrate to the court that s/he is the victim of “selective enforcement,” the court may dismiss the landlord’s action.

j. The language of the rental agreement provides (or suggests) that the landlord must accept partial rent payments and the tenant has offered a partial payment, but the landlord has refused to accept it.

If Larry wins, he is entitled to a judgment for possession of the rental unit and a money judgment for past due rent. Larry will not receive actual possession of the rental unit, however, until five business days (not calendar days) after entry of judgment. A.R.S. § 12-1178(C). If Terry does not voluntarily move out of the rental unit on or before the fifth business day, Larry may pay a fee and obtain a Writ of Restitution from the court. Larry may then give the writ to the sheriff or constable, who will forcibly remove Terry from the rental unit. Larry must then arrange to have the locks changed and all personal property left in the unit, if any, moved and stored.

And that is all there is to it. Okay, so it doesn’t sound all that simple. The first one never is. You now have two choices: (1) hire an attorney to do it for you, or (2) do it yourself. If you decide to prosecute a special detainer action yourself, at a minimum, you should consult with your attorney at two stages: (1) before you file the action, to ensure that you have complied with all the procedural requirements, and (2) any time you have a question or run into a problem. You must also make a point of obtaining and reading the “Rules of Procedure for Eviction Actions,” which became effective January 1, 2009. These rules require that certain language be included in the special detainer Complaint and on the judgment form and that various other procedures are followed. You can get a copy of these rules here (right side bar).

Comply with the Act and the Rules of Procedure, follow the steps above and you will do fine — you can do this.

What is the maximum security deposit a landlord may collect?

A landlord cannot collect a security deposit equal to more than one and one-half month’s rent. For example, if the monthly rent is $1,000.00, then the maximum security deposit a landlord may legally collect is $1,500.00. Sounds simple, but it’s not.

A security deposit does not include nonrefundable cleaning or redecorating fees, but DOES include refundable cleaning, redecorating and/or any other type of refundable deposit (i.e., refundable pet deposit, refundable key deposit, etc.). Incidently, security deposits are ALWAYS refundable deposits; there is no such thing as a “nonrefundable security deposit.”

Consequently, a landlord MAY: In the same example above, the landlord may collect a $1,500 security deposit, a $250 nonrefundable cleaning fee, a $250 nonrefundable redecoration fee, and a $25 nonrefundable application fee. But that same landlord COULD NOT collect a $1,500 security deposit and a $1 key deposit, because then the amount of deposits the landlord would be holding exceeds one and one-half month’s rent.

Hang on, we’re not done. Same example, but the landlord collects a $1,000 security deposit and a $500 refundable cleaning deposit. So far, the landlord is okay. But the tenant leaves at the end of the lease term and owes $2,000 in past due rent. There is no property damage and the property is left cleaner than when the tenant moved in. The landlord will want to apply all $1,500 to the past due rent, but he can’t. Under the Act, “‘security’ means money or property given to assure payment or performance under a rental agreement.” (See A.R.S. § 33-1310(14)). The tenant left the property clean – the tenant is legally entitled to return of the $500 cleaning deposit. If the landlord holds onto that deposit, then the landlord has “wrongfully withheld” part of the tenant’s refundable deposits and the tenant can sue the landlord for the $500 deposit, plus statutory damages equal to twice the amount wrongfully withheld (i.e., $1,000), plus attorney’s fees and court costs. A really bad result for the landlord.

The solution is simple. The landlord should collect only one deposit – a security deposit. I always recommend that my clients collect only a security deposit (not to exceed one and one-half month’s rent) because the landlord may apply the security deposit to any amounts owed by the tenant: rent, property damage, cleaning, whatever. Under the Act, and as stated above, the landlord can also collect fees and charges (i.e., nonrefundable) for cleaning, redecorating, etc. The only restrictions on fees and charges are: (1) they must be “reasonable” (whatever that means) and (2) the purpose of the nonrefundable fee/charge must be stated in writing (i.e., in the rental agreement or some other written document).

Must an out-of-state owner/landlord have a local property manager?

No, out-of-state owners/landlords are not required to have a local property manager, but out-of-state owners/landlords must have an in-state statutory agent, which is different.  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 owner/landlord fails to have a statutory agent, the owner/landlord is subject to substantial statutory fines and this is also legal grounds for a tenant to terminate an existing lease.  An out-of-state owner must have an in-state statutory agent. And, as a practical matter, it makes sense to have a local property manager because s/he can be more responsive to complaints, etc.  Also, if there is an eviction, the local manager can provide testimony about the relevant facts, otherwise the out-of-state owner will need to personally appear to give testimony.

What MUST be in writing for residential tenant?

Under the Act, the landlord is NOT required to have a written lease or rental agreement with the tenant. Nevertheless, both parties are much better off if a written lease or rental agreement is used.

1. If a landlord elects NOT to use a lease or rental agreement, the landlord still MUST provide the following written notices to the tenant:

2. The landlord must disclose to the tenant, in writing, at or before the commencement of the tenancy, the name and address of: (1) the property manager (if applicable) and (2) the owner or the owner’s agent (such agent must be authorized to accept notices, demands, and service of process). This information must be kept current and refurnished to the tenant upon request.

3. Out-of-state landlords must have an in-state statutory agent and must provide the name, address and telephone number of the statutory agent to the county assessor and the tenant.

3. The purpose of all nonrefundable fees and charges must be stated in writing. For example, if a cleaning fee is nonrefundable, then the purpose for this nonrefundable fee must be stated in writing. If the landlord does not have/use a written lease or rental agreement, then this information must be in writing and given to the tenant.

4. The landlord must give the tenant a notice that the tenant may obtain a copy of the Arizona Residential Landlord and Tenant Act from the Office of the Arizona Secretary of State free of charge.

5. The landlord must give the tenant a move-in inspection form, so that the tenant may document any property defects that existed before tenancy commenced.

6. The landlord must give the tenant a notice that the tenant may be present for the move-out inspection.

7. If the rental property has a pool or spa, the landlord must give the tenant a pool safety notice.

8. If the rental property was build before 1978 or is known to have lead-based paint or lead-based paint hazards, then the landlord must give the tenant a lead-based paint disclosure and comply with other requirement.

9. If the landlord has a real estate license, the landlord must disclose in writing that the landlord is an Arizona real estate licensee.

10. If the lease or rental agreement is for a period of time that is MORE than ONE YEAR (i.e., January 1 to December 31 is for one year; January 1 to January 1 of the following year is for MORE than ONE YEAR), then the lease or rental agreement MUST be in writing because of the statute of frauds.

11. If there is a written lease or rental agreement, all blank spaces must be completed. Any blank lines may render the agreement invalid or unenforceable.

12. If there is a written lease or rental agreement, the landlord must provide the tenant with a signed copy thereof.

13. If the landlord wishes to assess and collect late fees, then the amount of the late fees must be stated in a written lease or rental agreement.

As you can see from the foregoing, even if a landlord does not want to use a written lease or rental agreement, the landlord nevertheless MUST provide various written notices to the tenant. Inasmuch as the landlord is required by law to provide some written information, the landlord may as well use a written lease or rental agreement and merely include all the required written notices in the lease or rental agreement.

Lease/Rental Agreement – What is the difference?

There is no real difference.  Some practitioners refer to a “lease” when referring to a rental agreement for a specified period (i.e., six months, one year, etc.) and refer to a “rental agreement” when tenancy is month-to-month and/or when a written agreement does not exist (i.e., an oral “rental agreement”).  Both terms (i.e., a lease or rental agreement) refer to an agreement between a landlord and a tenant to rent a piece of real property.  An oral one-year “lease” is just as enforceable as a written month-to-month “rental agreement,” the distinctions may merely be the length of the term that the parties are bound by the agreement.  Naturally, the problem with any oral agreement, including an oral “lease” or “rental agreement,” is when the parties disagree as to the terms of the oral agreement, which is why it is always best to have a written agreement.  And that is true whether you call it a “lease” or a “rental agreement.”

Partial payment of rent (residential)

If the tenant wants to make a partial payment (either before or after you serve a 5-Day Notice to Pay or Quit) AND you wish to accept a partial rent payment (which the landlord IS NOT required to do), then you should use a “partial payment agreement.”  A “partial payment agreement,” as defined by A.R.S. Section 33-1371, is a “contemporaneous writing” of the terms and conditions of the partial payment.  A “contemporaneous writing” is a written agreement between the landlord and tenant that is signed by both parties at the time the partial payment is accepted by the landlord.  The language in he agreement may be as simple as: “I, landlord, agree to accept from tenant a partial payment  of $___.  The remaining amount due of $___ shall be paid by tenant on or before _____.”

Failure of the landlord to have a tenant sign a “partial payment agreement” will prevent the landlord from evicting the tenant for nonpayment of the balance that the tenant agreed to pay.  That does not mean that the landlord has waived for forfeited the balance due, it merely means that the landlord must wait until the next default (i.e., nonpayment of the next month’s rent or some non-monetary default) before the landlord may evict the tenant.

Are there any laws that address the issue of a rental property going into foreclosure?

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.

Can a commercial landlord include provisions in the lease that take away most/all of the tenant’s rights away?

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 recision 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.

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