The downturn in the economy has hit tourism and hospitality industries hard, as many discretionary dollars have been funneled into “day trips” and “stay at home vacations.” Arizona lodging providers are contemplating increasing revenues by offering lodging to persons who are in a position to want to stay with them “for a while,” without knowing exactly how long a sojourn that might turn out to be. It’s creative income production, and likely tempting, but hotel and motel operators need to think about a few issues in deciding whether to offer lodging on a seemingly – fixed-term basis.

The Arizona Residential Landlord Tenant Act (“ARLTA”) theoretically does not apply to “transient occupancy” in a hotel or motel, under ARS §33-1308(4); this complicates the decision of lodging providers, because the ARLTA does apply to a rental agreement of short duration, like one involving “a roomer who pays weekly rent”. In other words, a week-to-week guest, in some circumstances, may be covered by the ARLTA.

An initial observation is that in order to be bound by that landlord – tenant act, a hotelier likely will need to have a written lease agreement. Does the hotel/motel operator really want to be bound by the act? On the one hand, “innkeepers” have some obligations to guests under Arizona law. On the other hand, residential landlords have a mess of obligations under Arizona law, including possibly the requirement of registering its facilities with the Maricopa County Assessor as having “Residential Rental Property.” If a parcel of property is used for residential rental purposes, the parcel must be listed as a “class four” property for tax assessment purposes.

Also, know that the municipality where the lodging facility is located may have a transaction privilege tax on residential rent receipts; and failure to pay that tax will result in a penalty or fine by the municipality. The innkeeper should check on that circumstance in assessing this situation; getting a fine from a city or town just to accommodate a person or a handful of persons for a longer-term stay seems cost – ineffective.

The county where the facility is located has the right to inspect the rental property under the “slumlord” statutes. Practically speaking, that probably will not happen often, however, other than in response to a lodger’s complaint in writing filed with the county. Still, the innkeeper needs to realize that a landlord’s essential obligations under the ARLTA are found in Article 2 of the act, starting at ARS §33-1321. Very basically, the categories of commitments involve (i) maintenance of the rental unit, (ii) accounting for the tenant’s security deposit (if there is one) when the lease lapses, and (iii) lockouts of tenants and disposition of a tenant’s property when the lease is “over,” for whatever reason. I don’t think that the innkeeper will have any trouble complying with any of the physical-condition requirements, just in the ordinary course of maintaining the facility. But a disgruntled “tenant” can make you fix the toilet in his “unit,” instead of an innkeeper employing the more convenient device of just moving him/her/them to another room at the facility for a while or for keeps – if there’s a written lease, that is. And disposing of property of the departed occupant under the ARLTA requires lots of notice – giving and other hoops for a landlord to jump through. There’s more on the landlord’s obligations under the ARLTA in a February, 2009 post on this site.

It’s not uncommon for a landlord – tenant act not to define “transience.” Arizona’s doesn’t; neither did Oregon’s or Illinois’, in days past. I think the definition of a “transient occupancy” is a circumstance where a person does not have an expectation of indefinite occupancy of a particular dwelling unit. So, this is my modest suggestion to innkeepers: Don’t allow anyone to become a tenant, in a situation where the tenant thinks he/she will be in Room 679 as long as the rent is paid every week/month on time.

Instead, consider this – enter into a longer term guest agreement, where room charges only have to be paid monthly. Don’t call the arrangement a lease; write up something called a “Transient Occupancy Agreement”. Have that agreement recite that the rent is due every XX days, and that the parties presume that the occupant paying his charges timely will continue consistently to occupy Room 679. But, and here’s the big but, recite in the agreement that on some period of days of prior notice, the innkeeper has the right to relocate the occupant to another room. That way, two things will be favorable to the innkeeper:

• If the innkeeper doesn’t have time, labor, materials, whatever, to fix the toilet in Room 679, it won’t have to – instead, it can move the occupant to another place for a while until it gets around to having the toilet fixed; and
• The occupant cannot claim to be protected by the ARLTA, because, since an innkeeper has the right to relocate him as need arises, the renter does not have an expectation of indefinite occupancy of a particular room at the inn.

Courts have not landed upon a length, or range of lengths, of overnight stays that distinguish transients from “roomers.” Permanent residence, and therefore the application of the ARLTA, is going to be evaluated by external appearances of the intentions of the parties. The most important “appearance,” I suspect, is whether the occupant indicates by his or her behavior intent to establish a permanent residence.

-MNW