VOLUME 3 - ISSUE 5 LEGAL UPDATE
- 2006 Legislative Session Recap
- Are you Operating Safe in 2006
- Problematic Lease Clauses
- What Do the Locals Say?
2006 Legislative Session Recap
by Harry Anthony Heist, Attorney at Law
The 2006 Florida Legislative Session ended with no bills passing which had any major impact on the rental housing industry. Very few bills at all passed this year, and we can expect many of the same bills to be reintroduced in 2007. The following is a recap of some of the bills the Florida Apartment Association (FAA) and the Florida Association of Residential Property Managers (FARPM) were following this year. The complete text of the bills can be accessed by going to 2006 Bills
This bill addressed the ability of a victim of domestic violence to break a residential lease. Current law does not allow an individual to avoid lease obligations due to a domestic violence situation. While well meaning, this bill was poorly drafted and vague. This bill did not pass.
Mold Remediation and Certifications
The “Mold Bill” as we fondly call it would have regulated and created a certification process for mold inspectors and remediators. Currently no laws govern mold remediation or inspection, other then the usual laws regarding contractors and licensing, which are applicable if a mold remediator were to conduct certain activities such as roofing, plumbing, electrical work, etc. The bill exempted on-site maintenance from the requirements and included some liability reduction if a landlord used a certified mold inspector and remediator. A similar bill passed in 2005 but was vetoed by Governor Jeb Bush. This year, the bill did not pass.
An extremely poorly written though well intended bill was introduced this year, which would have made it a crime punishable with a fine and/or jail time in the event a landlord rented to a sexual predator, and the rental premises was within 2500 feet from locations such as schools, churches, playgrounds, bus stops among others. We feel that stronger laws should be enacted which punish the sexual predator, if the predator attempts to live in restricted areas. The landlord should neither be thrust into the role of law enforcement, nor should the landlord be punished criminally. This bill did not pass.
Early Termination Bill
Due to an incorrect interpretation of the law by a Palm Beach Circuit Court Judge, a number of lawsuits have been filed against apartment management companies for charging lease termination fees or re-letting fees to tenants when they break a lease. In reality, these liquidated and agreed to amounts actually benefit tenants, as tenants know what they will owe if they break a lease, and early termination rights are not otherwise provided under Florida law. Unfortunately the Judge felt that only the remedies which are specifically in Florida Statutes can be used, and the landlord and tenant cannot agree otherwise. This bill was an attempt to fix this problem and clarify the law. The bill passed the House of Representatives but died in the Senate. You can be certain that this excellent bill will be reintroduced in 2007.
Looking to 2007
There is no doubt that the above bills or variations thereof will be seen again in 2007. It is crucial that landlords get active in the legislative process. This year, the Florida Apartment Association and the Florida Association of Residential Property Managers had record turnouts in Tallahassee on their respective Legislative Days. As the complexity and sheer number of the bills increase, we urge all landlords and anyone involved in the rental housing industry to stay mobilized. The voice of the rental housing industry must be heard loudly and clearly. If you have any person involvement with any Florida Representative or Senator, please feel free to call our office at 1 800 253 8428, as you may be of great help in 2007.
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ARE YOU OPERATING SAFE IN 2006?
by Harry Anthony Heist, Attorney at Law
For two years, we have been warning landlords of the extreme dangers of the lawsuits which are increasingly hitting property management companies. These lawsuits are not just simple nuisance cases, in which a few hundred or few thousand dollars need to be paid out, but rather are full-fledged class action lawsuits which can cost a company millions of dollars. The subject matter of these suits are basic common practices of landlords which never seemed to be a problem for many years, but suddenly are coming under scrutiny. In 2006 a bill was introduced which could have solved many of our problems. It did not pass; therefore, the precedent which may have been set by the Equity Residential case in Palm Beach County should be taken seriously.
TERMINATION FEES, RE-LET FEES AND LIQUIDATED DAMAGES
Even in light of the Equity case, many property management companies are continuing to charge these fees and have clauses in the lease agreements which impose a penalty, re-let fee or liquidated damages in the event a tenant breaks a lease before the term is completed or is evicted. Many leases allow for a voluntary and agreed upon lease break with specific penalties and notice requirements. Though many companies have heard about the lawsuits, there seems to be an atmosphere of denial and an attitude of “it will not happen to us.” The Equity case out of Palm Beach County has held that these fees or penalties are impermissible, and that the remedies provided in Florida Statutes are exclusive and cannot be modified by the lease terms. The main holding of this case states that charging these fees, penalties, or liquidated damages is not allowed by law, and that the ONLY remedy a landlord has when the tenant vacates voluntarily or involuntarily, and the landlord puts the unit back on the market, is for the landlord to charge the tenant ONLY the rent that was lost at the time of the breach and AS IT BECOMES DUE. You cannot accelerate the rent or charge rent on top of a penalty, as this judge feels that this is charging “double rent”.
1. REMOVE ALL PENALTIES, LEASE BREAK FEES, And RE-LET CHARGES FROM YOUR LEASE NOW.
2. If you have charged these in the past to a tenant, NOTIFY YOUR COLLECTION AGENCY IN WRITING THAT THESE CHARGES ARE TO BE REMOVED FROM THE TENANT’S COLLECTION FILE NOW.
3. Recompute only your lost rent UNTIL THE UNIT WAS RERENTED, and REVISE THE AMOUNT SENT TO COLLECTIONS, if and only if the revised amount is LESS than what was previously sent to collections.
AUTOMATIC FORFEITURE OF SECURITY DEPOSIT UPON BREACH
For many years it was assumed by landlords and even expected by tenants that in the event the tenant broke the lease by vacating prior to the natural expiration of the lease or upon being evicted, the security deposit would be forfeited. This is often clearly stated in the lease. According to Florida statutes, a security deposit is for the full and faithful performance of a lease. It should go without saying that the landlord retains the full security deposit upon the tenant’s breach. When a tenant breaks a lease, there are many expenses which the landlord incurs that have nothing to do with rent loss or the physical damages to the premises. These can include advertising expenses, lease up expenses, turnover expenses, management fees that the landlord may have to pay again, among others. Again, the Equity case has put this into question and we feel that at the present time automatic forfeiture is extremely dangerous.
Cease automatic forfeitures of the security deposit. Charge only for actual damages that you suffer, including lost rent due at the time of breach and as it may accrue in the 30 day timeframe you have to send out the Notice of Intention to Impose Claim on Security Deposit.
LATE CHARGES/LATE FEES
The Florida Landlord Tenant Act does not address late charges or late fees charge by a landlord to a tenant for late rent. No limitations are put on the landlord in charging these amounts. A typical lease will have a specific amount due as a late fee/charge if rent is not paid by a specific date, usually the 5th of the month. Additionally, to encourage the payment of rent, many leases have per day charges ranging from $5-$10 on average. Are these fees/charges illegal? If the rent is $1000, the late fee/charge if paid after the 5th is $50 and there is a $10 per day late charge, at the end of a month, if the rent were not paid, the tenant would owe $1300. If the rent was not paid for a year (which would be absurd) the tenant would owe a total of $3600 making the per annum interest rate on late rent 360%. In the first month alone, the interest on the late rent would amount to 30%. As you can see, the per diem amount is causing the problem. Florida usury laws look to what the effective annualized interest rate will be, so the capped interest rate for an entire year is 18%.
Florida statutes 687.03 "Unlawful rates of interest" defined; proviso.-- (1) Except as provided herein, it shall be usury and unlawful for any person, or for any agent, officer, or other representative of any person, to reserve, charge, or take for any loan, advance of money, line of credit, forbearance to enforce the collection of any sum of money, or other obligation a rate of interest greater than the equivalent of 18 percent per annum simple interest, either directly or indirectly, by way of commission for advances, discounts, or exchange, or by any contract, contrivance, or device whatever whereby the debtor is required or obligated to pay a sum of money greater than the actual principal sum received, together with interest at the rate of the equivalent of 18 percent per annum simple interest.
While Florida law through the usury statute does govern interest rates on money loaned to individuals, it does not specifically govern fees/charges in the rental setting. It can be argued that rent owed to a landlord is not a loan, and therefore the usury laws do not apply. The problem we face is trying to explain that we were “damaged” by the late rent payment of the tenant. If these damages were easy to prove, we would not have a problem, but they are not readily ascertainable. You may see seemingly high amounts of fees and interest being charged in certain consumer transactions, such as “payday loans” and check cashing establishments. These exorbitant fees are actually specifically allowed by Florida law.
Many states do in fact govern the amount a landlord can charge a tenant for late fees/charges. Of the states that do, the amount is usually capped at 10% of the amount owed. We recommend that the Florida landlord seriously considers charging no more than 10% of the rent due. In our case above, the tenant’s per diem charge would be capped on the 11th of the month, with a total due of $1100. One may feel that the tenant is getting a free ride, because whether they pay on the 11th or the 20th, the same amount of money is owed, but our opinion is that the landlord should be seriously considering filing an eviction by the 11th of the month.
REDECORATING CHARGES, ADMINISTRATIVE CHARGES/FEES
Many landlords are charging the tenants nonrefundable fees or charges such as Redecorating Fees or Administrative Charges. These fees and charges have been under attack in other states as being unreasonable and outside of the Landlord/Tenant Acts of their respective states. In the “old” days, a typical landlord was able to collect first month’s rent, last month’s rent plus a security deposit often equal to one month’s rent. These days are over, so landlords have been trying to come up with novel ways to be compensated for damage to the premises which exceed the amount held as security deposit. A major argument by the tenant’s attorneys is that these charges or fees are an attempt by the landlord to get the tenant to pay for the ordinary wear and tear which may occur on the premises and which ordinarily under Florida law are not the responsibility of the tenant. Under Florida law, we know that the tenant can only be charged for damages which exceed ordinary wear and tear. Unfortunately it is extremely difficult to determine what ordinary wear and tear is, as it is not defined in the law.
We recommend that landlords do not charge Redecorating Charges or Administrative Fees. Knowing that many of our clients will choose nonetheless to do so, we strongly advise that the applicant is advised of these charges at first contact. Nonrefundable charges should be disclosed in the advertising of the unit, done verbally when there is a phone inquiry and in writing on an information sheet given to the applicant before the applicant is even shown the property for rent. Disclosure is extremely important, especially when arguing an agreed upon charge such as this in court. Do you really want to be the test case?
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PROBLEMATIC LEASE CLAUSES
by Harry Anthony Heist, Attorney at Law
There are thousands of different leases currently in use by Florida landlords. They include among many others, the homemade lease, the store-bought lease, the Supreme Court Approved Lease, the lease made by your attorney, the Blue Moon Apartment Lease, the many internet leases and the lease created by the Harvard graduate on the 60th floor of the big law firm in New York City. The problem? Florida law governs the Florida landlord/tenant relationship. If a lease clause violates Florida law, the clause and sometimes the entire lease will be stricken. More often than not, the lease clause does not violate Florida law, BUT can cause the landlord problems and actually interfere with the rights the landlord is given by Florida law! This article will look at some of the common clauses found in leases and the problems they cause.
The Visitor Clause
Often we see a clause which says that tenant may have no visitors for more than 72 hours without the landlord’s consent. The clause may say that visitors cannot stay on the premises for more than 5 consecutive days. These clauses are extremely difficult to enforce. The “consecutive day “ language would require the landlord to basically sit outside the unit for 5 solid days in a row to determine if the visitor is staying there. If the visitor was not there for one of the days out of the 5 days and came back, they would not have been there for more than 5 “consecutive” days.
The Rent Collection Clause
If the lease states that the landlord will collect the rent on the 1st day of the month, this means that the landlord is under the duty to collect the rent rather than the tenant being under a duty to pay the rent!
Rent Paid to a Post Office Box
Sounds fine, the tenant is supposed to pay the rent to a post office box. Problem is that Florida law allows a person 5 additional days for mailing time if they are to pay rent by mail. How do you give that person a Three Day Notice? You can’t. You need to give them an 8 day Notice giving them 3 business days to pay the rent not including Saturday, Sunday or court observed holidays PLUS 5 business days. On top of that, you have to deal with the “check must be lost in the mail” routine.
Rent Late Clauses
Many leases state that rent is due on the first of the month and if not paid by the 5th, there will be a late charge. Does that mean the rent is not late until after the 5th? Does this mean that the landlord must wait until after the 5th to serve a Three Day Notice? The lease need to clearly state when the rent is due, when the rent is late and when the tenant can receive a Three Day notice.
Late Charges Clause
We constantly see leases which say that a late charge will be due if the rent is not paid by a certain day of the month. The problem is that late charges cannot be put on a Three Day Notice. Only rent is allowed. The ONLY way you can put a late charge on a Three Day Notice is if you define the late charge as rent or additional rent in the lease. (Note: In Lake County Florida, we recommend that you do not put late charges on the Three Day Notice under any circumstance due to one Lake County Judge’s interpretation of the law)
The “How to Serve Notices” Clause
Florida law only requires ONE notice to be mailed by certified mail, and that is the Notice of Intention to Impose Claim on Security Deposit. We see many leases under which it is stated that ALL notices must be served by mail. This can create a huge problem when the landlord serves a notice by posting on the door or even hand delivery, only to find out that the lease clause required the notice to be mailed. One would think that if the lease required a notice to the tenant by mail, personal hand delivery should suffice. After all, isn’t the whole idea to get the tenant notice? This mailing business is a nice idea thought up by an attorney who thinks everything should be mailed, but this is a no go for serving the usual notices such as the Notice of Non-renewal, Three Day Notice and the Seven Day Notices of Noncompliance.
The Detailed Pet Clause
Some leases go to great lengths talking about pets, size limits, weight limits, etc. This should be left to the pet addendum, NOT the lease. The lease should simply state that no pets are permitted without a pet addendum and the proper pet fee or deposit paid. Too much talk about the pet policy in the lease could be an implicit authorization for the tenant to get a pet!
Landlord Retention of Rights Clause
Occasionally in single-family home rentals, landlords like to put in clauses which state that the landlord can use half of the garage, the pool or a room in the house for a certain time period or at a certain time of year. The landlord may also want to store items in the home or garage and not allow the tenant access to these items. These deviations from the norm sound good in the beginning but often lead to disputes later in court.
The Pool Clause
While most landlords know by now that it is a fair housing violation to not rent to a family with children for fear the child or children could be injured in a pool, canal, or lake, some leases attempt to relieve the landlord from liability for injuries which the children may suffer in the event of a tragic occurrence. In the first place, these clauses will most likely not relieve the landlord of liability, if it can be proven that the landlord was negligent, and more importantly, the mere attempt to prevent the family with children from suing you is a fair housing violation in and of itself. When you have someone sign a release of liability for a future event, you are attempting to take away a right from him or her. This right is the right to sue you. It would be nice if we could do this, but it is not legal.
The Month-to-Month Notice Clause
Florida law states that in the event either party wishes to terminate a month-to-month tenancy, at least 15 days’ notice must be given prior to the beginning of the next monthly rental period. Many leases state that in the event the lease becomes month-to-month, 30 or 60 days’ notice is required. The reasoning behind this is to try to hold a tenant to a longer month-to-month tenancy, as they must give you 30 or 60 days’ notice. Nice try, but the essence of a month-to-month tenancy IS the ability to get out of the tenancy with only 15 days’ notice prior to the beginning of the next monthly rental period. The 15 days is stated very clearly twice in Florida Statutes. Result? While the tenant only needs to follow the law and give you 15 days’ notice, the landlord will be STUCK with the clause in the lease, and the landlord will be required to give the notice as stated in the lease. There will come a time when you want to get a month-to-month tenant out as fast as possible. Do you want to be forced to give 60 days’ notice? We didn’t think so!
The Arbitration/Mediation Clause
Arbitration and mediation is often an excellent way to resolve disputes. Anytime you can avoid full-blown litigation, you have already succeeded. Some attorneys, especially real estate practitioners, are used to the arbitration and mediation clauses found in sales contracts. These clauses sometimes end up in leases. Suppose you file an eviction on a tenant, and the tenant demands mediation or arbitration? No matter what the result, there will be no way to force the tenant out, even if the arbitrator decides that the landlord is entitled to possession. You will end up in court. You may be thinking that a mediation or arbitration clause would be good in dealing with a security deposit dispute, but it is unknown whether taking someone’s right to access to the court will be allowed under the Landlord/Tenant Act.
The Military Clause
Many leases include a type of Military Clause which details the requirements for breaking a lease in the event of a military transfer or being called to active duty. The problem is that these laws change on a fairly regular basis, especially in time of war, and it really does not matter whether a military clause is in a lease. The Soldiers and Sailors Relief Act in addition to any state laws will override any clause that is in a lease. By having the clause in the lease, the landlord is led to believe that the clause is correct, when in fact it could be obsolete, incomplete or downright illegal.
A common clause found in leases states the number of occupants allowed to live on the premises. Some also state the number of children who are permitted. These clauses are vague, can often lead to having occupants you did not intend to have, and worse yet, a fair housing complaint. We recommend that all adult occupants sign the lease as tenants, and if there are children, their names are listed as occupants.
The Solution to the Lease Clause Problem
While some lease clauses are simply an annoyance or inconvenience, others can severely restrict the landlord or subject the landlord to a potential discrimination action. The lease document needs to be taken seriously and amended as the statutory laws change and case law is created. Our office generally does not review leases, but does recommend that you either use an attorney prepared lease, such as what we provide with our Lease Preparation Service if you have or manage a single family, condo, duplex or triplex residence. If you are a member of your local apartment association affiliated with the Florida Apartment Association or the National Apartment Association and manage units in apartment communities, you can consider using the Blue Moon Lease.
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WHAT DO THE LOCALS SAY?
by Cathy L. Lucrezi, Attorney at Law
The federal fair housing law bars discrimination based on an individual’s race, color, religion, sex, familial status, national origin, and handicap. Florida law bars discrimination on the same bases. Although these seven “protected classes” are fairly well known by housing providers, what many people don’t realize is that local laws can create additional categories of protection.
A county or city can enact its own fair housing law by passing an ordinance or resolution. Sometimes, when this is done, the local law mimics what the federal and state laws require. However, many opt to create additional restrictions.
For instance, under the federal and state law, it is okay to discriminate on the basis of marital status. Not so in Martin County! In Martin County, a landlord cannot refuse to rent to an unmarried couple just because they lack a marriage license. The same is true of Palm Beach County, Pinellas County, and the city of Sarasota (to mention just a few).
In Broward County, in addition to the seven protected classes of the federal law, it is unlawful to discriminate against tenants and applicants on the basis of sexual orientation, age, marital status, and political affiliation. Martin County adds ancestry to the list and the city of Sarasota adds veterans.
Sometimes, the difference between legality and illegality is the city line. A gay couple in Orange County has no fair housing protection unless they are within the city limits of Orlando. There, if they are refused housing because of their sexual orientation, they can contact city government to make an administrative complaint.
Although the local laws are not so well known, they nonetheless pack a punch. Violations of the local laws can subject the landlord to fines, damages, costs, and attorney fees. The local laws can be used to get an injunction against the landlord.
If you are unsure what laws apply to your property, some research may be in order. You can call your local city and county governments and ask to speak to the department that handles housing discrimination. Or, you can go to www.municode.com and look for the link to “online library”. Or, you can call our office at 1 800 253 8428.
Local laws change periodically. Thus, be sure you are getting the most up to date info when finding out what restrictions apply to you.
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