Effective February 1, 2019, the City of Scottsdale will increase their rental tax from 1.65% to 1.75%. While this is not a huge percentage change, it can still cut into an owner’s profits, if this tax increase is not passed through to residents. Therefore, all landlords with properties in Scottsdale, should be sending out 30-day notices of the increase to be effective 2/1/19, provided the parties lease expressly states that such increases can occur during the lease term.
The Arizona Residential Landlord and Tenant Act (“the Act”), A.R.S. 33-1314, provides:
“If a municipality that levies a transaction privilege tax on residential rent changes the percentage of that tax, the landlord on thirty days’ written notice to the tenant may adjust the amount of rent due to equal the difference caused by the new percentage amount of the tax. In order for a landlord to adjust rent pursuant to this subsection, the landlord’s right to adjust rent pursuant to this subsection shall be disclosed in the rental agreement.”
Therefore, the law allows a landlord to change the tax being charged to the tenant, if the municipal changes the rate and if the lease permits the change. If a city increases the tax, but the lease does not address the issue, the landlord has to pay that amount out-of-pocket and cannot recoup it from the tenant.
This is another reason to review your lease on a regular basis. If you would like assistance or have questions on where to begin this process, please contact our office. We are here to help!