VOLUME 4 - ISSUE 9 LEGAL UPDATE

- Doing Favors for Landlords
- No More Rentals in Condos?
- Bad Security Deposit Habits
- Housekeeping Problems

 

 

DOING FAVORS FOR LANDLORDS
by Harry Anthony Heist, Attorney at Law

 

Over the past five years, a huge number of individuals purchased homes in Florida with the intention of flipping these homes and making a fast buck in the process. While some purchased with the intention of renting the home out to cover the costs of their investment, many had no intention of doing so and became "accidental landlords". Accidental landlords are people who never intended to become landlords, but due to the inability to flip the property and the expenses of carrying the property, are now forced to rent the home or condo to a third party in the hopes that this will cover all or part of the expenses. In their zeal to save the percentage that is charged by a professional management company, the property owner places an ad in the paper, or hires a property manager to simply find a tenant, with the intention of the property owner handling the rest of the process and subsequent management of the property.

Invariably, the owner is an out of state absentee owner who will realize that it is nearly impossible to manage the rental property from afar. Something can and will happen necessitating the physical presence of some person to do something for the property owner. This is when the property manager receives that phone call asking for a favor to be done. The property manager's initial reaction may be to try to assist the owner if the request is not too unreasonable, but assisting the owner could create unnecessary liability for the property manager. How far do you want to go?

Serving a Notice

This common request by the absentee owner occurs when the rent is not received by the owner. What a surprise. The tenant decides not to pay the rent. Can this be happening? They seemed like such nice people. Most property owners know how difficult it is to collect rent when the office is one mile from the property, but the absentee owner is surprised when the tenant decides not to mail that rent check to California. While it may seem simple enough for you to prepare a Three Day Notice, you may be violating federal law by doing so. Under federal law, if you are trying to collect a debt for another, you may be considered a "debt collector" and be subject to all the rules, regulations and laws which govern debt collectors. Additionally, if the property owner prepares the notice, they will be asking you questions as to how to prepare the notice and what they can put on the notice. Very few owners understand that only rent can be demanded on a Three Day Notice, and furthermore, if the tenant is to pay the rent by mail to the absentee owner, 5 additional days must be added to the expiration date of the notice. Worse yet, some "helpful" property managers will prepare the notice demanding that the tenant pay the rent to the property manager's office location. Why should the tenant pay rent to some unknown third party?

Checking the property

Some time has gone by and the owner has not heard from the tenant. You get the call from the property owner to check out the property to see if the tenant is still there. You drive over to the property, look in the windows or enter the unlocked door, and it appears to you that the tenant has abandoned the premises. You tell this to the owner, and the owner gets the locks changed. Then the tenant comes back and sues the owner, claiming a lock out and alleging civil theft, as the tenant claims all his personal property is gone. The owner then blames you for the faulty information.

Meeting vendors

The property owner needs you to open up the premises to let the repair person in. You go to the property, and the vendor is nowhere to be found. You wait an hour and leave. The vendor then shows up, can't get in, charges the owner for his time, and you just wasted an hour of your time. The owner now is blaming you for not being there and feels you should pay the vendor's charge.

Showing the property

The owner asks you to show the property to a prospective tenant. You meet the applicant at the property, show him around, and he moves in. Next thing you know, you get a call from the tenant complaining about a repair that needs to be done. The tenant thinks you are the property manager, and the calls continue. Just showing the property can give the appearance that you are working for the property owner. In the event the prospective tenant was injured during the showing, you may be on the hook. Further, in the event of a dispute later as to the property condition, you may be pulled into the dispute or even become a part of some litigation.

Meeting the Sheriff

The property owner hired an attorney to file an eviction and the sheriff is set to meet the property owner at the premises on Monday morning at 9 a.m. The problem is that the owner is in Hawaii, so you get the call. You meet the sheriff at the property on Monday morning, and the tenant is still there. Moreover, the house is full of the tenant's personal property. Do you wait around until the tenant moves everything out? Did you bring a team to move everything out? Is the locksmith there with you? As you can see, this is not something with which you should get involved.

Our recommendations

When an absentee owner asks you to perform activities that normally would be reserved for property managers, you need to take a stand and either say "no" to the owner, or have some clear writing in which the task/responsibility is laid out with language completely limiting you from liability and stating what the owner will pay you. No good deed goes unpunished, and there is no reason why you should take on any additional liability, especially when not getting paid. Rather than increase liability, use the opportunity to get the owner to sign up with you to fully manage the property. Do this before the "favor" is done!

 

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NO MORE RENTALS IN CONDOS?
by Harry Anthony Heist, Attorney at Law

At the current rate of unreasonable rules and regulations, it will soon become impossible for rentals to occur in properties governed by condominium association and homeowners associations. Some of these rules and regulations are legal, some are completely illegal, and others fall into a gray area. Many of these rules and regulations are specifically designed to allow the condo board or manager to illegally discriminate against the applicant so as to prevent "those kinds of people" from moving into the condominium. Changing rules and regulations and their inconsistent application are causing increased frustration among unit owners who wish to engage in renting the units and managers who are managing these units for the unit owners. Unit owners and property managers are increasingly at the mercy of the full time owners who have a bit too much time on their hands to think up ways to inhibit rentals. From this point on in the article, we will refer to condominium and homeowners associations as "Associations", just to make it easy.

The Association Approval Requirement

Associations are allowed to require approval of applicants before they become tenants. Many Associations have not required this in the past, but suddenly decide to do this without giving you notice. The owner most likely has gotten notice, but you are operating on the assumption that no approval is required. Some Associations require approval, but do not enforce the requirement. Rest assured that they will if you place a tenant that they do not like. Never assume that approval is not required, and always check to see if changes were made. Often the approval process by the Association is stated to take up to 30 days. How many of your applicants can wait 30 days to be approved? These days, approval can be done in minutes.

The Face to Face Meeting Requirement

An Association can require a face to face meeting with the applicant. Why? Well let's think about this. The face to face meeting allows the Association to see if there are children, if the applicant is disabled, a minority or just someone that they don't want in their Association. If the purpose of the face to face interview is not to discriminate in any way, it is not illegal. If it can be proven that the applicant was denied due to a protected class status, then illegal discrimination has occurred. One of the newest requirements that has popped up is that the unit OWNER must have a face to face meeting with the Association or management as well prior to renting the unit. Try this when the owner lives in Argentina.

Excessive Approval Fees

Florida Statutes 718.112 allows the Association to charge an application fee of $100.00 per applicant, with a total of $100.00 if the applicants are a married couple. Presumably this is to pay for the background check that you are most likely doing already. The problem is that they are tacking on other fees, such as credit checking fees and non- refundable administrative fees. If the law specifically states that the Association can charge a $100.00 per applicant fee, how on earth can the Association get away with charging the additional non-refundable fees or credit checking fees? Why bother even having a law that creates a $100.00 limit if all these other fees can be added? Why can't an Association simply have so many non-refundable fees that no one could possibly pay them? The purpose of the law was to limit what the Association can charge. In our opinion, anything more than $100.00 per applicant is completely illegal

Security Deposits

Florida law allows the Association to charge the tenant security deposit of up to one month's rent, and this can be held in the Association's escrow account. Presumably this is to cover damage to the common areas of the premises. This is not too unreasonable, but could cause the tenant to have to come up with a significant amount of money out of pocket to move in. In some cases the property owner has put up this money, only to have it be returned to the tenant when the tenant vacates. Try getting this returned security deposit back from the tenant. Unfortunately, some Associations are violating the one month's rent law and asking for higher and additional security deposits from the applicant.

Limitations of durations and frequency of rentals

Case law has stated that Associations cannot completely prohibit rentals but can place restrictions upon them. Prohibiting weekly rentals and having 3 month minimums are standard regulations in many Associations. Some of the restrictions seem reasonable on their face, but in reality have unintended consequences. Take the restriction that there can be only one rental per year. You place a tenant in the unit, and the tenant skips after 3 months or gets evicted. The unit owner will not be able to rent the unit to another tenant until the year is up. Was this the purpose of the "one rental per year" rule, or just a bizarre, unintended consequence?

What can the owner or property manager do right now?

It will most likely take either legislative fixes or litigation to get sanity back in the area of Associations and rentals. While some actions by the Association are blatantly illegal and can be rectified by a call to the Association's attorney, others are in that gray area or are such that the Association will not budge. We urge you to report any unreasonable actions by Associations to us, as litigation may soon be in the works, and we may be able to draft some legislation which could solve a lot of problems for unit owners and property managers.

 

Florida Law pertaining to rentals in Associations

Florida Statutes 718.112 i) Transfer fees.--No charge shall be made by the association or any body thereof in connection with the sale, mortgage, lease, sublease, or other transfer of a unit unless the association is required to approve such transfer and a fee for such approval is provided for in the declaration, articles, or bylaws. Any such fee may be preset, but in no event may such fee exceed $100 per applicant other than husband/wife or parent/dependent child, which are considered one applicant. However, if the lease or sublease is a renewal of a lease or sublease with the same lessee or sublessee, no charge shall be made. The foregoing notwithstanding, an association may, if the authority to do so appears in the declaration or bylaws, require that a prospective lessee place a security deposit, in an amount not to exceed the equivalent of 1 month's rent, into an escrow account maintained by the association. The security deposit shall protect against damages to the common elements or association property. Payment of interest, claims against the deposit, refunds, and disputes under this paragraph shall be handled in the same fashion as provided in part II of chapter 83.

 

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BAD SECURITY DEPOSIT HABITS
by Cathy L. Lucrezi, Attorney at Law

 

Everybody knows about security deposits, right? You've been handling them for so long, you could do them in your sleep. Nothing new to learn. Yikes "“ Sounds like a situation ripe for a crisis. Although you learned the basics when you started your career, bad habits may have crept into your repertoire.

Security deposits are handled by every property manager. The basics are learned when one starts in the business and then, for the most part, forgotten as habits become learned. Complacency is dangerous, for some of the procedures that become ingrained are simply wrong. Here are a few "bad notions" to be corrected.

"We use the deposit for repairs during the tenancy if the tenant caused damages."

The deposit can only be disbursed or used after the tenant has vacated and the claims process has been followed. Never can the manager use part of the deposit to do repairs during the tenancy. Never can the manager start cutting checks from the deposit before the claims process has run its course.

The only exception is if both the landlord and the tenant sign an agreement for the deposit to be used in this manner. Even if the parties are willing to sign such an agreement, the landlord needs to consider whether this is a wise move. Certainly, it allows for a "band-aid" fix to an immediate problem, but it also depletes the reserve for other crises that may arise down the line.

"We give the deposit to the owner if he asks to hold it in his own account."

Florida law requires that all security deposits and advance rent shall be held in a Florida banking institution and that the funds not be commingled with other funds. Let's break that down.

The account must be in a bank that is chartered to do business in Florida. Most, but not all, banks that are physically located within the state fit into this category. [Not sure about your bank? Ask them if they are chartered in Florida. They easily know the answer.] If an out-of-state owner wants to hold the deposit in his own account, it needs to meet this criteria. It is not sufficient for the owner to place the deposit in a national bank located in his home state which has branches in Florida.

The deposit and advance rent must be kept separate from other funds. Property managers know this means the deposit cannot be placed in the operating account. Owners are less likely to understand the issue. If an owner is holding a deposit, it must be in an account that is set up for the purpose of holding the deposit. It cannot be mixed in with the owner's other funds in a checking or saving account.

We do not disburse the deposit until both landlord and tenant agree about how it is to be used."

This would be nice to do, but it is not always practical, and it is not required by the law. Rather, Florida law requires a property manager to follow the claims process as well as honor the obligations to the property owner who is her client.

Florida law requires that a landlord return the security deposit within 15 days after the tenant vacates the premises OR that the landlord make a claim against the deposit by sending the written claim by certified mail within 30 days after the tenant vacates the premises. Once a claim is made, a tenant has 15 days to write his objection.

If the property manager receives an objection from the tenant, the property manager must give it consideration. She does not have to accept the objection as the final word on the matter. If the property manager and the owner feel the tenant's objection is without merit, then the property manager may disburse the deposit according to the directions of the owner (which should be consistent with the claim that was made). Such a discretionary disbursement is proper under the law, provided the owner's directions are not unlawful. However, the agent's thankless job of exercising discretion may still carry some risk, even though the deposit would ultimately be allocated between the owner and the tenant in litigation.

 

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HOUSEKEEPING PROBLEMS
by Cathy L. Lucrezi, Attorney at Law

 

Although housekeeping is a hassle for everyone, it can pose special challenges to individuals with disabilities. The problem for the landlord is to figure out whether a tenant's poor housekeeping is a result of a disability, and if it is, figure out how to handle the problem.

Note that many physical disabilities may interfere with the ability to clean a home. An individual who relies on a wheelchair for mobility may not be able to take garbage bags to the dumpster. A visually impaired person may be unable to perceive the grime which the landlord considers unacceptable.

Mental illnesses can also interfere with keeping a unit clean. Cognitive disorders may mean the tenant fails to understand the need to clean. A tenant with a compulsive disorder may horde newspapers. The examples are endless.

Because handicapped individuals are protected by the Fair Housing laws, they cannot be evicted for conduct that is a result of the disability. For example, a landlord could not evict a mentally ill tenant because a disturbance was caused when emergency workers responded to his suicide attempt. In the same vein, poor housekeeping cannot be a basis for eviction if the tenant cannot clean the unit due to his disability.

Of course, when housekeeping problems become so bad that they pose a threat to the health and safety of other residents, the landlord needs to take action. In that case, a notice of noncompliance and, eventually, an eviction may be appropriate. The fair housing laws do not protect a tenant who is a "direct threat" to the health or safety of other tenants or who causes substantial physical damage to property, unless a reasonable accommodation can alleviate the situation.

There are many possible accommodations. One would be to permit more than the seven days to cure the noncompliance. Another might be to permit a "second chance" or allow time for the tenant's caseworker (if there is one) to help with the problem. Still another would be to permit time for the tenant to hire a cleaning service or enlist the help of family and friends. Ultimately, the accommodation is as unique as the tenant and the landlord themselves.

Documentation of the condition of the premises, as well as the efforts for an accommodation, is key. Not only is that data important for a successful eviction, it could later help defend a claim of housing discrimination.

 

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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


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