Understanding Arizona Sublease Agreements: Key Considerations and Best Practices

What is a sublease agreement in Arizona?

An Arizona sublease agreement is a legally binding contract where a tenant leases all or part of a residential property to another party (the "sublessor"), for a specific period of time. The existing tenant or renter is known as the "sublessor," and the party who will temporarily move into the sublessor’s home is called the "sublessee." The period of occupancy is set out in the Arizona sublease agreement. It could be for a few days, weeks or months. It is very common for Arizona sublease agreements to have a duration of less than a year. Most sublease agreements are for one month.
For the most part, Arizona sublease agreements work like standard lease agreements. The subreleasee pays rent (generally to the sublessor, who pays to the landlord). The use of the property is governed by the same rules and regulations of the lease agreement between the landlord and sublessor. However , in some cases the regular lease agreement might not be passed along to the subleesee. Under an Arizona sublease agreement, the subleesee has the right to live in the property and the obligation to follow its terms. Those terms might include paying rent, utilities, and abiding by all other rules set out in the sublease agreement and/or the original lease agreement. Typically, rental payments and utility payments go directly to the sublessor and the landlord. Like a regular lease agreement, an Arizona sublease agreement cannot be inconsistent with laws. State law is clear on the requirements for rental and other properties to pass final inspections in order to obtain certificates of occupancy. If those requirements are not met, sublease agreement might be considered void and the sublessor could be liable for damages set out in the lease agreement and/or civil penalties under state law.

Legal requirements for subleasing in Arizona

The legal requirements for entering into a sublease are somewhat different than transferring a regular lease and involve whether or not the original lease agreement grants the tenant the right to sublease, whether the landlord specifically reserves subleasing rights to itself, and whether your state law allows the assignment or subletting of a lease without written consent by the landlord. There are a number of practical and legal reasons why landlords need to be involved in the sublease process and may even want to prevent subleases in certain cases.
Arizona has a statute that governs subleases. The statute requires written agreements for subleases, and states that the tenant must seek permission from the landlord prior to subletting the property. If the tenant sublets the property without the landlord’s permission, the landlord may terminate the tenancy of the subtenant or take action against the original tenant. Additionally, pursuant to Arizona landlord-tenant law, "Persons not parties to the lease can be made parties and be bound by it…" Thirty percent of the rent for the year or fraction thereof after the subletting is "not to exceed $25, whichever is greater" if the lease is sublet without the landlord’s consent. This means that a court can order payment to the landlord of any unpaid rents. Since Arizona’s landlord-tenant laws have been held to trump the other landlord-tenant provisions that are included in other statutes, party agreements, and local ordinances, it is important to have a formal and written agreement and to be familiar with the specific provisions set forth in the Arizona landlord-tenant laws.

Steps to preparing an Arizona sublease agreement

A sublease agreement is similar to the original lease agreement in that the sublease must satisfy conditions like rent provisions, lease duration, security deposit amounts, and any pet or other occupancy restrictions. Also, the sublease may include all the same tenant obligations under a lease agreement, like maintenance responsibilities, damages, and repair obligations, and just like the lease agreement, also delineates information about taxes, utilities, and advance payments. The agreement should also contain descriptions regarding parking, signs, and alterations to the property.
The sublease also retains certain elements for the original lease agreement like default and breach, the term of the agreement, and renewal options. While Arizona law does not require a sublease agreement to be in writing, a written sublease is recommended, since the parties may need the contract to prove their respective rights at some point. The sublease term can be any length of time. Like with the original agreement, it can be terminated early. If the sublease does not contain legal terminology, this does not make it unenforceable, as the agreement is enforceable as long as the intention of the parties is clear.
The above information addresses the process for drafting an Arizona sublease agreement, but there are specific requirements that a sublease agreement must satisfy, as follows: The following guidelines will help a tenant draft an Arizona sublease agreement that meets all legal requirements and covers all necessary information about the lease agreement:

Common mistakes to avoid

One of the most frequent areas of contention in Arizona commercial subleases is the interest of the term of the sublease. A general rule of thumb is that a tenant cannot sublease for a longer term than its lease to the landlord. Thus, if a tenant leases commercial space through October 31 of this year, a tenant is not going to be able to sublease the space past that date. This is not an absolute rule as a lease can be signed or assumed that extends the original lease. However, lease terms that extend past the term that is held by the tenant are common sources of disputes. A related area where disputes are also common between landlord and tenant and which can frustrate both sides is rent due before the sublease term commences. It can be that the subtenant wants the benefit of the lease term without paying for the value received. Typically, during negotiations between the tenant and the subtenant, the subtenant will assert that they will pay the rent for the space for the entire sublease term. When it comes to actually paying the rent, the tenant will set a lease effective date that is close to the end of the lease and will avoid paying rent to the landlord until then. The issue now becomes whether the subtenant pays rent and the tenant pays the landlord or if the subtenant pays the landlord directly. If paid directly, this can frustrate the tenant who has committed to pay the landlord rent that is essentially being collected by the tenant for the period before the lease term starts. This issue can also provide a windfall to the Landlord at the end of the sublease if the tenant honors its obligation to pay the rent. Negative equity can build from this structure, especially if the tenant ends up being liable to the landlord for the rent but does not receive the total rents from the subtenant. This is a common pitfall of tenants that can easily be avoided.

Sublessor and sublessee rights and responsibilities

The rights and responsibilities of the sublessor and the sublessee are largely dictated by the original lease or rental agreement between the landlord and the tenant. When a lease allows or forbids subletting, the sublessee cannot assume any rights denied by the original lease. Even if subletting were allowed by the landlord, in Arizona, the original landlord would still have the right to collect rent from the sublessee directly, if needed. The landlord in Arizona retains the right to evict the sublessee for failure to pay rent directly to the landlord.
The sublessor remains responsible to meet the terms of the original lease. If your sublessor has a duty to provide services not listed on the sublease, as in apartment leases that require window cleaning every few months or free trash service, the sublessee is not entitled to these services unless they are a part of the sublease. If the original lease allows for renters insurance to be carried, so must the sublease, or else there is no requirement for the sublessor on this point. If you have concerns about the services and requirements of your sublease, you should talk with a qualified Arizona attorney before committing .
The sublessee is always responsible for the conditions of the property, as in any tenancy, but must fulfill these requirements in such a way that it is not a direct violation of the original lease. For instance, the subtenant would be correct to adjust the temperature of the air conditioning in the summer, but could not leave the premises all of the windows and doors open to "air out" the home while holding a week-long party. The subtenant must not violate the lease with loud parties, domestic disturbances or anything else that damages the property or endangers the other tenants in the building.
Most importantly, however, is the reversionary obligation of the tenant in Arizona, which is to vacate the property at the end of the lease. If you are on a lease for one year or longer, it will probably have an automatic renewal clause in it. BE CAREFUL NOT TO FAIL TO VACATE OR TO ATTEMPT TO VACATE EARLY. If you are paying a sublessee for room and board on a monthly basis, you should recognize that you have entered into a contract for service. Early cancellation will result in the obligation to pay rent through the agreed-upon termination date, unless the landlord agrees to otherwise renegotiate the contract.

Resolving disputes in a sublease

As is often the case with disputes, the best way to avoid them is to seek resolution without resorting to mediation or legal action. The initial step is open communication between you and your subtenant. If your subtenant breaches any clause of the Arizona sublease agreement, it provides you leverage for legally ending the sublease and pursuing remedies outlined in the original lease. If a breach is not a clear violation of the rental contract, an amicable conversation with your subtenant may resolve the dispute. Early options include: There are laws and regulations that must be adhered to when filing a claim related to disputes in an Arizona sublease agreement. Mediating disputes involves hiring a third-party expert who can look at the matter under consideration objectively. Having the assistance of a mediator allows both parties to communicate and work together to find the best solution for both parties. If mediation has been attempted and failed, consider pursuing legal remedies such as filing a dispute with the Arizona Department of Real Estate, or other appropriate dispute adjudication avenue. A peace officer like the sheriff may also be able to assist with this process. A more common option is filing a claim in small claims court. Once you file a lawsuit, the burden of proof is on you to prove a breach occurred. You must provide courtroom authorities with documented evidence supporting your allegations. Specify the amount they owe you in monetary value. You may be required to return certain rights to the property per terms of the lease and the Arizona Landlord and Tenant Act.

Tips for a successful sublease agreement

When engaging in subleasing activities in Arizona, the parties can adopt strategies that lead to better control of the process and the successful achievement of the sublease terms to which they have both agreed. A first action item for the sublessor is to recognize that it has all of the same responsibilities and duties as a lessor under the original lease. As a result, his or her first task should be to review that lease. Sublessors should take note of any restrictions under the lease on the sublease (i.e., it may prohibit further subletting). Additionally, a sublessor will want to determine whether any approval requirements exist under the lease for a subletting arrangement. If any conditions or restrictions are not followed, the sublease may be invalid.
There are also some considerations that sublessors can implement to better position themselves for a successful sublease contract. First, whether or not an approval requirement exists under the original lease, sublessors should send a copy of the proposed sublease agreement to the lessor before executing it (or better yet, before even negotiating the terms) . Any lease provisions that require prior approval regarding a sublease should then be discussed with the lessor. Sublessors should also consider obtaining a written consent from the lessor of the main lease to the sublease agreement. Second, sublessors should ensure that the main lease is legally binding and enforceable — if it turns out to be unenforceable or invalid, then so too will the sublease agreement. Third, sublessors should conduct a background check or run credit reports on prospective subtenants before executing the sublease agreement. Fourth, sublessors should be sure to engage in careful drafting and negotiation. If certain terms of the main lease should not be part of the sublease, they should be excluded and any unique provisions should be clearly delineated. In sum, sublessors in Arizona can implement certain best practices to help them navigate through the sublease process and accomplish their ultimate goals.