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Real Estate Q & A: Is a commercial tenant responsible for back rent due to calculation error?

Posted by   /  March 23, 2017  /  No Comments

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Adam D. Martinez, Esq. | Chairman of Real Estate Litigation Department

Question: I am a commercial broker. Several years ago I helped a company purchase two commercial condos. The company occupies one suite, and I found a tenant for the second-floor suite. The rent due under the lease is based on a calculation of square feet. The owner of the company recently informed me that it miscalculated the square feet of the rental suite and that based on a corrected calculation, the tenant owes roughly $10,000 in back rent adjustments from the past four years. The owner sent a demand to the tenant to pay the back rent along with the adjusted monthly rental payment on the next due date, which is almost a month away. The tenant has informed the owner that it will pay the corrected monthly rental amount, but that it is not required to pay any back rent because it was the owner’s mistake. Is the tenant right?

Answer: Probably, not. There are two important issues here. First, if the rent due is based on the square footage and the lease provides for that calculation, then the tenant has agreed to pay rent based on a correct calculation. If as a result of an incorrect calculation, the tenant has not paid enough rent, the landlord is entitled to the difference between the correct rent and the amount the tenant has paid. Second, while the landlord is entitled to the back rent, it cannot evict the tenant or make the tenant pay the back rent within less than a month or likely even 2 or 3 months. Parties to any contract in Arizona have an obligation of good faith and fair dealing. In this case, that means giving the tenant more than a few months to pay the back rent that has accumulated over the past 48 months, especially if it was the landlord’s error in the first place.

Adam Martinez is the Chairman of the Real Estate Litigation Department at Rose Law Group pc. and can be reached at amartinez@roselawgroup.com.

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