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

Facts: An owner claimed that a tenant failed to pay rent and other charges in the lease when due and additionally owed holdover rent 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 alleged that the owner was unjustly enriched by the tenant's expenditures, including monies expended for landscaping, water, and garbage collection.

At trial, the tenant argued that the owner's claim regarding holdover rent should be dismissed because the owner had waived its right when 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. Following the court's ruling that the owner was not entitled to the large holdover rent provided in the lease, the owner significantly reduced its damages claim.

The court ruled in favor of the owner on the specific issue of the tenant's failure to pay rent and other charges in the lease. The tenant appealed the decision of the trial court.

Decision: An Arizona appeals court upheld the award of late fees to the owner and certain reasonably charged expenses. 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, because the month-to-month tenancy was governed by the same terms and conditions as the lease, 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.

• Arraid Property, L.L.C. v. Alanco Technologies, April 2009