VOLUME 2 - ISSUE 6 LEGAL UPDATE

- SAFE HARBOR LEASE RECOMMENDATIONS JUNE 2005
-
COLLIER COUNTY RENTAL REGISTRATION AND INSPECTION FEES
- YOUR TENANT BROKE THE LEASE – NOW WHAT?
- EVICTING FOR UNAUTHORIZED OCCUPANTS
-
TERMINATION OF A LEASE IF YOU CANNOT GRANT POSSESSION

 

 

SAFE HARBOR LEASE RECOMMENDATIONS JUNE 2005
by Harry Anthony Heist, Attorney at Law

5 large property management companies in Florida are now being sued in class action lawsuits. This is at crisis stage. Based on what we feel is an incorrect outcome of the decision in the Yates et al vs. Equity Residential case, under which the judge held that it is not legal to charge a tenant a penalty such as liquidated damages or a termination fee for breaking a lease, a law firm is filing nearly identical lawsuits against other property management companies for charging these fees. Ironically, charging liquidated damages or a penalty for lease break, rather than holding a tenant to the full term of the lease, benefits the tenant in a soft market. Unfortunately, the judge in the Equity case feels otherwise, and until such time as that case is overturned or a higher court decides otherwise, property management companies should cease charging these fees.

ACTION NEEDS TO BE TAKEN NOW

1. GIVE THE APPLICANT A “SAMPLE LEASE” SHOWING ALL CHARGES AND FEES AT THE TIME OF APPLICATION

Disclosure is extremely important. The attorney filing these cases is trying to convince the court that some sort of trickery is involved when you fail at the time of application to give the applicant the lease that they will eventually sign if approved. Next to no one in property management currently gives the applicant a copy of the lease at the time of application. It just has not been the common practice, as most leases are fairly similar, and if an applicant had a major problem with the lease, that applicant would be able to back out if she disagreed with the lease terms. WE RECOMMEND THAT YOU IMMEDIATELY BEGIN PROVIDING A SAMPLE LEASE TO THE APPLICANT AT THE TIME OF APPLICATION

2. CHARGING A “RE-LET FEE”, “LEASE BREAK FEE”, “TERMINATION FEE” OR “LIQUIDATED DAMAGE FEE” IF TENANT BREAKS THE LEASE OR IS EVICTED

Remove these from the lease. If the tenant breaks the lease, you should only charge the tenant the amount of rent you will lose. This will be what you know you have lost for the month that the tenant vacated. The amount will increase as long as the unit is unoccupied. Once the unit is occupied by a new tenant, the lease-breaking tenant will owe no additional rent. We recommend against charging any type of liquidated damages, reletting fee or pre-set fee. DO NOT ACCELERATE THE RENT.

3. LIQUIDATED DAMAGES FEES OR RELET FEES FOR VOLUNTARILY AGREED LEASE BUY OUTS

We recommend that you cease using these lease clauses IMMEDIATELY. You will probably be safe letting a tenant “buy out” of a lease by paying a certain sum, but if the unit is re-rented, you MAY have to refund the money and not collect double rent. We recommend that if you choose to allow a tenant to buy out of the lease, that it be done outside of the lease agreement on a separate form, AND you refund the tenant money if the unit is re-rented. Get an opinion from your attorney.

4. SENDING ACCOUNTS TO COLLECTIONS?

If you send an account to collections, and later it is determined that the amount is incorrect, you can be sued for significant amounts. Exercise extreme care in sending any amounts to collections. Do not send any account to collections until the unit is re-rented and you can definitively determine exactly what your loss will be. If the tenant has objected to what you are claiming, the amount should be reported as “disputed”.

5. ACCOUNTS ALREADY SENT TO COLLECTIONS

We recommend that you revise any accounts sent to collections, and only charge for the amount of lost rent, removing any and all termination fees or liquidated damages fees from the amount owed.

6. ACCELERATING THE RENT UPON DEFAULT OR EVICTION

We advise against accelerating the rent. Charge only for rent you lose. Remove these clauses from the lease.

DISCLAIMER: These “Safe Harbor Recommendations” are provided for informational purposes by the Law Offices of Heist, Weisse & Lucrezi, P.A. as of June 16, 2005 and may change. They are the opinion of the Law Offices of Heist, Weisse & Lucrezi based on a current case outcome which we feel is incorrect. This is not intended to establish an attorney-client relationship, and this does not constitute legal advice to a client or any other person or entity.

(Back to Top)

 

 

COLLIER COUNTY RENTAL REGISTRATION AND INSPECTION FEES
by Harry Anthony Heist, Attorney at Law

Just when you thought it could not get any worse, Collier County decided to enforce an ordinance requiring a $30.00 per unit initial registration fee for every rental unit, $20.00 per unit every year thereafter and $200.00 inspection fees. This huge amount is unwarranted, unreasonable and unjustified. These types of fees will spread like wildfire if property managers sit back and do nothing to stop them. The Naples Area Apartment Association with the help of the Florida Apartment Association is fighting back. Currently some municipalities and counties require some sort of “registration fee”, but none come near what Collier County has imposed.

On June 13 and 14, 2005 Gary Scarboro, Governmental Affairs Director for the Florida Apartment Association, along with members of the Naples Area Apartment Association met with County Commissioners and code enforcement staff; 16 property managers attended the County Commission Meeting where Gary was able to speak at the meeting. Due to time constraints, Gary Scarboro served as the spokesperson for the group and was offered 5 minutes to speak. Discussion ensued among the commissioners, and county code enforcement staff was called on also to answer some questions, and the allotted 5 minutes ended up in a 20 minute discussion. During the discussion one commissioner took the property managers’ side strongly by asking pointed questions about how the fees were to be used, and even said that the fees appeared more like a tax. We learned from the discussion that the fees go into the county’s general revenue fund and are not specifically used for code enforcement activities. After discussion was closed, the commission opted to take no action on the issue. However, the code enforcement director and two other staff members followed the NAAA group into the hallway and initiated further discussion. They indicated a willingness to work with NAAA and said they would be calling to schedule an appointment for a meeting.

Since there was not enough time set aside at the meeting for all attendees to give public comment, Gary and the Naples Area Apartment Association arranged a videographer to video record the comments of the property managers who attended the meeting. After a two-hour discussion and prep session, about 8 property managers and Gary recorded comments by the property managers stating their opposition to the fees and the reasons for that opposition. The completed DVD will be sent to each commissioner, the county manager and the code enforcement director. We will be following this matter closely and ask all property managers throughout Florida to watch their city council and county commission meetings carefully, so if charges such as these are imposed, action can be taken, and we can organize industry leaders to assist in defeating any burdensome ordinances.

(Back to Top)

 

 

YOUR TENANT BROKE THE LEASE – NOW WHAT?
by Harry Anthony Heist, Attorney at Law

Your tenant skipped out in the middle of the night 3 months into a 12 month lease. No notice given, not even the keys left behind. The only thing the tenant left you with was a mess and a vacant apartment. Your owner or management company is wanting you to sue the tenant for the money owed and collect this money. Can you sue? Should you sue? Is it worth it? Are there risks?

Tenants break their leases on a regular basis. Sometimes they give you notice, but often they just get up and leave. While in some cases you are quite happy to be rid of a problem tenant, in other cases the skip was unexpected, and the landlord is upset at the loss of rental income and the prospect of a vacancy or having to retain a new tenant.

The usual reaction by the landlord is to want to sue the tenant to recover the lost rent. Unfortunately, most landlords are unsuccessful at collecting the rent in this fashion, and in our opinion, it is just not recommended.

For how much can you sue the tenant? You can only sue the tenant for the rent that you lost as it becomes due plus the damages to the property that exceed ordinary wear and tear, and these damages must be proven.

When can you sue the tenant? You can sue at any time after the skip, but you will not know what is owed until you have the unit re-rented. You cannot calculate the rent owed for the remainder of the lease and sue for this amount, as acceleration is not allowed.

Where is the tenant? In order to sue someone, you need to find them. If you cannot find them, you cannot sue them. It is that simple.

So you find the tenant and sue the tenant. Now what? The landlord or the property manager will have to attend a pre-trial which could take hours of waiting. At the pre-trial the tenant may not show up, and you will receive a default judgment. If the tenant shows, the case might be settled, or if it is not settled, the case will be set for trial at a later date. This will require another trip to court where a full fledged trial will be held and all witnesses must attend.

Can an attorney sue the tenant for you? Sure, and you will be throwing good money after bad. A typical small claims suit handled properly will cost between $500.00 to $2500.00 on average in attorney’s fees. You still will need the landlord, the property manager and/or witnesses in court at the pre-trial and definitely at the trial.

Doesn’t the tenant have to pay your attorney’s fees? If you win in court, the judge may award you attorney’s fee and costs based on the lease or Florida statute. Collecting them from the tenant is a whole different story.

Can the tenant win in court? A tenant who breaks a lease will come up with all kinds of reasons why the lease was broken, most of these reasons pertaining to the condition of the property, repairs that they claim were not completed, safety issues, noise issues or just about anything under the sun. These can all be LIES, but you will have to defend yourself against these lies. Many tenants can lie more convincingly than you can tell the truth. If the tenant wins, YOU will have to pay the tenant’s attorney’s fees. Many judges feel a lot of sympathy for a tenant who breaks a lease, if the tenant comes up with a good sob story.

The Counterclaim Risk Any time you file a lawsuit, you run the risk of the tenant, with or without an attorney, filing a counterclaim against you. This means that the tables are turned, and now you are not only a plaintiff, but you are a defendant and must defend yourself against the tenant’s alleged claims. This often will require you to hire an attorney and subject you to not only your attorney’s fees, but the tenant’s attorney’s fees in the event he retains an attorney and prevails in court. A simple lawsuit you file against a tenant for rent that he owes you can result in a complex counterclaim filed against you for damages the tenant allegedly suffered due to your actions or inactions. The accusations the tenant may make could be totally false and outrageous, but you will still be required to defend yourself.

ARE YOU CONVINCED YET? Our office does not recommend lawsuits against a tenant unless it is an eviction. If the landlord wishes to pursue a tenant, we recommend that they do this on their own and recommend that the property manager does not file suit for the landlord. Do some landlords win and collect their money? Absolutely. Most do not. We recommend that you take the money you would have spent filing a lawsuit, pay for an extra ad in the newspaper, and re-rent the property as soon as possible.

(Back to Top)

 

 

EVICTING FOR UNAUTHORIZED OCCUPANTS
by Harry Anthony Heist, Attorney at Law

You see the unauthorized person there every morning. You see their car parked there every night. The unauthorized person even comes into your office complaining about something. Can you force them out? Can you prove your case? It is harder than you think.

To evict a tenant for having an unauthorized occupant, you first need to have served a proper Seven Day Notice of Non Compliance with Opportunity to Cure. In order to serve a Seven Day Notice to Terminate, you must be absolutely certain that you can prove to a judge that the tenant has an unauthorized occupant residing on the premises, not just visiting, and that the occupant was not “authorized” by you, the landlord or prior management’s failure to act quickly. If the occupant has been on the premises for some time with your knowledge or the knowledge of maintenance personnel, employees or prior management, and/or you have accepted rent with this knowledge, you will not be successful evicting, as you have “authorized” the occupant by failing to act. This is due to the legal principles of waiver and estoppel.

 

SOME PROOF THAT IS NECESSARY PRIOR TO TERMINATING THE TENANT FOR FAILURE TO REMOVE AN UNAUTHORIZED OCCUPANT

1. Photos of unauthorized occupant AFTER the Seven Day Notice of Noncompliance with Opportunity to Cure has expired.

2. 24 hour Video surveillance tapes or written admission by the tenant(s) that they have an unauthorized occupant AFTER the Seven Day Notice of Noncompliance with Opportunity to Cure has expired.

3. Employees of the apartment community who will testify in court that they know for a fact the unauthorized occupant is still living on the premises AFTER the Seven Day Notice of Noncompliance with opportunity to cure expired and are prepared to show the judge proof.

4. Dates and time the unauthorized occupant was seen on the premises AFTER the Seven Day Notice of Noncompliance with opportunity to cure expired.

5. 24 hour Video surveillance of the unauthorized occupant’s vehicle AFTER the Seven Day Notice of Noncompliance with opportunity to cure expired.

6. Police report where the unauthorized occupant gives your address as his or her address AFTER the Seven Day Notice of Noncompliance with Opportunity to Cure has expired.

IF YOU DO NOT HAVE A STRONG CASE, YOU WILL LOSE. EXPECT THE TENANT TO DENY THAT THE PERSON IS LIVING ON THE PREMISES. REMEMBER THE JUDGE WILL NEED TO BE CONVINCED THAT THE PERSON LIVES THERE AND IS NOT JUST VISITING.

(Back to Top)

 

 

TERMINATION OF A LEASE IF YOU CANNOT GRANT POSSESSION
by Harry Anthony Heist, Attorney at Law

Did you ever sign a lease with a tenant for a unit that was currently occupied and the current tenant had given notice to vacate? Of course. Most of the time the tenant vacates as planned, you turn the unit, and the new tenant moves in. What happens if the current tenant decides not to move out as they had told you, and the new tenant is in the parking lot with a truck ready to move in? You give the bad news that you have no other units available, and the would-be new tenant drives away, STRAIGHT TO THE COURTHOUSE!

Common Practice It is common practice among property managers to attempt to rent a unit out once the current tenant has given notice of vacating, you have given notice to the tenant to vacate and/or the lease is expiring. This is not illegal in any way, and the property manager or landlord often will sign a lease with the new tenant, stating the occupancy date which will be some time after the current tenant has vacated. In most cases, the current tenant vacates according to plan, the property manager turns the unit, and the new tenant moves in on the beginning date of the new lease. Often the property manager has the new lease starting a week after the current lease expires, so as to provide time for the necessary cleaning or other work to be done on the unit to make it rent ready for the new tenant.

The Problem> Many tenants fail to move out on the date that they said they would vacate. The tenant could have had a change in circumstances, is building a home which is not ready as expected, or the tenant’s new residence may have fell through or is not ready for some reason or another. Can you just kick the tenant out, as you have a new tenant moving in? Of course not. Your only option is to wait for them to leave or file an eviction, which will most likely take 20 to 30 days. The property manager is now faced with a dilemma; in most cases, the tenant will move out within a short period of time, but you have a new tenant who has a fully executed lease who now cannot move into the unit. Another problem may not be related to the current tenant at all. The current tenant may vacate the unit as planned, but you find out that serious work must be performed on the unit to make it rent ready, or something serious like a rewiring job or replumbing job must be performed before a new tenant can move in. In the situation of the current tenant failing to move out, the current tenant is in breach of the lease by not moving, but YOU are now in breach of the lease with the new tenant, as YOU cannot provide the unit to the new tenant according to the terms of the lease. In the situation where major work needs to be done, the current tenant is out, but YOU are still in breach of the agreement with the new tenant.

The Liability If the new tenant cannot move in according to the starting date of the lease, the property manager or landlord has breached the agreement and could be held liable for the damages the new tenant suffers due to the breach. This could include storage costs, the higher rent the tenant may have to pay finding another place, hotel bills, moving bills, and any other possible expense that could arise out of the new tenant now not being able to move in as planned. The tenant may even go as far as suing for infliction of emotional distress or claim some bizarre theory of damages.

The Solution A simple clause in the lease agreement is all that is required to give the property manager and landlord protection in the event the unit is not ready for the new tenant as planned. This clause can provide that the lease may be considered null and void or terminated in the event that possession cannot be granted to the tenant on the expected move in date, or provide that the move in date can be extended to a fixed date not to exceed a particular amount of days. Since nothing is certain in the world of property management, a clause such as this will prove extremely helpful and is really a necessity, if the property manager or landlord intends to enter into a lease with a new tenant while a current unit is occupied. We recommend that this wording is placed in the same paragraph as the start and end date of the lease term.

 

Sample Lease Wording

IF FOR ANY REASON WHATSOEVER LANDLORD CANNOT DELIVER POSSESSION OF THE PREMISES TO TENANT BY THE BEGINNING DATE, THE BEGINNING DATE MAY BE EXTENDED UP TO ____ DAYS OR LEASE VOIDED AT LANDLORD'S OPTION WITHOUT LANDLORD OR PROPERTY MANAGER BEING LIABLE FOR ANY EXPENSES OR DAMAGES CAUSED TO OR INCURRED BY TENANT BY SUCH DELAY OR TERMINATION.

(Back to Top)

Law Offices of Heist, Weisse & Wolk, P.A.
Phone: 1-800-253-8428 Fax: 1-800-367-9038

Serving Florida's Property Managers with main office in Fort Myers Beach. Available by appointment in Orlando and Clearwater


|     Home Page     |     Firm Profile     |     Attorney Profiles     |     General Services     |     Apartment Communities     |     Residential Managers     |     Apartment Communities     |     Residential Managers     |     Homeowners/Investors     |     Eviction Q & A     |     Legal Articles     |     Training/Events     |     Contact Us     |