Owning commercial real estate is a lucrative venture for many Arizona landlords, but it comes with its challenges. One of those challenges is difficult tenants who fail or refuse to pay rent on time. If you are an Arizona commercial real estate landlord whose tenants are behind on rent, you may be entitled to perform a lockout. This should be a last course of action because lockouts are rife with potential for disaster and landlords must follow the letter of the law. In the event you need to execute a lockout, you should consult an experienced commercial real estate attorney to help you navigate the situation.
Here’s what you need to know in the meantime.
The Arizona Landlord and Tenant Act Permits Lockouts
Arizona commercial landlords often question whether they are permitted to lock out tenants that have failed or refused to pay rent. First, landlord’ should check their lease to see if a lockout is permitted. If it is, landlords should then consult the Arizona Landlord and Tenant Act, which states that tenants have a total of five days to pay rent as detailed in the relevant lease agreement. After the rent payment window has closed, the landlord may enter and repossess the premises, per A.R.S. § 33-361.
The landlord then has a lien on all the tenant’s personal property and can hold it as an attempt to demand payment. If the tenant still has not paid after 60 days, the landlord may sell the seized property and use the proceeds to make up for the missed rent.
Most Arizona Commercial Leases Require a Lockout Notice
Though Arizona commercial landlords have the power to lock out defaulting tenants, it can rarely be done without providing notice, as most lease agreements require notice be given. Courts tend to enforce these lease provisions between landlord and tenant. Thus, a landlord should check their lease before any actions occurs.
If your lease does mention providing a lockout notice, make sure it has been properly delivered. Your tenant then needs time to respond to the notice and may offer a solution to cure the default within a reasonable timeframe. Landlords may also be required to give notice before the property is sold.
Lockouts Do Not Always Make Sense
Once you take possession of your tenant’s premises, you have 60 days to hold the lien on their personal property before you can sell it. You may not want the burden of keeping their property for that long or the burden of complying with inventory and accounting rules. Further, your tenants may already have a plan to remedy the situation. Tenants often make attempts to cure their defaults during the lien period so they can resume business and repossess the premises. Further, if you wrongfully sell the property before the 60 days were up, your tenant could assert a claim against you.
Each case is unique. Some are best handled with a lockout or eviction, while others can be resolved more peacefully. An experienced commercial real estate attorney can answer specific questions about your situation and offer actionable advice.
Find an Experienced Arizona Commercial Real Estate Attorney
MacQueen & Gottlieb has significant experience with transactions between landlords and tenants in Arizona. Our firm can review your case and lease agreement if a tenant has fallen behind on their rent payments. We can assist you in determining the best course of action to the resolve the matter without exposing you to unnecessary legal exposure. Contact us today at (602) 726-2229 to schedule an initial consultation or make an appointment online.