Updated 2023

FACTS:

In light of significant credit problems, the tenants offered to pay a full year’s rent in advance if the landlord would accept them as tenants. The landlord ultimately accepted and the parties entered into an AAR Residential Lease Agreement. The tenants took possession and paid the entire year’s rent in advance.

ISSUE:

Is the property manager required to hold the rent in the brokerage trust account to pay the landlord on a monthly basis?

ANSWER:

See Discussion.

DISCUSSION:

Based on the facts presented, the parties agreed in the lease that the full year’s rent would be paid to the landlord. Accordingly, there is no obligation for the property manager to maintain the rent in the brokerage trust account. Rather, the rent should be forwarded to the landlord as the parties agreed.

Note: A lease owner is not permitted to demand or receive security, including prepaid rent, in an amount in excess of two month’s rent. A.R.S. § 33-1431.  However, a tenant is not prohibited from voluntarily paying more than two month’s rent in advance.