Landlords who receive rental income from tenants must start reporting payments made to vendors which exceed $600 a year. In July 2010 Congress enacted Small Business Jobs Act which was designed to encourage small business spending. However, the Act contained one provision that may have escaped the notice of taxpayers who own rental property, but will affect them starting in January 2011. Under the provisions of the Act, owners of property who receive rental income will be required to issue Forms 1099 to service providers for payments of $600 or more during the year. The Act requires recipients of rental income from real estate to the same information-reporting requirements as taxpayers engaged in a trade or business. Thus, rental income recipients making payments of $600 or more to a service provider such as a plumber, painter or accountant must provide an information return (typically, Form 1099-MISC, Miscellaneous Income) to the IRS and to the service provider. This rule goes into effect for all payments by landlords to vendors made after Dec. 31, 2010. There is an exception for individuals renting their principal residences, including active members of the military, from the reporting requirements. While the duty to report will not start until 2012, landlords must start keeping records of payments starting Jan. 1, 2011, so they will be prepared to issue correct 1099s. Landlords will need to obtain the name, address and taxpayer identification number of the service provider, using Form W-9 or a similar form.
Under Arizona law, a landlord has duty to maintain a residential property. The dwellings covered are apartments, Houses, mobile home parks and condominiums. This means that the landlord shall:
1. Comply with the requirements of applicable building codes materially affecting health and safety.
2. Make all repairs and do whatever is necessary to put and keep the premises in a fit and habitable condition.
3. Keep all common areas of the premises in a clean and safe condition.
4. Maintain in good and safe working order and condition all electrical, plumbing, sanitary, heating, ventilating, air-conditioning and other facilities and appliances, including elevators, supplied or required to be supplied by him.
5. Provide and maintain appropriate receptacles and conveniences for the removal of ashes, garbage, rubbish and other waste incidental to the occupancy of the dwelling unit and arrange for their removal.
6. Supply running water and reasonable amounts of hot water at all times, reasonable heat and reasonable air-conditioning or cooling where such units are installed and offered, when required by seasonal weather conditions.
There are a few exceptions, for example, the landlord and tenant of a single family residence may agree in writing, supported by adequate consideration, that the tenant perform the landlord's duties to maintain the property and also specified repairs, maintenance tasks, alterations and remodeling. However, such agreements are only valid if made in good faith, and not as part of the landlord's ulterior motive of evading the his obligations to maintain the property, and the agreed upon work must not be necessary to cure an existing noncompliance with landlord's duty to comply with building, health, safety and fire codes and make repairs materially affecting the habitablity of the property, and the agreement does not diminish or affect the obligation of the landlord to other tenants in the premises.
Bottom Line: If it is to be offered as a rental property, it must be kept in good, habitable condition.
Tenants must pay their rent in full and on time. In the absence of a written rental agreement that permits the payment of rent on a day other than the first day of the month, Arizona law requires tenants to pay their rent on the first day of each month. Inability to pay rent because of job loss, financial hardship, or medical problems will not stop an eviction. The only time a tenant may be excused from paying rent is if the tenant has been displaced from the property and is staying in temporary substitute housing due to the landlords need to make essential repairs, such as the restoration of water, power, plumbing or A/C or heat.
If a tenant is having a problem paying rent on time, she should try talking with the landlord first. A landlord may be willing to work with the tenant regarding payments. However, the tenant is still responsible for paying all of the rent owed in a timely manner. The landlord is not required to give a tenant more time or make special payment arrangements with the tenant in the case of financial hardship. Practice tip: A landlord does not have to accept a partial payment of rent. But if a landlord accepts payment in part or in full after he has given the tenant a notice of nonpayment or a notice of any other kind of lease breach, he cannot evict the tenant unless the tenant also signs a document that states that he can still evict the tenant for violations of the lease spelled out in the form of a partial payment agreement. If the landlord does not have the tenant sign this document, then he loses his right to evict the tenant for that breach of the lease.
Bottom line: Never accept partial payments unless the tenant first signs a written non-waiver agreement that preserves the landlord's right to proceed with an eviction if the tenant fails to pay as promised.
Mark Tucker has been practicing law for almost 20 years with an emphasis on Justice Court and Superior Court litigation, collection and real property issues.