Commercial landlords and tenants owe each other certain responsibilities under Arizona law. Likewise, commercial landlords and tenants owe each other certain obligations per the lease agreement as well. A real estate attorney will generally start with the lease agreement itself when evaluating a potential case or dispute, then evaluate the client’s overall matter in the context of Arizona’s statutory and common laws. To assist with understanding which party is responsible for what in a commercial lease, we put together this useful guide to Arizona commercial landlord and tenant laws.
Use and Adequacy of the Premises
Because the law presumes that commercial tenants are sophisticated contracting parties, commercial landlords generally do not have the same responsibilities as residential landlords and are at more liberty to freely contract with the tenant. When it comes to acceptability and adequacy of the premises for the tenant, a court will resort to the lease agreement. Many commercial leases have provisions regarding how a tenant can use the premises. A commercial tenant should ensure that the premises are suitable for its needs and intended use and ready for occupancy when it signs a lease. Both commercial landlords and tenants will benefit from clarity around this point in the lease agreement, including terms regarding which party will take responsibility for things like zoning and compliance with local laws to ensure the premises can be used as intended by the parties. A commercial landlord has a responsibility to deliver the premises per the lease terms on the agreed-upon start date, although sometimes the parties will allow for a delayed commencement date.
Tenant Quiet Enjoyment of the Premises
Commercial landlords in general have a responsibility to provide tenants with quiet enjoyment of the premises, which means the landlord cannot unreasonably disturb the tenant’s intended use of the premises. Simply put, landlords cannot cause any interruption to the beneficial use of the leased premises throughout the entire lease term. This typically only applies to disturbances caused directly by a landlord, not those caused by a government agency or third party. Some possible violations of this covenant may include entering the premises too frequently, restricting or interfering with essential services provided to a tenant, or allowing or causing the premises to become uninhabitable.
Handling Repairs and Defects
Commercial tenants generally have a duty to repair or replace items that were not defective at the time of occupancy unless the lease agreement states otherwise. Both parties should carefully consider which party is responsible for fixing things like bathrooms, HVAC, windows or doors if they become defective during the lease. If these items are not expressly included in the agreement, these responsibilities will likely fall on the commercial tenant assuming the landlord fulfilled its obligations in providing the premises in good condition.
Tenant’s Right to Assignment or Sublet in Arizona
Restraints on whether a tenant can sublease the premises is generally controlled by the lease. Because commercial parties are deemed sophisticated by courts, a court will defer to the lease. Some leases will allow a tenant to freely sublease the premises, other leases will require the landlord’s consent which shall not be unreasonable withheld. Other leases may have more restrictive language for assignment or subletting the premises. Some concerns of the landlord may include wanting valid evidence of financial irresponsibility, illegal or detrimental activities, and general unsuitability of the premises for a new intended use.
When Tenants Can Terminate Early in Arizona
The fact that a high percentage of businesses fail leads to a lot of potential reasons why a commercial landlord might want to terminate a lease agreement early. These issues typically are detailed in the break clause of any lease agreement. This is an important provision of the lease contract which details under what circumstances the landlord or tenant may terminate the lease prematurely. These provisions may include an ability for a tenant to terminate the agreement when the landlord can find a replacement tenant. Commercial landlords in Arizona have a duty to make all reasonable efforts to find a new tenant at fair market value when requested by a tenant. It is also common for landlords to assess some penalty in a lease agreement for early termination, like loss of deposit or some additional payment term. A tenant that wants to terminate its lease agreement can generally avoid or limit these penalties if they proactively find a suitable tenant to take over their lease.
Delinquent Rental Payments and Commercial Lockout Notices in Arizona
It should not be a surprise that failure to pay rent will result in the lease termination for commercial lease agreements. Under Arizona Revised Statute 33-361, commercial tenants have the right to enter the premises and lock out a tenant when they are more than five days delinquent on rental payments if it is not expressly prohibited in the lease agreement. Tenants should be aware that landlords even have the right to place a landlord lien on any personal property in the premises until full payment on past due amounts and penalties have been made.
Value of a Leading Commercial Real Estate Law Firm in Arizona
Commercial real estate law can be complicated for landlords and tenants. Since lease agreements are typically for longer periods of time and higher rental payments than residential, it is especially important to utilize the representation of an experienced commercial real estate attorney before executing any commercial lease agreements. Gottlieb Law was founded to deliver industry-leading expertise to our commercial real estate clients. Our firm routinely works with commercial landlords and tenants to draft and review lease agreements, resolve disputes, and, when necessary, pursue litigation in our clients’ best interests. Call us today at 602-899-8188 to schedule an initial consultation or make an appointment online here.
Gottileb Law published this article for information purposes only and it should not be considered as creating an attorney-client relationship. Contact our firm if you need specific assistance on a related matter.