Month-to-Month Tenancy Covered by Same Terms in Lease

Facts: An Arizona commercial property owner sued a tenant for failing to pay rent and other charges in the lease when due, and for holdover rent due for the third and fourth years of the tenancy. Including late fees and interest, the owner claimed that the tenant owed it more than $ 3.1 million.

The tenant claimed that the owner was unjustly enriched by the tenant's expenditures on landscaping, water, and garbage collection. The tenant asked the court to dismiss the owner’s claim regarding holdover rent, claiming that the owner had waived its right because it had attempted to negotiate a new lease with the tenant rather than evict it.

The trial court sided with the tenant on that point, ruling that, based on the ongoing lease negotiations and other actions of the owner, the tenant was a month-to-month tenant during the third and fourth years of the tenancy. The court ruled in favor of the owner on the specific issue of the tenant’s failure to pay rent and other charges specified in the lease. The tenant appealed.

Decision: An Arizona appellate court upheld the award of late fees and certain reasonably charged expenses to the owner. However, the court reversed the lower court ruling to the extent that it failed to credit the tenant for certain payments.

Reasoning: Under Arizona law, a month-to-month tenancy is governed by the same terms and conditions as the lease; therefore, the tenant should have been credited for all payments it made for landscaping, water, and garbage collection during certain years of the tenancy, the court ruled.

Source: Arraid Property, L.L.C. v. Alanco Technologies, April 2009