Arizona Real Estate 2015 - Property Management

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Uniform Residential Landlord and Tenant Act

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1973 - Regulates the relationship between landlord and tenant in residential leases.

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Lease

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A contract between a lessor and a lessee that transfers the right to exclusive possession and use of the property for a specified period of time in exchange for rent.

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Lessor

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Landlord

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Lessee

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Tenant

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Subletting

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Transferring part of a lessee's interest to another for a portion of the term of the lease.

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Actual Eviction

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The legal process that results in the tenant being physically removed from the leased premises.

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Constructive Eviction

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Actions of a landlord that disturb or impair a tenant's enjoyment of the leased premises and causes tenant to leave.

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Assignment

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When the right and interest in a property is transferred to another for the entire term.

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Distraint

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The landlord's legal right to seize a tenant's belongings for damages or rents in arrears under court order.

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Public Accommodation

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A privately owned entity that provides services or accommodations to the public.

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Reversionary Rights

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The right to take back possession of a property if lease ends.

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Property Manager

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One who manages properties in owner's best interest for compensation.

-Must hold a real estate license if managing 2 or more properties for someone else.

-Certified Property Manager (CPM) - Designation given by Institute of Real Estate Management (IREM).

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Duties of a Property Manager

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Achieve the owner's objectives by:

-Generate income for the owner and manage the staff.

-Preserve the value of the property.

-Securing suitable tenants through tenant screenings.

-Collecting rents.

-Caring for the premises through preventative, routine, and repair maintenance (broken items).

-Payments and other disbursement of funds.

-Monthly reports of income and expenses for the property.

-All rental agreements must be kept for 1 year from expiration date.

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Property Management Classifications

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-Residential

-Industrial

-Commercial

-Special Purpose

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Definition of "Residential" classification:

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-Single-family home used as rental properties (condos and vacation homes)

-Multifamily residences

-Property managers must obey all FFH laws regarding rental of residential property.

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Definition of "Industrial" classification:

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Both heavy and light manufacturing facilities and the land they are on.

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Definition of "Commercial" classification:

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-Includes types of income properties and public accommodation.

Liability:

-Must comply w/ ADA

If property has < or = 25 employees, ADA covers hiring of employees and interviewing potential tenants and must offer persons with disabilities full access to facilities and services.

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Definition of "Special Purpose" classification:

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Purpose of these facilities dictates design and function of organization such as nursing homes, theaters, and schools.

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Management Contract

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Contract between property owner and broker.

-Has nothing to do w/ RLTA.

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Terms of a Management Contract

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-Contracts begin by naming parties involved.

-Street address of property required.

-Must specify term of management.

-No single standard term; length depends mostly on the future intentions of owner.

-Specifies the agent's power to hire, fire and supervise personnel.

-Specify the authority to rent, operate, and manage the premises.

-Must have a beginning and ending date.

-Must have a termination provision.

-Must contain frequency on P&L and all reporting on property.

-Fiduciary responsibility.

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Payment terms for a Management Contract

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-Specify the amount of the fee and manner of payment.

-Can be flat fee or percentage which correlates w/ building revenue.

-Separate fee for activities.

-Bonus can be paid for reaching revenue goals.

-Finders fee - maybe paid to tenants, but not to leasing agent/company.

-Finders fee - Can't exceed $200 and cannot exceed 5 times in a 12 month period.

-Finders fee - Must be credit toward rent.

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Property Manager's obligation upon Termination

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-Immediately provide copies of rental agreements.

-W/I 5 days, provide a list of all tenant security deposits.

-W/I 35 days, provide reimbursements for all monies remaining in property accounts, except for unpaid obligations.

-W/I 75 days, provide final accounting of all monies, including bank reconciliation.

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Record Keeping

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-Property management financial records are kept for 3 years from their execution date.

-Property management agreements are kept for 5 years from their termination.

-Residential leases are kept until they are turned over to owner at termination of property management agreement or up to 1 year.

-Nonresidential leases are kept in individual folders and must contain documented trail of money and lease agreement.

-Fully executed residential lease agreements are not required to be reviewed and initialed by broker.

-Records can be kept on-site or off-site, if ADRE is notified in writing of address.

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Influential laws to be aware of in property management:

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-Fair housing laws include Americans with Disabilities Act (ADA).

-Health and building codes.

-Tax laws.

-Laws of Agency.

-State property code laws.

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Uniform Residential Landlord and Tenant Act

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1973

- Must give 48 hours notice to enter premises.

-Tenants are liable for guest's actions.

-No more than 2 persons per bedroom.

-Tenant must know rules at signing of rental agreement.

-Reversionary rights retained by landlord.

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Residential rental property qualifications:

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-80% or more of income is from dwelling units.

-In Arizona, all rental properties must be registered w/ county.

-Non-resident owners must appoint a statutory agent who lives in Arizona to represent them.

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Lease (Overview)

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-Lessor/Lessee.

-Statute of Frauds applies, except for a lease for 1 year or less.

-Leases are usually not recorded.

-Landlord and tenant must sign the lease.

-Most leases only allow subletting w/ owner's consent.

-Rent

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Types of Rent

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Contract Rent - Rental amount on the lease contract.

Economic Rent - Rental amount the current market is demanding.

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Types of Leases:

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-Gross Lease

-Net Lease

-Ground Lease

-Percentage Lease

-Lease Option

-Sale and Leaseback

-Graduated Lease

-Index Lease (escalation)

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Gross Lease

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-Tenant pays fixed rent

-Landlord pays all taxes, insurance, mortgage payments, repairs, etc. on the property.

-Most commonly used lease for residential purposes.

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Net Lease

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-Tenant pays rent and most of all property charges.

-Generally used for commercial or industrial properties.

-Generally long term.

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Ground Lease (Land Lease)

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-Leasing land alone.

-Used to separate ownership of land from building ownership.

-Usually 99 year lease.

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Percentage Lease

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-Lessee pays a percentage of his income.

-In addition to a Gross Lease or a Net Lease.

-Usually a retail operation.

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Lease Option

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First Right of Refusal - Gives tenant right to purchase property.

-Appurtenant.

-No extension beyond the terms of lease.

-Consideration can be rent.

-Delinquent rent payment can result in end of option.

-Can be assigned seperately.

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Sale and Leaseback

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Owner sells property on the market and then leases it back.

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Graduated Lease

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-Rent payments start at a fixed rate, but increase at set intervals during lease term.

-Often used for commercial tenant or in a tough economy.

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Index Lease (Escalation)

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-Rent adjusts according to changes in a price index.

-Often consumer price index or wholesale price index.

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Valid Lease Components

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-Legal ability to enter into a valid contract.

-Must be for a legal purpose.

-Offer and Acceptance - Two components of a valid lease, which consists of a meeting of the minds and the signatures of the lessor and less.

-Consideration - Rent (Assignable - Not personal , can usually be assigned, unless stated.

-Property description.

-Term of lease clearly labeled.

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Arizona Landlord and Tenant Act:

Divorce

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If a couple is going through the process of divorce, the spouse does not need to sign the lease (enforceable).

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Arizona Landlord and Tenant Act:

Cancellation of month-to-month lease requires:

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30-day notice to cancel agreement.

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Arizona Landlord and Tenant Act:

Landlord can change property rules with:

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30-day notice to tenants.

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Arizona Landlord and Tenant Act:

Exemptions from act:

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-Mobile homes

-Public housing

-Hotels

-Fraternity, sorority, dormitory

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Inspection notice timeline:

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Tenant has 5 days after occupancy to fill out and return move in inspection.

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Tenant must be given upon move in:

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-Name and address of property manager or owner.

-Notice where to obtain free copies of the Landlord Tenant Act.

-Move in inspection form (identifies pre-existing conditions).

-Pool safety notice.

-Lead-based paint disclosure for property.

-Bed bug educational materials.

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Bedbug education materials/restrictions:

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-Landlord must provide materials to existing and new tenants.

-Landlord shall not enter into a lease for a unit that has known bedbug infestation.

-Tenant shall not knowingly move materials into a unit with bedbugs.

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Presence of bedbugs:

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-Tenant must disclose knowledge to landlord of presence of bedbugs via electronically or written W/I 3 business days.

-Landlord or pest control unit has 7 business days to visually inspect bedbugs.

-Landlord has 7 business days from visual evidence to start treatment.

-Landlord shall give notice to tenants 3 days before initial treatment.

-This is at the landlord's expense.

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Move Out Inspection:

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-Tenants should be present (written notice from landlord).

-Landlord may apply the deposit against any accrued rent or damages to the premises when lease is over.

-An itemized list of damages must be given to tenant and any balance remaining must be returned to tenant W/I 14 business days.

-If deposit is not returned, tenant has right to recover up to twice amount wrongfully held.

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Breach

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Violation of any of the terms of the agreement W/O legal excuse.

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Constructive Eviction

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-Affects habitable conditions.

-Landlord has 10 days to from notice of noncompliance to fix problems.

-Lease is terminated not less than 10 days from notice.

-If the noncompliance is affecting health and safety, landlord has 5 days to fix problems and lease terminates not less than 5 days from notice.

-Tenant can repair property and be reimbursed up to $300 or half rent, whichever is greater.

-Terminates the lease W/O liability for any further rent.

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Actual Eviction

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-Landlord's remedy: tenant is forced to move out.

-5 days notice is needed.

-Distraint is not legal in Arizona.

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Skip/Abandonment

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Tenant moves W/O notice or payment of rent.

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Reasons for termination:

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-Destruction or condemnation of premises.

-Mutual agreement - lessee and lessor agree to rescind the lease.

-Expiration of the term of the lease.

-If tenant is convicted of a crime or is the victim of domestic violence.

-Death does not terminate a lease (falls to the heirs).

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Security deposits

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-Maximum deposit is one and a half month's rent.

-Cleaning and decorating deposits must be disclosed when nonrefundable.

-Security deposits are treated as trust money.

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Security deposits as trust money:

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-Can be interest bearing.

-Management agreement must identify interest goes.

-Broker may have $3000 of his own money in the trust account (comingling).

-Signers can be any employee/agent under the broker.

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Non-disturbance Clause

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Tenant cannot be disturbed if there is foreclosure on lessor.

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Assignment of Rents Clause

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Allows lender to collect rent if lessor defaults on loan.